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The Reserve Bank of Australia (RBA) has opened a consultation into card surcharging, which it says is no longer achieving its intended purpose of guiding consumers towards efficient payment choices.
The central bank released a consultation paper on July 15 as part of its Review of Merchant Card Payment Costs and Surcharging, which aims to ensure its objectives of competition, efficiency and safety in the payments system are achieved.
Along with the Payments System Board, the RBA has said that it would be in the public interest to remove surcharging on eftpos, Mastercard, and Visa card transactions, among several other proposed reforms.
The deadline for responses is August 26, 2025, and the RBA plans to publish its conclusions and an implementation timeline for any regulatory steps by the end of the year.
Australian consumers currently pay around $1.2bn (US$788m) in card surcharges each year.
More clarity, more competition
The RBA noted that as cash usage has declined, it has become harder for consumers to avoid surcharges.
In addition, it said businesses are increasingly charging the same surcharge rate for both debit and credit cards, and noted that there are significant challenges with enforcing the current surcharging rules.
Removing surcharging would make card payments simpler, more transparent and help to increase competition in the card payments system, the central bank concluded.
It also recommended lowering the cap on interchange fees paid by businesses, and said this could save them around $1.2bn in interchange fees each year.
The bank said that around 90 percent of Australian businesses would be better off under the recommended policies.
“The proposed reductions to interchange caps would benefit small businesses the most, as they tend to pay fees closer to the existing caps. Introducing caps on foreign interchange fees would help to lower fees for all businesses accepting international cards,” the RBA said.
In addition, it recommended requiring card networks and large acquirers to publish the fees they charge, which would improve transparency.
The hope is that increased competition will help all players better understand the fees they pay and make it easier for businesses to find better deals.
Addressing a nuisance
Surcharging has been banned in the UK and EU since 2018 under PSD2, though it remains a common practice in Australia and the US.
As covered by Vixio, reducing debit card surcharges is one of the Australian Treasury’s priorities in its two-year regulatory reform plan, which aims to modernise the country’s payments framework.
The practice has proven a nuisance for Australian consumers, who are already suffering the effects of high inflation. But as cash use has declined, surcharges have become more difficult for consumers to avoid.
In February, Jerome Laxale, Labor MP for Bennelong in northern Sydney, urged the Treasury and the RBA to create new powers that would allow regulators to penalise acquirers that charge "excessive" merchant fees.
Laxale warned that prohibiting surcharging alone is no solution if merchants continue to be locked into blended pricing plans that conceal the true cost of each payment.
Last year, the CEO of Australia’s largest bank came under fire after suggesting that merchants were overcharging consumers by adding card payment surcharges. He made the comments to the House of Representatives Standing Committee on Economics.
Impact of a ban
If Australia were to ban surcharging, it would affect all parts of the ecosystem.
The hope is that consumers would benefit from lower and clearer prices, although merchants would have to choose between absorbing the cost of accepting card payments or putting up prices.
A ban could also see merchants refuse to accept higher-cost payment methods, such as American Express and other credit cards, favouring debit and eftpos.
The RBA will hope that this might prompt providers to reduce their rates to stay competitive, which would in turn reduce costs for consumers.
However, this is by no means certain – as covered by Vixio, the EU’s surcharging ban has been contentious, with merchants and payment schemes arguing that it has not led to meaningful cost reductions.
