Credit Cards, Culture and Conduct.

I am on the board of an insurance organization. In practical terms, this means that, like all my fellow board members, I spend an inordinate amount of time ensuring that our culture and conduct are always fair to customers—or, as we in the insurance industry call them, our policyholders. Fortunately, we are proactive in this area, which is important because, over the past couple of years, our sector has faced a blowtorch of attention to ensure that our behaviour demonstrates both a policyholder-centric culture and conduct aligned accordingly.

Readers may be aware that, a couple of years ago, Australian regulators launched an investigation into their banking and insurance sectors due to perceived breaches in culture and conduct. In New Zealand, we are currently in the throes of a banking inquiry that seeks to determine whether our banking institutions act fairly or generate a defensible level of profit.

I’ve been thinking about banking inquiries recently. Last week, at Cactus, we received a letter from our bank informing us that an individual who had come into our store in Auckland and spent several thousand dollars had, in fact, used a stolen credit card. Since the card was stolen, Visa instructed the bank to reverse the transaction. For context, the individual in question had the physical card and, as is common practice, simply waved it at the EFTPOS machine to complete the transaction. Additionally, we have very impressive security cameras in our stores, which provided crystal-clear images of him and his accomplice. We even received a confirmed identification from several separate individuals who responded to our social media post about the theft.

So here we are—a retailer out of pocket by well over $3,000 and a perpetrator clearly and unequivocally identified. One would think that, if culture and conduct were at the forefront, Visa would take this information and pursue the perpetrator to seek reparations. This would seem especially likely if you consider that Visa made USD16 billion in profit last year, up 12% from the year before.

You’d also think that, as a credit card company purporting to offer both customers and vendors a secure and reliable platform to avoid the risks of carrying cash and transact electronically, Visa would have a strong incentive to ensure that fraud is quickly stamped out. You’d think so—but you’d be completely wrong.

Visa only cares about their fees and that aforementioned USD16 billion annual profit. In this case, Visa made it clear: it was a fraudulent transaction. The genuine cardholder denied making the transaction, so Visa simply reversed it. In their minds, it seems, “screw the retailer” is the culture and conduct they wish to perpetuate.

It seems a little bizarre, then, that we are in the midst of discussing whether bank profits are excessive while ignoring the predatory behaviour of credit card companies—behaviour that threatens the viability of countless small Kiwi businesses. I understand the policy argument about opening the floodgates for fraudulent transactions, but I’ll point out again that Visa claims to offer a secure platform while virtually forcing vendors to accept credit card payments. When that platform proves to be not at all secure, Visa accepts zero culpability. That is deeply problematic.

So, what do I want? What would be a good outcome? From Cactus’s perspective, it would obviously be great to actually receive the money we accepted in good faith for goods we sold. But this issue goes far beyond us. A few thousand dollars won’t make or break us. What’s more concerning is the aggregate effect of this practice—a few thousand dollars multiplied across thousands and thousands of New Zealand retailers who accept credit cards. Do the math, and you see a significant figure being siphoned out of New Zealand by a foreign-domiciled mega-corporation, harming the existence of a significant number of New Zealand businesses.

The banking inquiry should absolutely examine the culture and conduct of credit card companies, particularly regarding the unilateral reversal of credit card transactions from vendors who accept those transactions in good faith. I’m calling on the government to broaden the banking inquiry to scrutinize the behaviour of these credit card companies. In doing so, we can make it a little harder for huge commercial monoliths to exploit New Zealand retailers.