(Reuters) - New Zealand's Commerce Commission on Wednesday issued a draft decision to reduce the fees that local businesses pay to accept Visa and Mastercard ( MA ) payments.

The proposal would lead to an annual reduction of around NZ$260 million ($149.50 million) in the largest component of the fees charged to New Zealand businesses for receiving Visa and Mastercard ( MA ) payments, according to the Commission's statement.

"We're also setting the clear expectation that payment providers and businesses should pass these savings on to customers," said Commission Chair John Small.

A 'merchant service fee' is assessed to the company that receives the payment whenever a customer uses a Mastercard ( MA ) or Visa credit card, or makes a contactless payment.

The companies try to recoup this cost by raising retail prices or imposing surcharges, the Commission said in the statement.

New Zealand businesses have shouldered about NZ$1 billion in annual fees to offer Visa and Mastercard ( MA ) payment options, with consumers spending nearly NZ$95 billion using these services, the Commission said.

It further added that this decision is part of the Commission's ongoing efforts to simplify and reduce payment costs for businesses and consumers alike.

($1 = 1.7391 New Zealand dollars)