Ruth Riviere: Mastercard New Zealand Country Manager responds to Commerce Commission moving to cap credit card fees

Mastercard is pushing back against the Commerce Commission's plan to put a cap on credit card fees.

The Commission says regulation for credit and contactless payments could deliver $280 million in savings a year for merchants and consumers. 

But Mastercard New Zealand says the draft decision is disappointing, will undermine competition, and set back the local economy.

Mastercard NZ Country Manager Ruth Riviere says these suggestions by the Commerce Commission will bring down interest in investing in New Zealand.

"We're really clear that there's these unintended consequences of what's being proposed."

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Episode Transcript

Speaker 1 (00:00):
Right now, MasterCard is pushing back at the Commerce Commission's
plans to put a cap on some credit card fees.
Interchange fees are one part of a bunch of charges
that the retailers pay, and the Commerce Commission wants to
reduce those fees by about two hundred and eighty million
dollars a year by introducing a cap on them. But
the Commerce Commission says it can't guarantee that the full
two hundred and eighty mil will actually be passed on

(00:22):
to consumers. Ruth Verviea is Mastercard's country manager. Ruth, Hello,
Hi Ryan, how are you doing good? Thank you, thanks
for coming on the program. So these charges, the interchange fee,
do you make a profit off the interchange feepe?

Speaker 2 (00:37):
So MasterCard doesn't make any money from interchange. Interchange is
a really important balancing mechanism for the payments this ecosystem
that allows continued investment in experience, in technology, and in
safety and security.

Speaker 1 (00:52):
So the interchange fee is a charge that you use
for R and D basically, so it's what.

Speaker 2 (00:59):
Our partners use for that. So it's paid by the
merchants bank to the card issuers, to the cardholder's bank
and so it balances that the cost of issuing the
payment credential with the benefit that the merchant receives from
accepting that payment.

Speaker 1 (01:20):
So who profits off the interchange fee?

Speaker 2 (01:23):
So the person who issues the card or issues the
credential gets that money, and that's experience.

Speaker 1 (01:33):
That's you, right, master Card.

Speaker 2 (01:36):
So we don't issue any cards that would be your bank,
or that would be a fintech so or that would
be a credit card company. Those would be the people
who receive that revenue and then they would invest that
in a card proposition.

Speaker 1 (01:51):
So why have you got a problem with the interchange
fees being kept by the It's suggested by the ComCom.

Speaker 2 (01:58):
Because we think it's a really important mechanism in a
market to allow for continued innovation, continued investment in safety
and security, continued investment in experience. And what the Commerce
Commission is suggesting is hollowing that out, and that will
make the business case for investing in new products and

(02:19):
services much harder. It will make the business case for
investing in new payment types like open banking much harder.
So we're really clear that there's these unintended consequences of
what's being proposed.

Speaker 1 (02:31):
How does MasterCard make money off transactions. You know, when
I go to the deary and swipe my card, where
are you making your cut?

Speaker 2 (02:40):
Yeah, so we make money as the transaction is processed
by our network, and that's separate to interchange fees.

Speaker 1 (02:47):
It's a surcharge, Ryan, So.

Speaker 2 (02:50):
Surcharge is what a what a merchant would would charge
the person making the payment for that payment, some of
that would be used to cover interchange and scheme fees
and the fees from the bank of the merchant.

Speaker 1 (03:07):
Right, So your fee that you tack on, what's your fee?
If you know, if I went and bought a can
of coke or something, what does master Card get.

Speaker 2 (03:15):
Yeah, it's a really small proportion of the overall cost
for a merchant. So it would be, you know, a
fraction of what that interchange component would be or the
fee that the retailer's bank would be charging.

Speaker 1 (03:32):
So it's a fraction of the interchange fee. So you
do get some of the interchange fee.

Speaker 2 (03:37):
No, sorry, I just meant proportionally, so we don't get
do you know what is the fraction?

Speaker 1 (03:41):
Do you know?

Speaker 2 (03:42):
It would vary based on based on the transaction, as
a percentage, a small percentage.

Speaker 1 (03:51):
One, two percent, zero point three under ten percent, under
ten percent. That's that's quite a lot. I mean that
that that range is big. Do you mean up to
ten percent of the overall fees that are charged or
do you mean up to ten percent of the cost
of the good?

Speaker 2 (04:09):
No? No, no, no sorry no, not of the total good,
of the total overall costs that might be paid. It's
a very small proportion of the overall costs.

Speaker 1 (04:23):
Right, So up to ten percent of the fees that
we pay for using cards at shops for the convenience. Yeah, okay,
So the Commerce Commission seems kind of hell bent on
doing this, making this change, and they have kept it
once before. What do you think the effect will be?

(04:44):
Will we actually get cheaper? Will it make transactions cheaper
for us as consumers?

Speaker 2 (04:50):
We haven't seen that play out in any other market.
And what the Commerce Commission said was that by tapping
into change fees excuse me, surcharges would come down. And
they kept interchange or they brought interchange down two years ago.
And I think you speak to any key we and
they would say that surcharging has not gone down. So

(05:11):
it's really clear that surcharging won't come down as a
result of capping interchange. So what I think we can see,
what you can expect to see as a consumer or
as a card holder, is that you'll be surcharged more often,
and that by taking away this amount of interchange, which

(05:33):
as we've said, is a balancing mechanism between the two
sides of the ecosystem, consumers will pay for that in
other ways because that investment will still need to be made.

Speaker 1 (05:43):
Seems like we always pay for everything, doesn't that. Thank
you very much for that. That's Ruth Master Cards Country Manager.
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