Contributed by: Ruth Riviere, Country Manager, Mastercard New Zealand and Pacific Islands
As you may know, next month, the Commerce Commission (ComCom) is due to make an announcement on its proposed interchange intervention. If you aren’t across it, or thought it was only relevant if your business was involved in card payments today, I encourage you to look at the draft decision to further intervene on interchange fees, and think about how it may affect your business, today or in the future.
The ComCom’s consultation comes during what has been described as a “watershed year” for New Zealand’s fintech sector, and I agree. We’re seeing great progress with CDR, Exchange Settlement Account System (ESAS) access, banking licenses, regulatory sandbox and fintech success stories every day.
Adding to recent announcements in this space, this month Akahu and Westpac entered into a new agreement enabling Westpac’s customers to connect their accounts to a wide range of fintech services. One of those is Dunedin-based budgeting and personal finance software, PocketSmith.
Elsewhere, Sharesies and Mastercard are preparing to launch Sharesies Spend, a new offering that connects everyday spending with long-term wealth goals. It’s just one example of the exciting new card products emerging from New Zealand. Meanwhile, CreativeHQ’s Fintech Lab 2025 has just celebrated the mahi of fintechs that share our goal of simplifying financial services and delivering accessible tools that foster innovation, expand access, and build trust.
It’s these success stories that signal New Zealand hasn’t lost sight of its former reputation as a world-leader in innovative payment technology adoption.
However, that reputation may be no more than a reflection in the rearview mirror as we face a potential critical disruption to the core business model that supports payment innovation in New Zealand.
We all know there is a cost to payments and hollowing out interchange fees will make it harder for challengers to enter the market with sustainable business models, or for existing businesses to drive deeper innovation, customer engagement and utility.
Our payments ecosystem is a balancing act, and the proposal does not acknowledge that.
It’s interesting to note that this is the opposite to how ComCom has approached its response to the supermarket sector. There, it landed on the side of preserving competition by preventing the merger of Foodstuffs North Island and Foodstuffs South Island, while here it’s looking at intervention which will discourage newcomers to the market.
But don’t just take my word for it. Looking at the submissions, it was a pretty unanimous sentiment that the proposal will disproportionately impact the smallest players.
It’s rare for a consultation to see such agreement across an industry. ANZ, ASB, Altered Capital, American Express, Archa, Block, BNZ, Change Financial, The Financial Services Federation (FSF), Kiwibank, Mastercard, Revolut, Sharesies, TSB, The Co-operative Bank, Visa, Westpac, and Worldline outlined how the proposed interchange caps would reduce competition in our payments ecosystem. Multiple independent economists have also argued that competition will be impacted.
There seems to be little hope for Kiwi-owned banks, fintechs and new market entrants that rely on interchange to be commercially viable.
And it’s not just the players who will be impacted, but also the systems that are fundamental to how they operate and what they can offer to consumers.
Submissions clearly outlined concern that the intervention could dramatically slow the pace of open banking progress. Again unanimous, ANZ, BNZ, Kiwibank, Sharesies, TSB, Visa, Westpac and Worldline all noted how commercial viability for open banking solutions would be limited, primarily by reducing potential revenue streams and making business cases difficult for new entrants and innovators.
Given the Government has already been critical of New Zealand’s slow pace of transition towards standardised API-based open banking and expressed a view that we risk falling behind the rest of the world, I would hope these concerns are heard and considered.
If not, open banking providers will indirectly have the unenviable task of trying to provide a new service at a price point that does not adequately compensate all players in the ecosystem. Meanwhile, the incumbents will be further entrenched.
The threats to competition and innovation are only two of a number of potential unintended consequences of ComCom’s proposal.
Many concerns, arguments and potential recommendations have been shared in submissions, by those of us within the ecosystem as well as those outside of it.
If we have a vision for New Zealand to once again become a world-leader in innovative payment technology adoption, we need informed voices to join the conversation and make themselves heard.
If we want this watershed year to be the bricks rebuilding our reputation, we need to maintain competition and innovation. The hollowing out of interchange and a thriving payments
ecosystem are incompatible goals, and as the builders of the ecosystem, it’s our responsibility to protect it.
As Jason Roberts so rightly outlined in his call to action, it’s time to ensure we are active participants in writing our industry’s future. Feedback can be given to Ministers or the ComCom itself, and we hope to see all concerns considered ahead of the final decision next month.
