Despite strong advice from Treasury and the Commerce Commission,  the Government is cautious about regulating the fees that banks charge merchants to process credit cards.

Commerce Minister Paul Goldsmith yesterday announced a consultation period for the public to comment on the fees.

But in an interview with POLITIK, he was clearly wary of agreeing to any regulation.

“My basic instinct would be to say we expect competition to keep prices under control

“And if you are in an area of rapid innovation and technological change you want to be pretty cautious about regulating in case you end up stifling innovation.

“But we do want to ensure that New Zealand consumers aren’t ultimately paying over the odds for using the fundamental payment system that we have.”

But Goldsmith’s caution contrasts with advice from the Commerce Commission in 2013 after it inquired into the fees and concluded that it was not able to address anything other than breaches of the Commerce Act and so alternative regulatory intervention might be required.

Then in February this year  Treasury wrote to Goldsmith expressing concerns about the level of credit card merchant payments to banks.

“The Treasury agrees with the Ministry of Business Innovation and Employment’s judgement that the case for regulation in New Zealand needs to be investigated, given that market forces appear unlikely to drive more efficient outcomes absent government intervention,” their letter said.

Goldsmith is known as one of the Government “driest” Ministers, favouring free market solutions to most issues.


And it’s clear that’s the approach he is taking on the credit card fees.

He says that regulation can lead to unintended consequences.

“It’s (banking) a complex system.

“You might put a cap on a particular fee, but other fees somewhere else in the system could go up and so what the overall outcome of what you do is not straightforward.

“In general with regulations you’ve got to be very, very careful that whatever regulations you bring in will have a reaction of some sort and to try and work out what is; what the overall cost will be and the consequences of that is the purpose of good regulation.”

So  Goldsmith has released an issues paper on the payments, and  public consultation will run until 13 December 2016.

However, he is in favour of greater transparency on the fee component of retail payments.

“The question is making that easy to understand and transparent, and there is a good case for looking at that.”