Surcharge ban to shake up payment practices for SMEs and retailers

Retailers and small businesses across New Zealand are preparing for a major shift in how they manage electronic payment costs, following the Government’s announcement of a nationwide ban on in-store payment surcharges.

Commerce and Consumer Affairs Minister Scott Simpson revealed today that the move, set to come into effect by May 2026, will eliminate surcharges on in-store transactions using domestic Visa, Mastercard, and EFTPOS cards. The Government will introduce the Retail Payment System (Ban on Surcharges) Amendment Bill by the end of 2025.

“Surcharges are a hassle and an unwelcome surprise when shoppers get to the till,” says Minister Simpson.

“That pesky note or sticker on the payment machine will become a thing of the past.”

The change is aimed at giving consumers greater confidence at the checkout. “We’re banning surcharges so consumers can shop with confidence knowing how much they will pay for their purchases. Shoppers will no longer be penalised for their choice of payment method, whether that’s tapping, swiping or using their phone’s digital wallet.”

According to Government estimates, New Zealanders are currently paying up to $150 million in surcharges each year, including $65 million in excessive charges. The move follows the Commerce Commission’s recent efforts to reduce interchange fees paid by businesses, fees that are typically passed on to customers through surcharges. The reduction is expected to save merchants around $90 million annually.

But while consumers may cheer the surcharge ban, industry groups warn that businesses, especially smaller operators, will face tough decisions about how to handle payment processing costs.

Steve Armitage, Chief Executive of Hospitality NZ, acknowledges the intent behind the change but stresses that “electronic payments come with real costs to businesses.”

“If surcharges are removed, many operators will have to adjust their pricing to reflect that – particularly for small hospitality operators already under pressure,” he says.

“Some operators may be able to absorb the cost, but for many, particularly smaller businesses, that won’t be realistic. These businesses may have no option but to reflect those costs in their pricing.”

Armitage says the group supports the Commerce Commission’s action on interchange fees and called for further transparency from banks and payment providers to ensure the cost savings are passed on to merchants.

“Our priority is to make sure that any changes introduced are sustainable for hospitality businesses and ultimately deliver a fair outcome for both consumers and operators,” he adds.

BusinessNZ welcomed the move, calling it a “step in the right direction for consumers, and for businesses that issue the cards.”

Director of Advocacy Catherine Beard says the change aligns New Zealand with global trends.

“We used to pride ourselves on being early-adopters of new technology, but surcharges felt like a step back for New Zealand,” Beard says.

“Ultimately these changes will lead to a better shopping experience with a no-fuss payment process at checkout, and consumers knowing the costs up front. This is the way the rest of the world is regulating.”

A spokesperson for Mastercard had this to say following the announcement: “We welcome the New Zealand Government’s move to tackle surcharging by proposing a ban on all regulated domestic card transactions, aligning the country with other leading economies at a time when payment acceptance costs have never been lower.”

The impact of the ban on SMEs will depend largely on how businesses adapt to the change, whether by absorbing the fees, adjusting their pricing structures, or negotiating better rates with payment providers. Either way, the retail and hospitality sectors are set for a recalibration of how everyday purchases are processed at the till.