Clark DavidRETAIL PAYMENT SYSTEM BILLThird ReadingHon Dr DAVID CLARK (Minister of Commerce and Consumer Affairs): I present a legislative statement on the Retail Payment System Bill. ASSISTANT SPEAKER (Hon Jenny Salesa): That legislative statement is published under the authority of the House and can be found on the Parliament website. Hon Dr DAVID CLARK: I move That the Retail Payment System Bill be now read a third time. It feels like only yesterday we were all here in the committee of the whole House discussing the Retail Payment System Bill and here we are today passing this bill through into legislation. The bill aims to ensure that we have a competitive and efficient retail market—Andrew Bayly: How? Hon Dr DAVID CLARK: —in New Zealand. It's vital for consumers that the retail payment system is both competitive and efficient and I look forward to explaining how for the benefit of members opposite who expressed a keen interest. In an increasingly cashless society of course it is easy for any one of us to forget just how important retail payment networks are. It all happens so quickly and so easily: money is transferred from our wallet quite virtually into a business as a payment for goods and services. But it's been apparent for some time now that in New Zealand these payment methods that we are so familiar with attract higher merchant service fees than they should. That's why in the 2020 election the Labour Party took a manifesto commitment to reduce these fees and to bring them into line with comparable countries and today we make good on that promise. This bill establishes a new regulatory regime that's concerned with the underlying causes of high merchant service fees. However it also takes much more direct and immediate steps to lower the fees in a short time horizon and be clear that payment networks where those problems are most acute are designated immediately. While I don't want to prolong the bill's journey through the House I do want to make a few acknowledgments and remind the House of the ways that this change will benefit merchants and consumers. So quickly on the history: the possibility of regulating the retail payment system has been considered by successive Governments and after pledging to get on with it and to actually regulate these fees at the 2020 election as the newly minted Minister of Commerce and Consumer Affairs I set about my task with alacrity. Straight away and at pace we put together a discussion document to go out to get feedback from the public so that we could make sure that we did this in the way that would be enduring and would achieve the purpose we'd set out. Now policies for this bill were agreed by Cabinet in April and July following that consultation last year. I was then able to introduce the bill to the House in October 2021 and it's carried the momentum through the select committee. I do want to thank those who worked in the select committee on this bill from the Ministry of Business Innovation and Employment officials through to the stakeholders who made submissions on the bill and there were lots of high-quality submissions; the Parliamentary Counsel Office staff who do the drafting; the Economic Development Science and Innovation Committee Jamie Strange—and I see the chair here; I acknowledge his work—and the whole committee; and of course the Commerce Commission who fed in their expertise along the way as we've brought this from a rough-hewn stone to a polished product. Now the bill executes as I've said a short-term and a long-term strategy for promoting competition and efficiency in the retail payment system and that is for the benefit of consumers and merchants. So in the short term there is an intervention in that the bill caps interchange fees in the Visa and MasterCard networks for an initial pricing standard. Interchange fees as many in this House will now know have been a part of the debate and what many folks at home will know is that it's often the largest part of a merchant service fee. They've tended to be particularly high in the Visa and MasterCard networks and that perhaps reflects the dominance of those networks in the New Zealand market. Capping interchange fees will happen six months after this bill has passed and had Royal assent and it will relieve a significant burden on particularly small merchants who face a disproportionate burden from the interchange fees. It's been estimated that this change this cap this pathway that will see in six months these fees adopted as the ceiling on a conservative estimate will save New Zealanders around $74 million a year. So that goes in the first instance to those merchants—Jamie Strange: How much?Hon Dr DAVID CLARK: It's $74 million a year and it's a conservative estimate and then many of those savings—or much of that saving—will be passed on to consumers and come back into Kiwis' pockets. The longer-term strategy that's embedded in the bill is the empowerment of a regulator—in this case the Commerce Commission—to respond to competition or efficiency issues as they arise in the markets. So essentially we're futureproofing here but also giving them the powers to investigate once a payment network's been designated to dig into it and to make further decisions about how it should be regulated—make sure there's transparency in the system and so on. So the Commerce Commission are given regulatory tools through the passing of this bill and those tools—as I say the process for designating networks which the commission can then regulate—are designed to be flexible and responsive as the retail payment system continues to evolve over time.Andrew Bayly: Is that how it assists with competition?Hon Dr DAVID CLARK: It certainly will assist with competition Mr Bayly—absolutely. The commission will be able to regulate designated networks through network standards and directions and it enables them to do some very specific things which I'll just share with the House: require network participants to disclose information regulate prices they charge for payment services require participants to allow entrants to access certain critical services or network infrastructure require network rules to be set and scrutinise certain changes to network rules. Now those are quite technical aspects but indeed they do get to making sure we have a competitive market. Importantly there are several constraints on the Commerce Commission in the use of these powers. They're only available in relation to designated networks. The bill prescribes a process for designated networks that involves them going out setting out network standards and directions. They are subject also to criteria to processes. The commission must publish any proposed standard or direction issues and its reasons for proposing that standard. They must also consult affected persons before they can issue any standard or direction. Ultimately the commission is bound by the purposes and the principles that are embedded in the bill in terms of the way that they conduct themselves as regulators. Finally the standards and directions are secondary legislation meaning they're disallowable by Parliament so Parliament retains a degree of oversight here. The bill also enables the commission to intervene should it wish on surcharging standards surcharging practices and could set standards to make sure that merchants aren't over-recovering on their costs. It's quite reasonable when you see it: sometimes merchants are charging a surcharge where they face a higher fee and it seems reasonable to allow them to pass that on to consumers because some networks are more expensive to use than others. But the commission will have the power to intervene if they see abusive practices evolve in this area. Now the commission has the flexibility in how it uses any merchant surcharging standards to achieve that. But the flexibility is likewise subject to constraints and procedural requirements.Network operators and card issuers will need to be in a position to comply with the initial pricing standard within six months of the bill coming into force—and I do want to thank the support around the House for making this happen. This is a very direct intervention. It's a way of making sure that this pledge kicks into action sooner rather than later as the commission may take some time in my experience to do their analysis on certain things because they are thorough. This sets an initial standard that is comparable to what we have in Australia. I want to thank the House for prioritising the passage of this bill to ensure that the savings that it generates are passed on to merchants and to consumers. As the Labour Party made its pledge front of mind was those small businesses that talked about how tough it was. I spoke to a number of small businesses particularly around this announcement originally and as we went out with consultation documents and the like they shared with me just what a burden it is with some of the fees. They don't have the leverage with the banks and the schemes to demand different network fees. So this cap will make a meaningful difference for small businesses and if small businesses flourish we know we will have a more competitive landscape for consumers and we know also with the cap on fees that that money not only lands back in the merchants' pocket but gets passed on to consumers. So this is good for small business. It's good for consumers. Reducing merchant service fees has been a priority for the Government. We're now passing this bill. It's a good day. And it brings me to the end of my speech with great pleasure as I commend this bill to the House.ASSISTANT SPEAKER (Hon Jenny Salesa): The question is that the motion be agreed to.