SpeechRETAIL PAYMENT SYSTEM BILLSecond ReadingHon Dr DAVID CLARK (Minister of Commerce and Consumer Affairs): I present a legislative statement on the Retail Payment System Bill.ASSISTANT SPEAKER (Ian McKelvie): 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 second time.This bill fulfils a Government pledge relating to merchant service fees charged to retailers and wants to bring them into line with comparable economies. The retail payment system is what makes it possible for consumers and merchants to sell and receive goods and services. Before the last election the Labour Party pledged to regulate these fees to make sure that it was no longer the case that New Zealanders could be charged rapacious amounts for the use of these card systems. The common ones we know the credit and debit cards the EFTPOS cards these are familiar to all New Zealanders.COVID-19 has of course changed the way we spend our money with online and contactless transactions being used more. These payment methods currently have higher fees and that puts an additional pressure on businesses that transfers also to consumers. So reducing these fees is a priority for this Government. It's a pledge the Labour Party made at the last election and it's an important contribution to the recovery of the economy from the impacts of COVID-19.The bill itself introduces a new regulatory regime to ensure the retail payment system delivers long-term benefits to consumers and merchants and the regime does this in three ways. First it enables the Commerce Commission to regulate participants in designated retail payment networks. Second to reduce merchant service fees more quickly it sets an initial pricing standard for the Mastercard and Visa credit and debit networks. That standard will reduce interchange fees. Interchange fees—as members of this House I'm sure know—are generally the largest component of fees charged to merchants for accepting payments. The initial pricing standard targets card products issued by Mastercard and Visa because they cover the largest share of the New Zealand market for retail payments but other providers will follow suit. Third the bill enables the Commerce Commission to issue merchant surcharging standards. And I note too for the House the bill also provides for investigation monitoring and enforcement by the Commerce Commission.At this stage I'd like to thank the members of the Economic Development Science and Innovation Committee for their consideration of the bill. Given the slightly shorter period for the committee to consider the bill the members met outside of sitting weeks to give the bill due consideration. So I do say thank you to the members of that committee.Joseph Mooney: Hard-working group.Hon Dr DAVID CLARK: And as the member opposite calls out a very hard-working group and I do thank them for that.I'd also like to thank all the submitters who considered the bill and took the time to provide feedback for that committee to consider. The committee received 30 written submissions on the bill from a range of industry parties. Two of the common views expressed were that buy now pay later products and secondly American Express products should be directly regulated by this bill. So I note here for the House's benefit that the Government is separately considering wider questions around whether and how to regulate buy now pay later products. And officials have received feedback as part of a submission process and are working on that as we speak. My priority for buy now pay later products is to address any triggers that cause consumers to experience financial hardship.Submitters also suggested that the likes of American Express as I've mentioned and other card schemes should be directly regulated by the bill in addition to the immediate price regulation being applied to Visa and Mastercard. I do want to say so that this is on record for the House that American Express is absolutely in scope of regulation under the new regime although it hasn't been chosen to be designated straight away. So the Commerce Commission can choose to designate them in due course. But my focus in having a price path effectively for Mastercard and Visa payments to start is because that brings about the greatest immediate benefit for merchants and consumers. American Express as we know has a relatively small share of the market—their model doesn't involve interchange fees and they're also constrained by competing with Visa and Mastercard in what they can charge—and of course if we regulate their fees that will have a knock-on effect to the model for American Express.I note that the select committee has recommended a number of changes to the bill. Those changes aren't significant policy changes but they do represent minor tweaks and I think improvements to the bill which I trust will enable the legislation to work better. So as previously noted the initial pricing standard will require Mastercard and Visa as well as banks and other card issuers to reduce interchange fees which are generally the largest component of the merchant service fee. The bill now states the commercial credit card payment products which are intended to be excluded from the initial pricing standard—the fees cap will not apply to credit payment products issued to a business and used exclusively for their businesses' commercial purposes. However for the sake of completeness if a business customer is issued a personal credit card that they might use for mixed purposes the card will be captured by the initial pricing standard.The reported-back version of the bill also addresses comments made by a number of submitters on the provision prohibiting net compensation. In other economies where interchange fees have been capped we see what's known colloquially as the waterbed effect; fees or arrangements are adjusted—Andrew Bayly: Waterbed?Hon Dr DAVID CLARK: The waterbed effect: the fees and so on are adjusted other aspects of the fees to compensate the card issuers for the loss of the interchange fees and the no net compensation provision was targeted at that kind of behaviour. However some submitters raised issues with banning net compensation altogether and with the definition of net compensation. So the committee to its credit has found a better way to stop caps on interchange fees being undermined by compensation to card issuers through that waterbed effect that Mr Bayly no doubt will also comment on. Interchange fees are now defined as including any net compensation that can reasonably be attributed to retail payment transactions.Finally submitters commented on the ability for the Commerce Commission to issue standards that limit merchant surcharging. Some submitters opposed having merchant surcharging standards while others thought they wouldn't go far enough and that such charging should be banned altogether. And while caps on interchange fees may reduce the need for retailers to surcharge the bill allows basically for the Commerce Commission to issue standards if it deems it necessary or desirable at a future point. Ultimately consumers and competition can be harmed if surcharging is excessive and so the commission has now provided the powers to set standards and guide what is and isn't acceptable and I think that's a good compromise.In conclusion retail payments are the nuts and bolts of the market economy. The payment methods make it easier to secure goods and services but the fees that sit behind them are simply too high. We want to ease the burden of these fees on retailers and other small businesses who are already struggling with the impacts of COVID-19 and we recognise that when we do that the knock-on benefit is also to consumers who will rightly see—well they won't be paying the surcharge effectively through that business as the business tries to recover its costs.So this bill is a step in the right direction will ensure the retail payment system delivers long term-benefits to New Zealand consumers and businesses and it also fulfils a pledge of the Labour Party before the last election. It's a delight to actually have here in the House this evening the former Commerce and Consumer Affairs Minister the Hon Kris Faafoi who can also celebrate this gain and I also acknowledge the work of the Hon Stuart Nash in this area. We're not through all the reading stages of this bill but the select committee has approved the bill.Hon Kris Faafoi: payWave payWave.Hon Dr DAVID CLARK: They're discussing the merits of payWave behind me. We know this bill is a sensible bill that will make things better for New Zealand consumers better for small businesses and aid the economic recovery from COVID-19. I commend this bill to the House.ASSISTANT SPEAKER (Ian McKelvie): The question is that the motion be agreed to.