‘Putting the cart before the horse’: COSBOA pushes back on surcharging ban

“The surcharging framework, introduced more than two decades ago, is no longer achieving its intended purpose of steering consumers towards making more efficient payment choices,” the central bank said in a statement.

“The increased prevalence of businesses surcharging all cards at the same rate, challenges with enforcing the current surcharging framework, and consumers using less cash have reduced the effectiveness of the surcharging regime.”

The central bank also pledged to lower the caps on interchange fees, a move it said would reduce businesses’ costs when accepting domestic or overseas card payments, and predicted that small businesses would benefit the most from this change.

COSBOA chair Matthew Addison welcomed the RBA’s focus on reducing payment costs, but was sceptical that these savings would be passed through in full to small businesses.

“Lower fees are only meaningful if small businesses actually see the benefit in what they’re charged. Without clear pass-through, this reform doesn’t deliver real relief,” he said.

Without a guarantee that the cost savings would flow through to small businesses, Addison said the changes could impose higher operating costs on small businesses already grappling with inflationary pressures and volatile fuel costs.

“If you ban surcharging without guaranteeing lower fees, small businesses have no choice but to absorb the cost and that will ultimately be reflected in prices,” he said.

“Surcharging has been one of the only ways small businesses can recover these costs. If you remove that without fixing the underlying fees, you’re asking small businesses to wear them.”

Treasurer Jim Chalmers welcomed the RBA decision, saying it would help with cost of living and support both small businesses and consumers. The RBA estimated that Australian consumers collectively paid $1.6 billion in surcharges annually.

“Small businesses will no longer have to wade through complex surcharging rules and will be armed with more information so they can shop around for card payment services that meet their needs,” he said.

“The Australian Small Business and Family Enterprise Ombudsman will help small businesses understand changes and ensure they are well positioned to benefit from the reduction in costs.”

The RBA also anticipated that the changes would promote competition and efficiency in the payments system.

“Removing surcharging would make card payments simpler, more transparent and increase competition among payment service providers. Removing surcharging also aligns with the preference of most consumers for payment costs to be incorporated into advertised prices,” the central bank said.

However, COSBOA argued that policymakers had acted prematurely in banning surcharging before ensuring that the lower fees were genuinely being passed onto small businesses.

“Banning surcharges before businesses can see lower fees and understand their costs is putting the cart before the horse,” Addison warned.

“Small businesses will need time to see the impact of these changes, adjust their pricing, and update systems. Without a practical transition, they risk being hit with the cost before the benefits arrive.”