The Reserve Bank of Australia (RBA) has released a Consultation Paper as part of its Review of Merchant Card Payment Costs and Surcharging. The paper proposes significant changes to Australia’s payment systems, including the removal of card surcharges, which the Payments System Board claims will save consumers $1.2 billion per year.
The paper also proposes lowering the cap on interchange fees and requiring card networks and large acquirers to publish the fees they charge.
The proposals present a “mixed bag” for businesses, offering some welcomed reforms in transparency and fee reductions, but risking serious unintended consequences by eliminating the right to surcharge, says Council of Small Business Organisations Australia (COSBOA) Chair Matthew Addison.
“The RBA’s claim of $1.2 billion in consumer savings is a mirage,” he said. “The reduced interchange fee is welcomed; however merchant fees include many other charges. The reality is that these fees will still be paid, just not disclosed. That cost will be baked into the price of coffee, groceries, and services across the country.”
ACAPMA says the Consultation Paper is a “missed opportunity to overhaul the payments system” and “demonstrates a failure to understand the realities facing small businesses”.
“Sectors such as petrol and convenience operate on slim margins and the RBA should be looking at ways to reduce the cost of doing business, not increasing costs or forcing businesses to pass on increased costs in the form of higher prices,” a spokesperson for the industry body said.
The Independents Payment Forum (IPF) warned the RBA’s proposed regulatory options fail small businesses and the local communities they serve.
“Today small business pays the lion’s share of more than $6.4 billion in processing fees charged by banks, PSPs and card schemes and this will not change under the RBA’s proposals,” IPF co-founder Bradford Kelly said.
Proposal to remove surcharging on eftpos, Mastercard and Visa cards
The consultation paper claims surcharging is no longer achieving its intended purpose of steering consumers to make more efficient payment choices.
“Removing surcharging would make card payments simpler, more transparent and help to increase competition in the card payments system,” the paper states.
Australian Payments Plus (AP+) Chief Payments and Schemes Officer Adrian Lovney says the proposed changes will simplify the payment experience for customers and bring consistency across the industry.
“But it also means merchants will need to absorb these costs, making efficient payment routing and competitive and transparent pricing more important than ever,” he said.
COSBOA says removing surcharges doesn’t remove all the cost, it simply hides it.
“For small businesses already managing tight margins, this means those costs would have to be absorbed into base prices, making it harder for businesses to be transparent and for consumers to make informed choices,” Mr Addison said.
“A blanket ban ignores the real issue: high and complex payment costs driven by opaque pricing and a lack of competition.”
Proposal to lower the cap on interchange fees paid by businesses
The paper claims lowering the cap on interchange fees could save businesses around $1.2 billion a year, with small businesses to benefit the most, as they tend to pay fees closer to the existing caps.
Proposal to require card networks and large acquirers to publish the fees they charge
Improving transparency and competition will help all players better understand the fees they are charged and make it easier for businesses to shop around for a better deal, states the paper.
AP+ supports measures that promote cost transparency and competition across the payment system.
“Interchange and scheme fees are one component of the overall card acceptance payment cost that merchants pay to their banks and payment service providers,” Mr Lovney said.
“Thoughtful regulation in this area will help support a more competitive and efficient payment system for Australia.”
ACAPMA recommends legislative measures requiring acquirers and payment service providers to disclose detailed breakdowns of costs – interchange, PSP fees, and scheme fees.
“The RBA or ACCC would then publish such data (akin to petrol price transparency) to enable easier comparison,” it said.
Ongoing calls and consultation
IPF, whose participants represent more than 100,000 retail shop fronts including convenience stores, pharmacies and independent supermarkets, says the RBA’s paper fails to address fundamental issues such as:
- Regulating and capping (scheme) fees charged by card schemes like Visa, Mastercard and eftpos, which make up half the wholesale cost of a debit card payment
- Separating debit and credit card fees by disallowing a practice known as “blended rates” which artificially inflates debit card fees
- Mandating dynamic least-cost routing in a way that ensures savings are returned to small businesses and their customers.
“We as a nation must decide if we genuinely appreciate and want small business,” Mr Kelly said. “If so, these proposed changes need urgent revision.”
ACAPMA has also called on the implementation of dynamic Least-Cost Routing (LCR) for debit cards by January 1, 2026.
“This would allow automatic routing of transactions through the most economical network at the point of sale, rather than relying on static routing which often forces payments through costlier credit-card networks,” ACAPMA said.
Mr Addison from COSBOA added: “If the RBA and government are serious about helping small business, the focus should be on increasing competition, enforcing least-cost routing, and regulating payment providers, not restricting merchant rights.”
The RBA invites feedback on the proposed policy options and draft standards by 26 August 2025. It will draw on this feedback and publish conclusions and an implementation timeline for any regulatory steps by the end of the year.
