A cap on card interchange fees and greater use of contactless boosts card growth in New Zealand credit: shutterstock.com

New Zealand’s card payments market is expected to grow by 6.5% to reach NZ$102.4bn ($65.0bn) in 2023, supported by an economic rebound and a growing consumer preference for electronic payments, says GlobalData, publishers of EPI.

According to GlobalData’s Payment Cards Analytics, New Zealand saw a decline of 10.5% in card payments value in 2020, as it grappled with the Covid-19 pandemic and subsequently its economy fell into recession. However, with the economic rebound, New Zealand’s card market recovered with 1.0% growth in 2021 followed by 6.6% growth in 2022.

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Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, said: “The payment card market in New Zealand is mature, with individuals on average owning more than three cards. The frequency of card payments remains notably high at 92.7 in 2022. The accessibility to formal financial services is seamless, contributing to a populace that is exceedingly at ease with using credit and debit cards for both online and in-store transactions. Consistent endeavors by the financial regulators to enhance knowledge about electronic payments and foster the expansion of payment acceptance infrastructure have further bolstered the progression of card payments.”

There has also been a significant change in consumer payment habits post pandemic as large number of consumers are moving away from cash payments, and instead opting for digital payment. The value of ATM cash withdrawals reduced by 20.9% and 5.9% in 2020 and 2021, respectively, a trend that continued in 2022 with a 3.4% decline.

Among the card types, credit and charge cards are favoured over debit cards, accounting for 53.7% in total card payments in 2023. This can be attributed to value added benefits such as reward points, and discounts on purchases at partner retailers. Debit cards account for the remaining 46.3% share. The debit card market in New Zealand is dominated by local scheme provider EFTPOS. The strong adoption of EFTPOS is due to its easy accessibility and higher merchant acceptance.

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Interchange fees cap boosts increased card acceptance

To further drive card acceptance among the merchants, New Zealand enacted a new legislation in November 2022 to regulate interchange fees on card payments. Accordingly, the interchange fees for consumer credit card transactions was capped at 0.8%, which was previously charged up to 2.25%. Similarly, online and contactless debit card transactions were capped at 0.6% and 0.2%, respectively.

Sharma concluded: “The economic recovery, rise in consumer spending, increased contactless adoption coupled with government support will continue to push card payments usage in New Zealand, which is projected to register a compound annual growth rate (CAGR) of 4.1% between 2023 to 2027 to reach NZ$ 120.2bn ($76.4bn) in 2027.”