Unpacking the RBA’s Ban on Card Surcharging and New Interchange Caps

Changes to the rules on merchant card fees in Australia aim to introduce greater transparency and spur competition, and will contribute to the shifting landscape as alternative payment methods expand the variety of options.

Announced in a Conclusions Paper published by the Reserve Bank of Australia (RBA) at the end of March 2026, the decision to ban surcharging and reduce the caps on interchange fees effectively ends a 20-year experiment in favour of a more European-style model of lower interchange and all-inclusive pricing.

The announcement is the culmination of a process that has been underway since 2024, and will see the removal of surcharging on debit, prepaid and credit cards on the designated eftpos, Mastercard and Visa card networks.

The Payments System Board (PSB), which is responsible for the RBA’s payments system policy, has also determined that surcharging and merchant card payment costs are interconnected issues, and that it is in the public interest to reduce the interchange fees on card payments.

The domestic-issued debit and prepaid card interchange cap will fall to 8 cents (or 0.16 percent on an ad-valorem basis), and the domestic-issued consumer credit card interchange cap will fall to 0.3 percent.

The interchange cap for domestic-issued commercial credit cards will stay at 0.8 percent, and an interchange cap of 1.0 percent will be introduced for all foreign-issued card transactions.

The 16 percent of Australian businesses that currently implement surcharges will have to amend their pricing, although businesses will still be able to offer discounts if they choose, including to consumers who pay by cash.

The removal of surcharging and reductions in interchange caps for domestic card transactions will take effect on October 1, 2026. 

The introduction of the interchange cap on foreign cards and some changes to payment cost transparency will come into effect later, on April 1, 2027. This is to ensure the industry has enough time to implement these more complex changes.

The drivers of the changes

The RBA and the PSB have introduced the changes because they believe the surcharging framework, introduced more than two decades ago, is no longer achieving its intended purpose of encouraging consumers to make more efficient payment choices.

Their thinking has been influenced by factors such as single-rate surcharging (where merchants charge the same percentage fee for all card types, despite different card types having different underlying costs), the decreasing use of cash, concerns about a lack of transparency and the need to level the playing field with other payment types such as buy now, pay later (BNPL).

The regulators argue that removing surcharging will make card payments simpler, more transparent and increase competition among payment service providers (PSPs).

They also note that “removing surcharging aligns with the preference of most consumers for payment costs to be incorporated into advertised prices.”

The impact of the changes

The PSB’s assessment is that removing surcharging will enhance competition and efficiency in the payments system by:

• Making card payments simpler and more transparent for consumers and merchants.
• Incentivising merchants to choose lower-cost payment plans.
• Encouraging the use of lower-cost payment methods.
• Enabling card networks to compete on a more level playing field with higher-cost payment methods that do not allow surcharging, such as some BNPL products.

In addition, it notes that banning surcharging outright will be less costly for PSPs to implement and less disruptive to existing business models than removing surcharging on debit cards only, which had been an option.

Similarly, the regulator said that the new and reduced caps on interchange fees for card transactions acquired in Australia will enhance competition and efficiency in the payment system by:

• Lowering wholesale card payment costs for merchants by around A$910m ($620m) per year.
• Reducing the disparity in card payment costs faced by small and large merchants.
• Reducing the extent of cross-subsidisation of consumer credit cardholders by debit cardholders.
• Preserving the competitive tension between card networks processing commercial credit cards.

Modernisation and competition

The intention is that the changes will strengthen competition among players within the payments chain, put downward pressure on card payment costs and make it easier for businesses to shop around for a better deal.

The changes sit in the context of the rapid modernisation of payments both in Australia and around the world.

Another factor that might influence the pricing of card payments is competition from alternative payments such as account-to-account (A2A) payments and digital assets.

Australia launched its first open banking initiative, the Consumer Data Right (CDR), in July 2020. The big four banks, Commonwealth Bank (CBA), Westpac, National Australia Bank (NAB), and ANZ, were required to start sharing product reference data with accredited data recipients. 

The rollout of CDR has happened alongside that of the New Payments Platform (NPP), launched in 2018, which offers the ability to make real-time digital payments 24/7. According to Australian Payments Plus, NPP connects more than 100 banks, financial institutions and fintechs, facilitating around A$6bn of payments each day. 

These options have helped bring new payment technology to Australian consumers, in a customer-centric manner, creating competition for existing payment methods and contributing to the decline in cash usage, one of the triggers for the new card fee rules.

On announcing the ban on surcharging and the new interchange fee caps, the RBA also noted that it intends to issue a public consultation on regulating other areas of the retail payments system, including mobile wallets, three-party card networks, BNPL services and e-commerce platforms. It expects to launch the consultation in mid-2026.

Taken as a whole, these developments represent a pivot towards making digital payments essential infrastructure, under a simpler, more transparent system in which consumers can take prices at face value. 

PSPs should prepare for increased competition spurred by new entrants such as wallet and stablecoin providers that can access core payment systems like the NPP and card networks without using banks as intermediaries.