The Reserve Bank says that surcharges on debit, prepaid and credit card networks like EFTPOS, Mastercard and Visa are to be removed by October 1.
But the Australian Chamber of Commerce and Industry (ACCI) and Australian Banking Association (ABA) says fees are likely to rise as a result.
The Reserve Bank of Australia (RBA) made the decision in the wake of a review by its Payments System Board into card payment costs and surcharges; click here to read the board’s findings.
The board found that 76% of consumers want the practice to stop.
And the central bank says it intends to start talking to the public around June about regulating payment system not covered by the review like mobile wallets, three-party card networks, ‘buy-now, pay-later’ services and e-commerce platforms.
RESERVE BANK STATEMENT
In an RBA statement, the board says removing surcharges, reducing interchange fees and greater transparency would promote greater competition.
The board believes network surcharges on the use of debit, prepaid and credit cards is no longer working since its introduction more than 20 years ago, pointing to greater use of uniform rates by businesses and a shift away from cash as trends that reduced the role of surcharges.
The Reserve Bank says the new interchange cap on foreign cards and some changes to payment cost transparency will take effect on April 1, 2027, to give the payments industry enough time to make these more complex changes; click here for more media reports on the move.
CHAMBER REACTS
The ACCI claims the surcharge move could shift the burden of payment system costs onto small businesses at a time when many are already struggling with rising costs and greater economic pressure.
Chief Executive Officer (CEO) Andrew McKellar says: “Small businesses don’t surcharge because they want to — they surcharge because the payment system charges them money every time they receive payment from customers.
“If you remove the ability to recover those costs at the checkout, you are effectively dumping those costs onto small businesses,” he says.
The ACCI says treating surcharging as the problem is not tackling the real issue: high and opaque merchant card payment costs for businesses.
“Small businesses shouldn’t be punished for accepting payment, especially when the cost of doing business is already their number one pressure,” McKellar says.
BANKERS SPEAK OUT
The ABA says the move will favour large foreign companies over local ones and says credit card fees may rise and interest-free periods shorten; click here to visit their website.
“The Reserve Bank decision will see foreign multinationals extract an increasing share of revenue from the payments system to the long-term detriment of Australia,” CEO Simon Birmingham says.
“Australian banks invested more than $2 billion building new payments system and these deep cuts to interchange will erode their ability to fund future modernisation.
“International experience shows that this reduction in interchange will not lower costs for business; it will shift more of the fees they pay into the pockets of multinational payments and technology companies,” he says.
“Evidence suggests that under these changes Australian banks could receive less than half of the interchange revenue from many in-person payments, which challenges the viability of current card payment models.”
Birmingham says banks will be reconsidering what credit card conditions will be like after the change takes effect.
“If changes flow as the Reserve Bank foreshadowed, consumers face the possibility of higher card fees, higher rates and shorter interest-free periods,” he says.
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