Most people tend not to spend a lot of time thinking about payments. The impact of Covid-19 on the retail sector has changed that. Questions are being asked about contactless payments and how we can best, and safely, support our shopkeepers and consumers.
New Zealand is blessed with a payments infrastructure that is the envy of the world. Thirty years ago, the banks came together and created a new era of electronic payments that was accessible by all New Zealanders. And this system didn’t clip the ticket. Retailers pay a flat monthly fee per terminal, whether they conduct 100 or 100,000 transactions.
Over time, payment cards evolved. First came EFTPOS cards with a magnetic stripe. Then we saw smart chip and PIN on credit cards and finally, contactless. Just wave your card over the reader and the transaction is accepted. With Covid-19, contactless use for both credit and debit has substantially increased.
Here’s the catch: while EFTPOS and contactless debit cards both access money from your current account, it costs retailers significantly more to accept the contactless debit card. If you swipe your EFTPOS card or insert your debit card it is processed inexpensively by the local EFTPOS networks. If you tap your contactless debit card the merchant is charged fees like a credit card. We understand that these fees are the third highest cost for many merchants, after rent and staff.
With the rise of contactless, there have been calls for these high fees to be temporarily removed, to relieve some of the burden on smaller retailers. Some banks agreed and everyone is pleased with this short-term victory.
However, post Covid-19, shoppers will continue to use contactless and retailers will either bear the higher costs or we’re back to having stickers over buttons and “no paywave” signs.
So, why hasn’t the inexpensive EFTPOS card gone contactless? Because this card type does not return a revenue stream for the issuing bank. In contrast, merchants pay a percent fee on every single transaction made with a contactless and/or a credit card.
Thirty years ago, when EFTPOS cards removed cash from our system, the banks were saving money. Today, a low-cost debit solution like EFTPOS, is simply seen as a cost.
Here at Paymark, we provide retailers with the next generation of low-cost contactless payment solutions to meet the changing needs of Kiwis, using smartphones instead of plastic cards.
Smartphones and banking apps are commonplace. These apps give consumers control over their own money and shoppers should be able to use them to make purchases.
Retailers want innovative and inexpensive ways to accept payments online. They’re racing to integrate their two worlds – real world shops and online commerce – so they survive and flourish. At Paymark we introduced Online EFTPOS to enable customers to buy goods through their banking app without a card. But it’s not yet available to all Kiwis – we need more banks on board.
The government is keen to see industry-led change, but it has expressed concern over the lack of progress. Government would rather encourage innovation in new technologies than regulate the old. We agree but this will take time, so how do we help Kiwis now? Retailers need support during this time of crisis, and this in-turn benefits consumers.
There is one thing that can be done quickly, easily and could lead to long-term positive progress.
Contactless debit cards could be used without the high cost. All that New Zealand needs is one industry rule change mandating all debit card transactions (contactless or otherwise) be processed via the local EFTPOS networks. No government intervention or regulation is needed, the New Zealand payments industry simply needs to agree the rule change itself. Easy.
If that one rule is changed, we can save local debit and focus on investing in the future of payments. Let’s encourage developers to create local, flexible open banking products that utilise Paymark’s up and running, state of the art payment platform OPEN .
This one change wouldn’t stop New Zealand banks from making a profit, nor would it dent the profitability of credit card companies, but it would help retailers at a time when many are struggling.
Overseas governments have rebuilt local payments networks to ensure merchants and consumers have a choice about payments. We already have an efficient, low-cost payments network. Why don’t we make use of it?