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New data from the Reserve Bank of Australia (RBA) indicates that merchant fees rose sharply towards the end of 2024 — a finding that could become a key factor in the country’s showdown over surcharging.
In Q4 2024, total average merchant fees for accepting payments via eftpos hit a new high of 0.4 percent per transaction, an increase of 33 percent over the previous quarter.
Average fees for accepting debit payments via Visa and Mastercard also rose in Q4, albeit less sharply, at 6 and 8 percent respectively.
Average credit card fees also climbed, with Visa and Mastercard up 5.5 percent and 6.7 percent respectively.
The figures make for sobering reading for the RBA, whose efforts to promote eftpos as a low-cost alternative to Visa and Mastercard appear to be showing diminishing returns.
As noted by the RBA, the December 2024 data was also affected by changes in the way the data is collected.
Specifically, the RBA expanded its data collection on merchant fees to include “larger payment facilitators” and “additional acquirers”.
However, the central bank did not specify which entities were newly included in the December 2024 data.
Peter Drennan, head of research at the Independent Payments Forum (IPF), noted that, at the very least, it is clear that these newly included entities are charging merchants significantly higher fees for the same transaction types.
The inclusion of these new entities also calls into question the accuracy of the RBA's previous data on merchant fees, which are likely to have been higher than previously stated.
The case for ending blended pricing
The RBA’s latest data highlights the lack of transparency merchants face when it comes to pricing structures for payment acceptance — a key component in the country’s surcharging debate.
As covered by Vixio, the RBA has acknowledged that opaque pricing is a more serious problem for small and medium-sized businesses, which are more likely to recoup their payment costs through surcharging.
Unlike larger retailers, small businesses are unable to negotiate favourable rates with their payment providers, including cut-price interchange fees and scheme fee rebates.
In addition, most small and medium-sized merchants are on fixed or blended pricing plans, whereby their acquirer charges them a flat rate to accept any type of transaction.
As noted in the RBA’s Issues Paper on surcharging, the use of fixed pricing plans means that merchants are unaware of their payment costs across different networks.
In particular, savings that merchants could have enjoyed when accepting payments via eftpos, Australia’s lowest-cost network, are not passed on to the merchant, and are instead pocketed by their acquirer.
Fixed pricing plans also encourage merchants to surcharge for every transaction, regardless of its true cost.
“This means that consumers may be paying more than necessary for debit card transactions, given debit card transactions are much cheaper to process than credit card transactions,” said the RBA.
“It also means that the price signal for consumers to use a lower cost payment method is dampened.
“In other words, consumers using higher cost payment methods (such as credit cards) are being cross-subsidised by those using lower cost methods (such as debit cards).”
The dangers of banning surcharging without price reform
Australia’s existing surcharging framework already prohibits merchants from imposing “excessive” surcharges on consumers.
As per the Competition and Consumer Act 2010, an excessive surcharge is defined as surcharging the consumer over and above the merchant’s “cost of acceptance”.
The problem, as the RBA acknowledges, is that those costs are now unclear, thanks to fixed-rate pricing and to the bundling of other non-payment-related costs, such as software services.
When the RBA opened its latest consultation on surcharging in October last year, the Albanese government said it plans to introduce a ban on debit surcharging from January 1, 2026.
This proposal appears to have fairly wide support. "Big Four" banks Westpac and NAB have said they support a debit surcharge ban alongside controls on credit surcharging, and ANZ said it supports a revision of the definition of “cost of acceptance”, to rein in excessive surcharging.
Commonwealth Bank (CBA), the largest acquirer in Australia, has said it supports a blanket ban on surcharging — a move also favoured by Visa and Mastercard — while other acquirers such as Block, Stripe and Worldline oppose a surcharge ban.
For others, such as the IPF, the key danger of a ban is that surcharging has been permitted for so long that it is now a key component of small business revenue.
Many of these small businesses operate in highly competitive sectors with low profit margins. Fuel retailing has a profit margin of 3 percent, for example, food retailing 4 percent, and the overall retail industry 6 percent.
“A political objective has been set to remove the practice of surcharging,” said IPF co-founders Brad Kelly and Warwick Ponder. “This is an existential risk to many small businesses, because surcharging is used to defray operating costs, namely payments acceptance costs.”
The IPF has therefore called for regulation that separates debit from credit pricing, alongside new regulations on scheme fees and acquirer margins, before any ban is considered.
