Last week Prime Minister Anthony Albanese announced the government is willing to “tackle excessive surcharges, with further work underway to reduce payment fees”. He also declared that “the government is prepared to ban debit card surcharges”, subject to recommendations of a current review by the Reserve Bank, which may take effect as of January 2026.
It is estimated that Australian’s are losing around $1 billion per year due to payment surcharges.
Small businesses currently face complex and difficult to understand fee structures and have much less bargaining power to negotiate better rates for their business and customers. The Reserve Bank’s issues paper states that “the average per-transaction fee paid by small merchants is around three times that paid by large merchants”.
The Reserve Bank review will investigate ways of reducing transaction costs across payment systems in an effort to “put downward pressure on merchant card payment costs by promoting competition and efficiency”.
The government has positioned these reforms as a crackdown on payment providers and banks to benefit consumers. Treasurer Jim Chalmers says the ban will be subject to “sufficient steps and safeguards to ensure both small businesses and consumers can benefit” from the ban.
Despite this, the uncertainty of what this will look like in practice is creating particular concern for small businesses.
If debit card surcharges are banned it’s unclear whether payment providers will merely pass on costs to businesses and thereby consumers by, for example, charging higher flat fees for using their payment systems in lieu of surcharging.
The Reserve Bank review that will underpin the federal government’s decision is open for submissions until 3 December and will be finalised in early 2025.
