The Reserve Bank of Australia (RBA) has proposed eliminating surcharges on debit and credit card transactions, a move that could save Australian shoppers up to $1.2 billion annually. This significant call aims to simplify the payment system, reduce costs for consumers, and enhance the transparency of payment-related fees. The RBA’s proposal comes at a time when many Australians are facing rising living costs, with the central bank looking to alleviate some of the financial burdens by addressing this common but often overlooked surcharge.
The RBA’s plan is part of a broader strategy to overhaul Australia’s payment system. It focuses on three key changes: scrapping card surcharges, capping interchange fees, and pushing for greater transparency in fee structures. The central bank’s goal is to create a fairer, more competitive payments ecosystem that benefits both consumers and businesses, particularly small enterprises that bear a disproportionate burden of high transaction fees.
The Financial Impact of Surcharges
Surcharges on credit and debit card payments have long been a point of contention for consumers and businesses alike. According to the RBA, Australian shoppers are collectively paying $1.2 billion annually in these extra fees. These surcharges are applied by merchants when customers use credit, debit, or eftpos cards for purchases. The fees are meant to offset the costs that businesses incur when processing card payments, but they often result in higher prices for consumers.
The RBA’s proposal to eliminate these surcharges is seen as a potential relief for shoppers, particularly in a time of economic strain. If the plan goes through, it would make everyday transactions more affordable, especially for those who rely heavily on card payments. With nearly every Australian household using debit or credit cards for purchases, the potential savings are significant.
Interchange Fees: A Complex Issue
In addition to scrapping surcharges, the RBA is calling for caps on interchange fees, which are paid by businesses to banks for processing card transactions. These fees, often viewed as a hidden cost of doing business, have been a source of concern for many small businesses, which typically pay higher fees compared to large corporations. By capping interchange fees, the RBA believes it could help reduce operational costs for businesses, allowing them to invest in other areas like customer service or product innovation.
The RBA’s proposal suggests that reducing interchange fees could save Australian businesses a collective $1.2 billion annually. Furthermore, the RBA points out that about 90% of local businesses would stand to benefit from these changes, with small businesses expected to see the greatest gains. This move could help level the playing field, making it easier for small and medium-sized enterprises to compete with larger players in the market.
Backlash from Business Associations
Not everyone is on board with the RBA’s proposal. The Australian Restaurant & Cafe Association (ARCA) has criticized the plan, calling it a “short-sighted” policy that could harm small businesses. ARCA argues that eliminating surcharges would force merchants to absorb the costs, which they believe would ultimately be passed on to consumers in the form of higher prices.
Wes Lambert, the CEO of ARCA, expressed concerns about the impact of these changes during a period of rising living costs. He pointed out that businesses previously paying minimal fees could now face a substantial financial burden. The ARCA’s stance highlights the tension between consumer benefits and the financial challenges facing small businesses, particularly in the current economic environment.
Similarly, the Council of Small Business Organisations Australia (COSBOA) has raised concerns about the unintended consequences of removing surcharges. While COSBOA supports reforms aimed at improving fee transparency and reducing costs, it warns that small businesses could struggle to absorb the hidden costs that would result from the elimination of surcharges. This, they argue, could make it harder for businesses to remain transparent in their pricing and for consumers to make informed purchasing decisions.
Industry responses and the path forward
Despite the backlash from business groups, several industry players have welcomed the RBA’s proposal. Australian Payments Plus, which covers payment platforms like BPAY and eftpos, praised the plan, highlighting the potential for a simplified and more consistent payment experience for consumers. According to Adrian Lovney, the Chief Payments and Schemes Officer at Australian Payments Plus, removing surcharges would streamline the payment process and encourage better pricing models within the industry.
However, some major Australian banks and the Australian Banking Association (ABA) have expressed opposition to reducing interchange fees. They argue that these fees are essential for counteracting fraud and protecting consumers from chargebacks, a process that allows banks to reverse certain transactions. The ABA has called for caution, suggesting that lowering interchange fees could undermine the security features built into the current payment system.
The RBA’s proposal is still under review, with the central bank seeking public feedback until the end of August. The final decision is expected to be made later this year, with any changes potentially taking effect from the beginning of 2026.
