RBA bans card surcharging as it targets $1.6b in fees
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The news: The Reserve Bank of Australia (RBA) will stop merchants from adding surcharges to card transactions from 1 October as it unveils its long-awaited reforms to Australia’s payment system.
Announcing its policy decisions on Tuesday, the central bank said the removal of surcharging on debit and credit cards on Eftpos, Visa, and Mastercard networks would mean consumers would only pay the sticker price of purchases. American Express cards will remain exempt from the change, being subject to a future review.
The central bank claimed it would end the $1.6 billion in annual surcharging fees charged to consumers, although merchants are expected to pass on some of their payment costs via higher prices.
The bank said the headline change would help increase simplicity, transparency and competition in payments as part of a broader raft of reforms.
It will also lower the caps on interchange fees paid directly by Australian businesses — especially small businesses which pay disproportionately more than larger merchants. It is expected to reduce interchange revenue by $660 million per year.
It will lower the cap on domestic credit cards to 0.3% and domestic debit cards to 8 cents or 0.16% from 1 October, and foreign-issued card transactions at 1% from 1 April 2027. It will maintain the cap on domestic commercial credit cards at 0.8%.
The RBA will also implement a raft of changes to increase transparency of payment fees to help businesses to lower costs and increase competition. Those measures include publishing average fees of each payment provider and comparing fees to others in market.
The central bank will require businesses to be provided with standardised information on their statements in order to make it easier to compare payment service providers, and force card networks to simplify the scheme fees they charge.
What they said: RBA governor Michelle Bullock said the changes would simplify card payments for consumers and provide better value to businesses on payment services.
“Surcharging no longer works as intended. Consumers and businesses find the rules complex and confusing, surcharges are often not well disclosed, and most consumers want surcharging to stop,” Bullock said, adding that interchange caps meanwhile would help lower costs for business.
“Removing surcharging needs to be paired with lower payment costs for businesses, especially for small businesses, which pay the highest fees.”
“We will also require payment service providers to give businesses all the information they need to get accurate quotes.”
The context: The Australian payments system has come under intense scrutiny as policymakers try to cut costs to small business and consumers as part of large-scale reform.
Tuesday’s decision concludes the RBA’s Merchant Cost and Surcharging Review, enabled by the expansion of its powers under the updated Payment System Regulation Act.
The central bank will next examine American Express, digital wallets like Apple Pay and Google Pay, and buy now, pay later schemes, beginning its public consultation in the middle of this year.
A parliamentary standing committee is meanwhile working on its own schemes, digital wallets and innovation in the payments sector, interviewing payment companies and banks in Canberra earlier this month.
The source: RBA
