The Reserve Bank of Australia (RBA) has proposed banning debit and credit card surcharges as part of a broader reform of the nation’s payments system, which also includes potential changes to interchange fee caps. The central bank estimates the measure could save Australians a collective $1.2 billion annually, based on the removal of per-transaction charges.
In the middle of the public discussion, Yahoo Finance reported that Mastercard has raised concerns about the broader impact of these changes, suggesting they could influence rewards programs, alter credit card fee structures, and prompt pricing adjustments across different sectors of the Australian economy.
RBA Proposal Aims to Eliminate Surcharges
The RBA’s draft policy would mean Australians no longer paying a surcharge each time they tap their card. The bank estimates the average person could save around $60 annually. The plan also includes changes to interchange fees—charges a merchant’s bank pays to the customer’s bank for each transaction.
To achieve the projected savings, businesses would need to absorb these costs entirely rather than pass them on through higher prices. Business owners, however, have suggested that absorbing the costs may force them to raise prices to remain viable.
A Yahoo Finance poll of more than 1,700 readers found 71% would accept higher prices if surcharges were banned.
Mastercard’s Warning on Unintended Consequences
Richard Wormald, Mastercard’s division president for Australasia, expressed concern about the RBA’s expectations.
“What the RBA is doing by a broad-based reduction in interchange fees… the net result, we think, is not a $1.2 billion saving for consumers, as the RBA suggests, but a $1.5 billion cost increase for consumers,” he said.
“The RBA is assuming that there’s this perfect storm of generosity that every stakeholder is going to act against their own commercial interest,” Wormald told Yahoo Finance.
Wormald added that banks would “have to rebuild nearly every product” they offer, and it could take several years before new charges appear in the market.
Potential Changes to Interchange Fees
Currently, domestic credit card interchange fees are capped at 0.8% of the transaction value, though the weighted average is closer to 0.5%. Debit and prepaid card fees are capped at 0.2% or 10 cents, whichever is lower.
Foreign card transactions have no cap, with rates reaching up to 2.4%. The RBA is considering lowering domestic caps and introducing caps for foreign card transactions. It argues these changes could save merchants hundreds of millions of dollars.
Historically, interchange fees have funded the development of systems such as the eftpos network, contactless payments, and tokenised mobile wallets.
Projected Impacts on Consumers
Mastercard, in its assessment of the RBA’s draft proposal, outlined several potential financial impacts it believes could emerge if the changes to surcharges and interchange fee caps are implemented, highlighting specific areas where consumers and businesses might experience increased costs or reduced benefits.
Mastercard estimates the proposed changes could lead to:
- $421 million cut in rewards programs like frequent flyer points and cashback offers
- $384 million annual increase in credit card fees
- $260 million rise in credit card account-keeping fees
- $260 million in higher costs from large retailers losing access to negotiated low interchange rates
Large retailers such as Woolworths and Coles could face higher credit acceptance costs if the proposed caps remove their preferential rates. These increases could then flow through to higher shelf prices.
