Paywave's surcharges are catching the eye of the Commerce Commission. Photo: RNZ / Leonard Powell
The Commerce Commission estimates Paywave is taking hundreds of millions of dollars out of New Zealanders' pockets each year.
It is just a fraction of the one billion dollars a year Kiwis spend on merchant service fees using the Mastercard and Visa payment networks.
The commission said Paywave's 2 percent surcharge is particularly high and it has a plan to slash fees.
Commerce Commission chairperson John Small told Checkpoint there was a fee inside Visa and Mastercard networks.
"It gets transferred from the merchant who sells you something, the merchants bank then passes this fee across to the cardholder's bank.
"The effect of that is the merchant gets charged for it and it inflates the fees that they've got to pay to their bank.
"The merchant then has to either put up their prices or potentially surcharge as we've seen a lot of in recent times, and it's becoming really quite annoying for people."
Paywave taking 100 million out of pockets across NZ - ComCom
Small said historically, all credit card fees have been reasonably high, unless they are swiped through the terminal.
"Historically I think there was perhaps a case for it when these networks were new and they needed to get users on board, so they wanted it to be attractive for card holders, that justification, we think, is not there anymore.
"We've looked around the world, our fees are quite a quite a lot higher than some others, we think we could do better. We don't see a reason why they're so high."
When a law was passed a couple of years ago, Parliament pushed fees down, saving merchants about $100 million at year, he said.
"The fees are still reasonably high though. Now a little bit later, we've looked at this and thought this is potentially a good time to look at this and consider whether we can get them down a bit further."
He said the commission was now consulting with the industry and with others who wanted to share their views to ensure there were no unintended consequences.
Merchants got to choose whether they surcharge or not, he said.
"The idea here is if we push these fees right down, then the maximum surcharge that you could expect to see would be about 0.7 percent and at that point some merchants are going to say it's not worth it."
Small said the commission believes there will be less surcharging and overall surcharging will be lower.
"They'll also be a lot more stable because merchants will have a better understanding of what their costs are, so will card holders, 0.7 percent is the maximum you should pay."
The fee ultimately goes to the bank that issued people's credit cards or debit cards, he said.
"They use that for various things, so it will be a revenue loss for those banks or those departments of those banks, so they'll probably object to this I'd imagine."
He said cost-based surcharge would be under the proposal the commission is consulting on.
"Some surcharges are even over 2 percent," he said.
He said currently merchants should shop around for the bank that provides them with payment services.
"There's quite a lot of variation in what those banks charge so a merchant can often save money by shopping around for cheaper rates."
He said for customers, "If you use a debit card and swipe it, there will be no charge to the merchant and certainly no charge to you, and that would include an EFTPOS post card if you've still got one of those."