If you run a business in New Zealand, there’s a good chance you add a surcharge to card payments. It’s common practice — typically 1–2% on top of the transaction — and it exists because accepting card payments isn’t free. Every time a customer taps their card, your business pays interchange fees, scheme fees, and processor margins. Surcharging passes some or all of that cost back to the customer.
That practice is on its way out. The government’s bill to ban in-store payment surcharges has passed its first reading in Parliament, and businesses need to start preparing.
Where does the legislation stand?
The bill to ban in-store payment surcharges has passed its first reading in Parliament. The exact implementation details and timeline are still being finalised through the select committee process, but the direction is clear.
New Zealand is following a well-established precedent. Australia banned excessive surcharges in 2017, capping them at cost-recovery levels. In 2024, the Australian government went further and announced a full ban on card surcharges. The European Union has prohibited surcharging on consumer card payments since 2018.
Alongside the surcharge ban, the Commerce Commission has already regulated interchange fees — capping domestic in-person credit card interchange at 0.30% from December 2025 and introducing caps on foreign-issued cards from May 2026. These changes reduce the fees merchants pay, but they don’t eliminate them. Businesses should be preparing now rather than waiting for the surcharge ban to take effect.
Why does this matter?
If you currently surcharge card payments, a ban means you’ll absorb the full cost of card processing fees on every transaction. With the new interchange caps, domestic card fees are lower than they used to be — but depending on your provider and card mix (especially if you see a lot of commercial or foreign-issued cards), total merchant service fees can still run 0.5–1.5% per transaction or more.
To put that in context: a business doing $500,000 in annual card revenue could absorb $2,500–$7,500 in processing fees that were previously passed on to customers. For high-margin businesses, that’s manageable. For slim-margin operations — cafes, bakeries, dairies, takeaway shops — it’s a meaningful hit to the bottom line.
The businesses that will feel this most are the ones that already operate on tight margins and handle a high volume of small transactions. A $5.50 flat white with a 2% surcharge recovers 11 cents. Multiply that across hundreds of daily transactions and you’re looking at real money.
What can businesses do to prepare?
The surcharge ban is working its way through Parliament, and the smart move is to start reducing your dependence on surcharges now. Here are practical steps:
Negotiate better rates with your payment processor. Many businesses are on default pricing that hasn’t been reviewed in years. Ask your provider for a rate review, and get competing quotes. Even a 0.3% reduction on a $500,000 turnover saves $1,500 a year.
Consider alternative payment methods that bypass card networks. Card payments are expensive because they involve multiple intermediaries — the issuing bank, the card scheme (Visa or Mastercard), and the acquiring bank all take a cut. Payment methods that skip the card networks can dramatically reduce your per-transaction costs.
Look at bank-to-bank payments via Open Banking. Open Banking allows payments to move directly from a customer’s bank account to your bank account. There’s no interchange fee and no scheme fee. The cost per transaction is a fraction of what you’d pay on a card payment.
Build customer loyalty to increase repeat visits and average spend. If your per-transaction margins are going to shrink, growing revenue through repeat business and higher basket sizes becomes more important. Loyalty programs, customer engagement, and personalised offers all help here.
How Open Banking helps
Open Banking payments move money directly from the consumer’s bank to the merchant’s bank. There’s no Visa or Mastercard in the middle. No interchange fees. No scheme fees. The fees are a fraction of card processing costs.
This isn’t hypothetical — Open Banking payments are available now. The infrastructure exists, consumers can use it, and merchants can accept it today.
For businesses worried about the surcharge ban, Open Banking offers a straightforward way to reduce the cost of accepting payments without passing fees on to customers. The economics work because you’re cutting out the most expensive parts of the payment chain.
What tapara offers
Tapara merchants accept bank payments at near-zero fees via Open Banking. Customers tap an NFC pad or scan a QR code, confirm the payment through their banking app, and the money moves bank-to-bank. No card network, no interchange, no surcharge to worry about.
Every transaction on tapara — whether paid by bank or card — automatically builds your customer database and loyalty program. You get visibility into who your customers are, how often they visit, and what they spend, without needing to ask them to sign up for anything.
If the surcharge ban has you thinking about your payment costs, it’s worth looking at what’s possible. Learn more about tapara for businesses.