Michele Bullock: Reform could solve Australians’ gripe over surcharging on card payments

One of the most common complaints I get about the payments system is surcharging on card payments.

Surcharging feels more prevalent today. We’re tapping to pay more than ever and it’s not always obvious there is a surcharge until after we’ve paid. Our current estimate is that Australians spend about $1.2 billion on surcharges each year.

The rules governing surcharges were set decades ago, in a very different payments landscape. Back then, most transactions were in cash. Surcharging on card payments helped to reflect the relative cost of different payment mechanisms and keep payment costs contained. If a surcharge felt too high, consumers could simply pay with cash.

The RBA is committed to making cash available for those who want and need to use it, but most people pay by card or by tapping their phone regardless of the fees. And many businesses apply the same surcharge for debit and credit cards.

Small businesses, in particular, face challenges. Card processing fees are often high, and comparing providers is complex and time-consuming.

The RBA believes these three key reforms would address these issues:

1. Removing surcharges on debit and credit cards for eftpos, Mastercard, and Visa cards. This would save consumers $1.2 billion annually, simplify payments, and boost competition.

2. Lower the interchange fees paid by businesses to card providers. This change could save businesses around $1.2 billion a year. This has clear benefits for the 90 per cent of businesses that don’t surcharge.

3. Increase transparency by requiring card networks and large payment providers to publish the fees they charge. This will boost competition and help merchants make informed choices.

We’re seeking feedback on these proposed reforms before reaching a conclusion later this year.

For consumers, this could mean the end of unexpected card surcharges.

Businesses, even those that stick with their current provider, will benefit from lower interchange fees. Others may choose to reassess and shop around. Our proposed reforms will improve transparency and make it easier for businesses to find better deals.

We recognise that there will be many views on these issues, particularly from businesses that are currently surcharging, and we are keen to hear those perspectives. But we believe these reforms are necessary to create a simpler and more competitive payments system for everyone.

Michele Bullock is the governor of the Reserve Bank of Australia