If you’re running a small business in New Zealand, then you know that Merchant Service Fees (MSF) can add up quickly. Contactless payments, Apple Pay, Google Pay, and credit card payments are convenient but can eat away at your profit margins.
Surcharging can help offset these fees. This way, you can offer flexible payment options without raising prices. When implemented in a compliant and transparent way, customers are happy to have a variety of payment options, and you have a long-term solution for offsetting merchant fees. Win-win!
In this blog, we’ll talk about the benefits of surcharging, how to implement it properly, and how to ensure regulatory compliance.
Key Takeaways
- Merchant service fees on various contactless and credit card payment methods can become costly and reduce profits.
- Surcharging offsets merchant fees without raising your prices.
- If you do so compliantly and transparently, customers appreciate flexible payment options while you cover your merchant service fees.
The Case for Surcharging in NZ
If you’re wondering about whether to implement surcharges for your business, then it’s worth considering three clear benefits:
- Protecting profits: In New Zealand, surcharging serves one key purpose: recovering the actual cost of acceptance of a transaction. These fees apply to contactless and credit card payments, and can take a bite out of your bottom line. With surcharging done correctly, you can offset those fees.
- Price fairness: Implementing surcharges on credit card and contactless payments means you’ll avoid raising your base prices to cover merchant fees. This way, customers that pay with cash and other non-surcharge methods won’t feel like they’re subsidising people who use contactless and credit card payments.
- Payment flexibility: With surcharges, you won’t have to turn off contactless and credit card payment options. By adding surcharges to contactless or credit card payments, you’ll retain all the convenient, high-converting payment methods customers love. Plus, your checkout will be quick and easy.
- Future-proofing: With the rise of mobile wallet adoption in New Zealand, you will ensure your business does not miss out on future-proofing to changing customer trends.
These are all positives any business can expect with surcharging. However, there’s one thing that you need to get right while implementing surcharges: compliance.
The Surcharging Rate Compliance Trap: Why Generic Rates Fail
Many New Zealand businesses will simply let their hardware provider handle surcharge rates for them. Unfortunately, this isn’t a good idea. Most of the time, your hardware provider’s surcharge rate will be incorrect, and rates can vary by acquirer or provider.
Many terminals set a generic, fixed, flat surcharge rate across all payments. This can be an issue, as card processing rates vary by payment type. Mixed pricing across card types can lead to overcharging and undercharging.
Overcharging is bad news for your customers, and especially for your business. It violates the New Zealand Commerce Commission’s guidelines under the 2022 Retail Payment System Act. When you factor in the legal and reputational risk that can come with overcharging, it’s worth getting compliance right the first time.
Finding the “Sweet Spot” in Surcharging Fees: Customer Satisfaction & Card Mix
If you’re going to implement surcharges on contactless and card payments, you want to meet your customers in the middle. Make your surcharges too low, and you won’t make a dent in your merchant service fees. If you make them too high, you may deter customers from doing business with you altogether.
The best course of action, then, is to set your surcharges to match the actual cost of your merchant fees (usually around 1-1.2%). When fees are so small, customers barely hesitate to tap and pay: the fees feel fair to them, and the convenience outweighs the costs.
Staying Compliant: Surcharging Rules in New Zealand
In New Zealand, surcharge compliance falls under the 2022 Retail Payment System Act. Administered by the Commerce Commission, the Act has four key rules that New Zealand businesses must abide by for compliance:
- Actual Cost of Acceptance Only: Your surcharges must not exceed the actual cost of your merchant fees, and cannot be used as a profit generator.
- No Surcharges on Free Options: Businesses cannot add surcharges to normal EFTPOS payments, cash, or chip-and-PIN debit. None of these methods have an associated merchant service fee to accept.
- Have Surcharge Signage Transparency: Before a customer pays, clear visual signs at the counter or on your terminal must indicate surcharges. The terminal screen must show the surcharge amount before the customer completes payment. Additionally, the surcharge should be clearly indicated on a customer’s receipt.
- Single Transaction Collection: A surcharge must be processed as part of a customer’s overall purchase. It should never be collected separately or as a cash payment.
These four rules are important to master, but they’re also simple. Follow them, and you won’t have any issues from customers or regulatory bodies.
Why Compliance is Key to Surcharging Being Here to Stay
In New Zealand, regulators and the government constantly monitor surcharging to keep it fair to businesses and customers. If businesses overcharge, it hurts the reputation of surcharging as a whole and puts the very concept at risk. Poor surcharging practices result in greater regulatory scrutiny, which could lead to an overhaul that businesses won’t find favourable.
By keeping rates fair, transparent, and accurate, businesses can help maintain surcharging as a legal way to recoup merchant fees in New Zealand. Businesses that play fast and loose with surcharge rate accuracy and signage put the practice at risk, while those that maintain good behaviours and fair rates have nothing to worry about.
This is why Shift4 offers one of the only compliant and easy surcharging setups in the New Zealand market.
Surcharging Activation & Terminal Setup
Setting up surcharging on Shift4’s Android EFTPOS terminals is easy. We do all the work for you, and the terminal is delivered preconfigured. The terminal handles your surcharge calculations automatically and applies the correct surcharge in line with the cost of acceptance when detecting a contactless or credit card payment method.
Shift4’s surcharging setup is seamless for you, and more importantly, fully compliant for your business, and completely transparent for your customers. They’ll see a fee on-screen, tap their payment method, and be on their way with an itemised receipt showing the exact surcharge amount. There’s no calculating rates, no punching in numbers, and no stressing about getting fees right: it’s all taken care of. For those who wish to avoid the surcharge, they can simply swipe/insert to pay.
The Only Fully Compliant Surcharge on the Market
If you’re looking for dynamic, exact-cost matching for surcharge payments, look no further than our Low Cost Tap & Pay solution. With it, the surcharges your customers pay match the exact cost of accepting their transaction.
There’s no second-guessing and no fumbling around to calculate the right rate: just a fully compliant, stress-free setup. You’ll eliminate overcharging and stay 100% compliant and on the side of the law. End-of-month bills and settlements will also be much clearer with the simple rate, and all transactions can be viewed in the Shift4 Business Hub.
To make it sweeter, when you surcharge with a Shift4 EFTPOS machine, you not only get free terminal rental, you can reduce your monthly merchant fees bill to $0! Contact our team today to discuss how this can work for your business.
Stop Paying Just to Surcharge
A lot of our competitors and banks will happily charge extra fees just to activate surcharging on your EFTPOS machine; that’s on top of the monthly terminal rental fee you already pay. When you shift to Shift4, you can take advantage of our No Fees model.
Under our No Fees model, you’ll pay $0 to activate surcharging on our terminals and $0 in hardware rental fees. This way, you’ll keep all of your cash without paying fee after fee to other providers.
Would you like to offset your merchant fees with transparent, compliant surcharging? Talk to our EFTPOS specialists, and have surcharging activated on your terminal today.
* Minimum monthly fee and T&Cs apply
