Credit cards dominate New Zealand cashless payments
Introduction to New Zealand
An overview of New Zealand's currency, population and key statistics.
The New Zealand dollar (NZD), also known as tāra o Aotearoa in Māori, is the official currency of New Zealand and several other territories, including the Cook Islands, Niue, the Ross Dependency, Tokelau, and the British-owned Pitcairn Islands. It is denoted by the symbol $ and divided into 100 cents. Coin denominations of 10, 20, 50 cents, and 1 and 2 dollars, as well as banknote denominations of 5, 10, 20, 50, and 100 dollars, are in circulation.
New Zealand has yet to implement a digital currency. However, the Reserve Bank of New Zealand is actively exploring the potential for launching a central bank digital currency. The bank cites a few factors influencing this consideration, including the diminishing role and use of physical cash in the country, and the rise of private digital currencies like stablecoins. The central bank has launched a public consultation to explore the possibility of a digital currency in New Zealand.
New Zealand had a population of approximately 4.82 million as of the middle of 2020, according to United Nations data. Based on the most recent UN data, Worldometer estimated the population to have been around 4.85 million in 2021. Around 86.9% of the population resides in urban areas, mainly in Auckland, the largest city. The median age of the population was 38 years in 2021.
According to Stats New Zealand's preliminary estimates, the population had increased to around 5.2 million people by 2023. The gender ratio was nearly equal, with 2,616,000 females and 2,583,100 males.
English, Māori, and New Zealand Sign Language are the country’s three official languages. Historically, English has been the primary and unofficial official language. Māori, the native language of the indigenous community, was granted official status in 1987. New Zealand Sign Language was designated as an official language in 2006.
New Zealand had a gross domestic product per capita of US$42,271.71 in 2022, according to Trading Economics data. This is 335% above the global average. According to more recent CEIC data, GDP per capita was US$46,936.752 in March 2023, down from US$48,784.842 the previous year.
Internet & mobile phone trends
New Zealand had approximately 4.99 million internet users as of early 2023, according to DataReportal, translating to an internet penetration rate of 95.9%. The number of internet users in the country increased by 1.7%, or approximately 79,000, between 2022 and 2023. In addition, there were 6.54 million active mobile phone connections in New Zealand as of early 2023.
Statista forecasts that New Zealand's e-commerce market revenue will reach approximately NZ$5.55 billion in 2023. The market is expected to grow at an annual rate of 11.89% between 2023 and 2027, reaching a volume of around NZ$8.7 billion. In a global context, 74% of people in the US, 81% in the UK, and 69% in China made at least one online purchase in the preceding 12 months as of 2021. Projections for New Zealand suggest that its e-commerce revenue could reach NZ$6.3 billion in 2023 and surpass NZ$10 billion by 2027.
Summary of fiscal policy
New Zealand's approach to fiscal policy has undergone several refinements, with a key change being the implementation of the Fiscal Responsibility Act of 1994. Instead of establishing mandatory financial targets, this unique legislation establishes "principles of responsible fiscal management." The act requires the government to outline both short-term and long-term fiscal plans and goals across a variety of financial metrics.
Despite this, a study by AUT University has found that the country is trapped in a cycle of low-value output, inadequate wages, and sluggish productivity growth. The OECD has identified several contributing factors to New Zealand's so-called "Productivity Paradox," such as weak competition regulations, insufficient savings, and inadequate investment in research and development.
Additionally, the New Zealand workforce faces a skills gap, where the training individuals receive does not align with the skills needed for economic success. The study also highlights managerial deficiencies, citing a lack of competition and the prevalence of small firms as reasons many managers in the country are underqualified.
How people pay in New Zealand
An overview of how people in New Zealand choose to make payments.
Traditional payment methods
The primary traditional payment methods used in New Zealand
A Visa credit/debit card is a financial payment card issued by banks or financial institutions. It allows users to make purchases, withdraw cash, and be used online and in person. Visa's processing network can handle over 65,000 transaction messages per second.
Mastercard is a worldwide payment network that links financial institutions, merchants, and individuals, facilitating seamless transactions. This renowned company provides a range of credit and debit cards issued through partner banks. Depending on the specific bank, customers may enjoy supplementary benefits such as rewards programs, cashback offers, and insurance coverage.
American Express cards encompass a range of payment cards provided by the multinational financial services corporation, American Express Company. The Amex card portfolio includes diverse options like credit cards, charge cards, and prepaid cards. Renowned for their broad acceptance among merchants, these cards grant cardholders access to various advantages, including perks, rewards programs, travel benefits, and dedicated customer service assistance.
Alternative payment methods (APM's)
Alternative payment methods
POLi is a digital payment platform available in Australia and New Zealand. It is designed to facilitate secure transactions directly between a user's online banking account and a business. POLi is an alternative to payment methods such as PayPal, BPAY, and credit cards. It allows customers to use their banks' internet services to make purchases. One benefit of using POLi is that businesses receive instant payment confirmation. Customers are not required to register to use the service.
PayPal is a frequently used digital payment system that allows clients to use their PayPal accounts, debit/credit cards, or bank accounts. Customers use PayPal for secure online shopping and to send/receive money.
Apple Pay, a mobile payment service from Apple Inc., allows users to make in-person, online, and in-app payments. It replaces chip and PIN transactions at contactless terminals.
Google Pay is a digital wallet and payment service developed by Google. It allows users to make secure payments using their mobile devices or computers. It supports various payment methods, offers compatibility across different devices, and provides features like loyalty program integration and transit ticketing. Google Pay prioritises security and convenience with tokenisation and biometric authentication. It has expanded to include digital banking services and continues to evolve.
Afterpay is a financial service that allows consumers to spread the cost of their purchases over a series of payments. The total amount is typically divided into four instalments, with the first instalment due at the time of purchase and the remainder due every two weeks for six weeks. For more expensive orders, Afterpay offers a different product that resembles an instalment loan, which allows customers to choose a six- or 12-month repayment plan with interest.
Accepting payments in New Zealand
A guide to accepting payments in New Zealand.
How to accept online payments in New Zealand
Before accepting online payments, you must determine which methods you prefer. Then you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.
Although there are plenty of payment gateway options in New Zealand, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
1. The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
2. The retailer sends the payment details to the acquirer, who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).
3. The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
4. The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. If the payment is approved, the issuer sends an authorisation code to the payment scheme.
5. The payment scheme sends the authorisation code to the acquirer, which then sends it to the retailer, completing the transaction.
How long does an international payment from New Zealand take?
The payment processing time may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can quickly and conveniently send money to multiple destinations.
Bank debit/credit cards: International payments with bank debit or credit cards may take a few minutes to a few hours, depending on bank processing times.
Online money transfers: Platforms like PayPal can process international payments within minutes to hours, depending on the service and destination country.
Wire transfers: Traditional bank-to-bank transfers via SWIFT or wire may take one to five business days or longer, depending on the destination country, intermediary banks, and transaction requirements.
Merchant fees for online payments in New Zealand can vary depending on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in New Zealand:
Credit and debit cards: Merchant fees for accepting online credit and debit card payments can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.
Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.
Other fees surrounding online payments in New Zealand include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:
Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.
Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.
Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.
Merchant discount rate: A processing fee that merchants are charged for transactions made using credit or debit cards. This fee generally falls within 1% to 3% of the total transaction amount.
Security challenges of online payments in New Zealand
Online payments in New Zealand present several security issues. E-commerce platforms are frequently targeted by cybercriminals who aim to steal customer payment data for fraudulent activities. Since your customers are required to enter both personal and financial information when making online purchases, this increases the vulnerability of your website to attacks.
To address these security concerns, take certain preparatory measures before modifying your business operations to accept online payments. Among these are the implementation of a robust and secure online store or e-commerce system, as well as the careful selection of a secure payment gateway. Businesses also need to be aware of the distinct security requirements and compliance standards for each payment method.
Furthermore, the payment card industry has established the Data Security Standard (PCI DSS) for businesses that accept credit cards. This standard sets the baseline for the secure handling of payment data and is crucial for any business processing credit card payments online. Adherence to PCI-compliant service providers and integration of these security measures can significantly reduce the risk of cyber-attacks.
Key sectors & industries in New Zealand
According to the US International Trade Administration and other various sources, the top 10 industries in New Zealand are:
New Zealand is a major player in the global dairy export market. It also exports large amounts of beef, mutton, wool, fruits, vegetables, and wine. The agricultural sector is the backbone of the country's economy, and it is also responsive to consumer preferences, as evidenced by the value of the country's organic sector reaching NZ$455 million in 2020.
The national government is advancing reforms in response to the significant challenges that local governments in New Zealand face in managing drinking water, stormwater, and wastewater services. As part of the Three Waters Reform program, four public water service entities will oversee these services from July 2024. This national initiative to improve water infrastructure is expected to cost between NZ$75 billion and NZ$100 billion.
The electric vehicle market in New Zealand is rapidly expanding. Statista forecasts that the revenue in this sector may reach approximately NZ$1.838 billion in 2023, and is projected to grow at an annual rate of 13.47% between 2023 and 2028, to an estimated market value of NZ$3.457 billion. The market is expected to reach 45,800 vehicles in terms of unit sales by 2028.
The healthcare system in New Zealand is a mixed public-private-nonprofit system, with the government covering approximately 85% of healthcare costs. This allows residents to access free or subsidised medical care. The government allocated a NZ$7 billion annual healthcare budget in May 2022. This funding will primarily be used to renovate regional hospitals, improve ambulance services (road and air), and introduce new medications.
New Zealand has a sophisticated digital infrastructure, ranking among the top 20 countries in the world in terms of network coverage, 5G rollout, and internet speeds. The information, communications, and technology (ICT) sector is the country's third-largest source of export revenue, generating over NZ$8.7 billion annually. It comprises approximately 7,500 organisations, and most global brands have a presence in the New Zealand market.
The gaming industry in New Zealand is rapidly expanding and has enormous potential. The country's game development industry earned more than NZ$323 million in the fiscal year ending March 2021, a 59% increase over the previous year. Most of this revenue came from exports of interactive software and online services.
Tourism is a vital sector in New Zealand, previously being the country's largest export industry, generating NZ$40.9 billion and employing nearly 10% of the workforce. It has a substantial positive effect on regional economies. Tourism expenditure increased by 2.7% to NZ$26.5 million for the fiscal year ending March 202
Education is a key sector in New Zealand, and it has made notable progress in recent years. According to OECD data, the percentage of 25- to 34-year-olds with tertiary education has risen to 45% in 2021 from 29% in 2000. This is still slightly lower than the OECD average of 47%, but it represents a significant improvement. However, in terms of early childhood education, the country still lags behind the OECD average. Only 59% of children aged three to five were enrolled in early childhood education programs in 2020, compared with the OECD average of 83%.
Mining contributes significantly to the New Zealand economy. The industry primarily extracts coal, gold, and silver, which are used both domestically and for export. The mining sector contributed approximately NZ$2.2 billion to GDP as of March 2022. Thousands of people work directly in the mining industry, extracting valuable resources such as coal, iron ore, gold, and silver.
The forestry sector is an important part of New Zealand's economy, employing over 35,000 people, mostly in rural areas. The government introduced the Forestry and Wood Processing Industry Transformation Plan (ITP) to support wood processing in the country and develop a high-value, low-carbon industry. The plan aims to increase output from the wood processing sector by 25% or 3.5 million cubic metres by 2030 and NZ$600 million in export earnings from value-added wood products by 2040. To ensure the successful implementation of the ITP, the government has allocated NZ$27 million in the 2022 budget, with an additional NZ$155 million set aside for ITP-related initiatives and projects.
New Zealand's imports and exports
New Zealand's trade landscape was vibrant in 2022. Imports increased by 23.3% to $54.4 billion, up from $43.8 billion in 2018. Machinery and computers were the main drivers, accounting for 13.4% of total imports. Vehicles came in second at 13.2%, followed by mineral fuels such as oil at 11.5%.
Electrical machinery, equipment, and plastics all contributed significantly to the overall import figures. Interestingly, mainland China emerged as the dominant supplier, contributing 35.6% of New Zealand's total imports. Australia, the United States, South Korea, and Japan also played notable roles.
New Zealand's exports performed well in 2022, with total exports valued at US$44 billion. Dairy, eggs, and honey led the way, accounting for 30.4% of total export volume. Meat exports held their own, accounting for 14.3% of total exports.
Wood, fruits, and beverages (including spirits and vinegar) rounded out the top five export categories, each making a significant contribution. Mainland China was New Zealand's top export destination, accounting for 28.8% of the total. Australia and the United States came in second and third, with 11.2% and 10.9%, respectively, with Japan and South Korea also being significant export destinations.
Regulation in New Zealand
The regulatory environment of New Zealand
Summary of the regulatory environment in New Zealand
To maintain fairness and operational smoothness in business ventures in New Zealand, entrepreneurs are required to comply with a range of laws and regulations, which include:
Company law: This includes regulations governing companies' establishment, operations, and dissolution.
Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.
Product liability law: This includes regulations governing the legal liabilities and responsibilities of manufacturers, sellers, distributors, and other parties involved in the production and sale of goods.
Intellectual property law: This includes regulations governing copyrights, patents, and trademarks.
Competition law: This includes regulations governing competition and antitrust matters to promote fair competition.
Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.
Data protection law: This includes regulations concerning the collection, use, and storage of personal data.
In New Zealand, the Employment Relations Authority oversees employment law, enforcing labour relations and worker rights rules. The Privacy Act passed on June 30, 2020 is the key legal framework for data protection in New Zealand. The Office of the Privacy Commissioner is the primary regulatory body overseeing data protection, ensuring compliance, and educating the public about privacy issues. These agencies help maintain a fair and up-to-date legal landscape in New Zealand.
How card payments are regulated in New Zealand
The Retail Payment System Act of New Zealand was enacted in 2022 to establish a regulatory framework for the country's retail payment system, which consists mainly of banks, credit card schemes, and merchants. The act aims to reduce the fees merchants pay for transaction processing and empowers the Commerce Commission to monitor and intervene in the system.
The Ministry of Business, Innovation, and Employment is also committed to ensuring that the payment system serves both businesses and consumers. The act further contains provisions aimed at increasing economic efficiency and competition in the sector.
Do I need a licence?
In New Zealand, you don't need a licence to establish a new business. However, there are various requirements that you need to follow to operate a successful business. For instance, you must notify Inland Revenue about any changes in your tax status. In addition, depending on the type of business that you operate, you may also require different licences and certificates.
If you're planning on starting a business that involves the production, selling, or distribution of food, then you'll need to apply for a licence, which will ensure that your enterprise is following the country's safety and food handling standards.
Payment solutions in New Zealand
An overview of how to accept payments from customers in New Zealand
Payment gateways and providers in New Zealand
New Zealand's evolving payment landscape requires merchants to accommodate multiple transaction forms. Businesses are thus seeking versatile payment solutions. APEXX uses its payment orchestration layer (POL) to link payment methods and banks.
The POL's strength lies in its support for various payment types and its features that boost business productivity.
Thanks to APEXX's pre-configured plugins and APIs, integrating its payment services into current systems is hassle-free. It allows smooth compatibility with different platforms, including online stores and point-of-sale systems, enhancing workflow.
APEXX's solutions allow firms to process diverse payments and enhance transaction volumes. Its flexible framework helps in elevating customer service.
Cheapest payment solutions in New Zealand
To reduce fees in their payment stacks, merchants in New Zealand can implement the following strategies:
Negotiate fees: Merchants should negotiate with their payment providers for better rates, including transaction fees, and monthly fees.
Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees.
Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.
Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.
Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.
Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.
Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.
BNPL in New Zealand
The buy now, pay later (BNPL) sector in New Zealand is rapidly expanding, providing a new credit option, particularly for online shopping. OpenPay, Afterpay, and Laybuy are among the major players in the market.
BNPL transactions were expected to increase by 58% year on year to NZ$771.9 million in 2021. Long-term prospects for the country remain bright, with a compound annual growth rate of 27.4% projected from 2021 to 2028. The market value of BNPL could reach NZ$4.2 billion by 2028. The Ministry of Business is also seeking feedback on the benefits and drawbacks of BNPL, which could foreshadow future regulations.
Merchants can use APEXX's solution to take advantage of the numerous opportunities offered by the emergence of alternative payment methods. The solution allows them to manage their various operations and integrate different systems.