Credit card deals could save retailers millions

The Commerce Commission says agreements unveiled today with seven financial institutions could save retailers tens of millions of dollars.

The agreements with the financial institutions follow settlements reached in August with Visa and MasterCard that paved the way for credit card interchange fees in New Zealand to be set by competition.

A result of the settlements is that merchants can surcharge customers when they use credit cards to make purchases.

Today the commission said the agreements ushered in a new competitive landscape for the credit card industry in this country.

Commission chairman Mark Berry said savings to retailers during the next three years as a result of the settlements were expected to be in the order of $70 to $80 million.

"This represents a significant reduction in the cost of doing business for retailers who offer credit card payment options, and we would expect to see this passed on to consumers over time through lower retail prices," said Berry.

The institutions announced today to have reached settlements with the commission are ANZ National, ASB, Westpac New Zealand, Bank of New Zealand, Kiwibank/New Zealand Post, TSB Bank, and The Warehouse Financial Services.

Berry said the commitments made by the institutions would put immediate downward pressure on interchange fees while ensuring that those fees remained transparent and open to competitive forces.

The commission said that in High Court proceedings it claimed that the parties breached the Commerce Act by agreeing and implementing the Visa and MasterCard credit card scheme rules in New Zealand which, among other things, provided for the payment of multilateral interchange fees.

The commission said it alleged those rules substantially lessened competition by artificially inflating the cost to retailers of accepting credit cards and ultimately raising prices paid by all consumers.

Each of the financial institutions would contribute towards a combined total of $1m to cover the unmet costs of the commission's proceedings, the commission said. It previously recovered $5.6m towards its costs from Visa and MasterCard.

Also today, a group of retailers said it had reached a settlement with MasterCard over interchange fees and scheme rules.

The settlement, along with the commission's settlement with MasterCard and Visa, was significant for the retail industry, spokeswoman Louise Evans said.

The settlement reaffirmed retailers' ability to pass on the cost of accepting credit card payments through a reasonable surcharge as provided in MasterCard's settlement with the commission, which retailers were previously prevented from doing.

"This new level of transparency means that for the first time the actual cost of using a credit card will be known to consumers," said Evans.

"This may ultimately result in customers choosing to use different payment options. It is this development which may have the greatest impact for customers."

The retailers group was made up of Progressive, Foodstuffs, Dick Smith, Farmers, Noel Leeming and Whitcoulls.

"After spending the last three years preparing to go to court, we're pleased to have a satisfactory result and be able to get back to our businesses," Evans said.