RBA proposes removing surcharge fees costing Aussies $1.2bn

The Reserve Bank of Australia has called for all credit and debit card charges to be banned in a move that would save Aussies $1.2bn.

Australian consumers could stop paying a sneaky surcharge fee that costs us $1.2bn a year after a Reserve Bank of Australia proposal.

The RBA proposes the removal of surcharge fees for tapping a card on eftpos, MasterCard and Visa, in a fresh consultation paper.

While this is a step further than the government’s proposed ban on fees for debit transactions, the RBA said it would bring the Australian payment market in line with the rest of the world.

The central bank is looking to finalise consultation with industry by the end of the year and have surcharges removed by next July.

RBA governor Michele Bullock said the payment landscape was always evolving, meaning it was critically important to keep pace and ensure Australia remained safe, competitive, and efficient.

RBA governor Michele Bullock said it was critically important for Australia’s payment market to remain competitive. Picture: Christian Gilles / NewsWire

“We think the time has come to address some of these high costs and inefficiencies in the system,” Ms Bullock said.

“This could save consumers $1.2bn annually, simplify payments and boost competition.”

Despite flagging savings, the RBA consultation papers show if businesses raise prices to compensate for the removal of surcharges it will add 0.1 per cent to inflation.

“Merchants that surcharge debit card payments would be faced with a choice of increasing their prices or absorbing their debit payment costs through reduced margins,” the RBA said.

The Independent Payment Forum says the RBA’s announcement will do little to decrease the $6.4bn in card fees levied on consumer and businesses.

IPF co-founder Bradford Kelly said these costs were ultimately borne by consumers.

“Today small business pays the lion’s share of more than $6.4bn in processing fees charged by banks, PSPs (payment service providers) and card schemes and this will not change under the RBA’s proposals,” Mr Kelly said.

“The proposed regulatory options fail small businesses and the local communities they serve. Rather, they benefit big business, big banks and big offshore companies.”

Mr Kelly said a proposed ban on surcharging would expose many thousands more small businesses to these fees levied by banks, PSPs and card schemes, leading to reduced ability to compete with big business, potential job losses and higher prices for all consumers, including those who use cash.

“Without fundamental reform and more legislative intervention, these unfair and inflated fees will continue to decimate small business profit margins, increase prices, reduce productivity and possibly lead to closures,” he said.

The profit margins cafes would get if they absorbed card charges. Picture: Supplied

Australian Payments Plus chief payments and schemes officer Adrian Lovney welcomed the RBA’s call for a fit-for-purpose payments network.

“The proposed changes will simplify the payment experience for customers and bring consistency across the industry,” Mr Lovney said.

“But it also means merchants will need to absorb these costs, making efficient payment routing and competitive and transparent pricing more important than ever.

“The RBA has acknowledged any savings for customers would require businesses to absorb the costs.”

The surcharge fees are costing Aussies $1.2bn. Picture: NewsWire / Nicholas Eagar

The central bank is proposing another two changes to Australia’s card network, including lowering the cap on interchange fees in a move it says could save businesses $1.2bn a year.

“Around 90 per cent of Australian businesses are estimated to be better off under the proposed change,” the RBA said.

“The proposed reduction in interchange caps would benefit small businesses the most, as they tend to pay fees closer to the existing cap.”

The RBA is also in consultation to require card networks and large acquirers to publish the fees they charge.

“Improving transparency and competition will help all players better under the fees they are charged and make it easier for businesses to shop around for a better deal,” the RBA said.

Federal Treasurer Jim Chalmers said the decline in cash use and the rise of electronic payments meant more Aussies were getting slugged for using their own money.

“The payments system is complex and the RBA’s review and consultation paper is an important step to reduce costs for consumers while managing the impact on small businesses and the broader economy,” he said.

“The RBA expects to be able to implement these changes under its own powers, subject to the outcomes of its consultation.

“We take the RBA’s views seriously and will consider their recommendations along with broader industry feedback.”