iscoverThe Reserve Bank is reviewing its regulation of card payments and surcharging in a move to save consumers $1.2 billion a year.
RBA proposes eliminating debit and credit card surcharges
16 July 2025
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9 minute read
In a consultation paper released by the Reserve Bank of Australia, the removal of surcharges on all designated debit, prepaid and credit card systems has been proposed to enhance competition and efficiency in the payments system.
The consultation paper noted that consumers were estimated to pay around $1.2 billion in payment surcharges each year, pushing the benefit of the removal.
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“A full removal of surcharges on all designated card networks would reduce broader economic inefficiencies associated with consumers finding it difficult to avoid a surcharge, inadequate merchant disclosure, drip pricing involving added card payment surcharges and the complexity of surcharging rules,” the central bank said.
“This policy would also be easier for market participants to understand and implement than only removing surcharges on debit card payments.”
The suggestion comes after the preliminary conclusions of the Payments System Board on public consultation after the release of the Merchant Card Payment Costs and Surcharging Issues Paper in October last year.
According to the PSB, in addition to surcharge removal, competition and efficiency in the payments system would also be enhanced by lowering wholesale card payment costs and increasing the transparency of card payment costs.
The RBA perceived this to provide a significant benefit to small merchants, as they tended to pay high interchange fees, at or near the current regulatory caps.
“Lowering these caps would therefore benefit small merchants the most and reduce their cross-subsidisation of large merchants, improving the efficiency of the payments system for the broader economy. Around 90 per cent of small merchants would be better off under the proposed measures than under the current framework.”
Other benefits of the proposed measures included simpler card payments, lower wholesale card payment costs for merchants, a reduction in the disparity of card payment costs, improved payment plans, reduced cross-subsidisation, a levelled playing field between card networks, as well as a reduced enforcement and compliance burden.
In addition to consumers paying less than $1.2 billion in surcharges per year, small merchants would be better off by around $185 million, with around 90 per cent of small merchants benefiting from the measures in net terms.
Michelle Bullock, RBA governor, said that with this proposal, the eftpos, Visa and Mastercard networks would be allowed to ban surcharges.
“Our goal is a more competitive, efficient and safe payment system for everyone,” she said.
“We know these proposals will spark discussion, especially among businesses that currently surcharge, which is why we are consulting on these proposals for six weeks.”
The RBA invited feedback on the proposed policy option and draft standards by 26 August 2025, and said it would “draw on this feedback to finalise reforms that are in public interest in line with its objectives of a safe, competitive and efficient payments system”.
In response to the proposal, Matthew Addison, chair of the Council of Small Business Organisations Australia, said it presented a “mixed bag” for small businesses.
Addison attributed this to the fact that it offered some welcomed reforms in transparency and fee reductions, yet risked serious unintended consequences by eliminating the right to surcharge.
“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 to be transparent and for consumers to make informed choices.”
“The RBA’s claim of $1.2 billion in consumer savings is a mirage. 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.”
COSBOA warned that any proposed reform must consider the real-world impact on small business owners who face rising costs, wage pressures and complex regulatory burdens.
“Removing surcharging without fixing the root issues risks creating a new layer of hidden costs that will ultimately hurt both businesses and consumers.”
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