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The Reserve Bank of Australia (RBA) has unveiled a new paper recommending the end of surcharging on debit, pre-paid, and credit cards across the eftpos, Mastercard, and Visa networks. This conclusion follows extensive consultations with various stakeholders.
According to the RBA’s statement, the surcharging framework, initially introduced over twenty years ago, is no longer effectively guiding consumers toward more efficient payment options. The original intent of the framework has diminished over time, especially as businesses increasingly apply uniform surcharges to all card types, complicating enforcement and coinciding with a decline in cash usage.
The paper highlights that eliminating surcharges would lead to simpler and more transparent card payments, fostering greater competition among payment service providers. Furthermore, the RBA points out that this change aligns with consumer preferences, as most people favor incorporating payment costs directly into advertised prices rather than encountering additional fees at checkout.
The paper found removing surcharges would make card payments simpler and more transparent, while also increasing competition among payment service providers.
“Removing surcharging also aligns with the preference of most consumers for payment costs to be incorporated into advertised prices,” the release said.
However, the Australian Hotels Association says the decision lets down both consumers and businesses.
“The RBA’s decision today doesn’t pass the pub test – instead of backing consumers and small businesses, the RBA has backed the banks, Visa, Mastercard and payments companies,” chief executive Stephen Ferguson said.
“It’s all smoke and mirrors – consumers and small businesses have been abandoned in the middle of a cost-of-living crisis.”
Ferguson said the RBA confirmed the total cost of a coffee or beer won’t decrease as a result of its decision.
“What was the purpose of the whole exercise if it wasn’t to decrease costs for consumers?” he said.
“Worse still, even if you pay cash now, they’ll still have their hands in your pocket thanks to today’s decision. People using their own money will still be subsidising the cost of those who borrow money.”
Other changes coming into force
The RBA will also lower the caps on interchange fees paid by Australian businesses.
“These changes are expected to lower businesses’ costs when they accept domestic or overseas card payments,” the RBA release said.
“Small businesses should benefit the most because they tend to pay fees closer to the existing caps.”
Transparency will also increase over fees charged by card networks and payment service providers.
“Improving transparency will enhance competition between players within the payments chain, put downward pressure on card payment costs and make it easier for businesses to shop around for a better deal,” the release said.
Card surcharges will end on October 1, 2026, while the reduction of the interchange caps for domestic card transactions will come into force on the same day.
The introduction of an interchange cap on foreign cards and some changes to payment cost transparency will come into effect later, on April 1, 2027, as the RBA said more time was needed for the payments industry to make these more “complex” changes.
A new public consultation will begin mid-year to look into other areas of the retail payments system, including mobile wallets, three-party card networks, “buy now pay later” services, and e-commerce platforms.
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