Years after the EU and UK banned payment surcharges on credit and debit cards, Australia has yet to catch up.
With an increasing number of Australians moving away from cash to card payments – and who lose billions of dollars in these charges each year – the Reserve Bank of Australia (RBA) is moving in to bat for consumers.
The RBA has reportedly brought forward its review of merchant costs and surcharging, and hopes to release a consultation paper by the end of the year. It review will consider whether surcharging should be banned.
“People don’t use cash any more, so everything is just getting surcharged. It’s prevalent in the retail industry, particularly hospitality,” RBA governor Michele Bullock told a parliamentary committee last week.
In November last year, the RBA released a report of a survey which showed that the share of in-person transactions made with cash halved, from 32 per cent to 16 per cent, over the three years to 2022.
The demographic groups that traditionally used cash more frequently for payments – such as the elderly, those on lower incomes and those in regional areas – saw the largest declines in cash use.
It found that cash usage has generally been replaced with card payments, though the share of alternative means such as digital wallets and buy now, pay later services make up a small share of payments.
The RBA estimated in 2022 that 7 per cent of all card payments involved some surcharge. It does not however collect data on how much surcharges Australians are being charged, seeking numbers from payment providers instead to quantify the number.
The RBA will also examine whether caps on interchange fees, charged by a merchant’s bank to the bank that the customer has a card with, could be reduced.
“We are going to be looking at the economic circumstances now, and whether surcharging is still fit for purpose as an instrument to improve efficiency in competition,” said Bullock.
This week, legislative voices also grew louder in their call to ditch card surcharges. “Card providers, merchant and technology providers, and the banks are having a laugh here, scraping $4 billion off our bank accounts to provide an essential service that costs less to operate and maintain than its free, non-digital alternative,” said Labor MP Jerome Laxale, citing a Canstar estimate, according to the Australian Financial Review.
“I think Australians have had enough of this rort. Being charged to access your own money simply must change.”
Most banks and payment providers that would be hurt the most by any cap or elimination of surcharges are expectedly against bringing in any changes to the existing regime.
The Australian Banking Association have maintained that there are costs involved in ensuring payments are made safely and securely. “Just because payment rails are invisible, like the 5G network and water pipes, it doesn’t mean they are free to operate,” ABA chief executive Anna Bligh said. “They have to be built, maintained and upgraded, which all requires significant investment.”
The ABA noted that there was a 13 per cent drop in merchant service fees in the 2022-23 financial year.
The chief executives of major banks will be grilled about electronic payment costs by Laxale and others when they appear before the House Economics Committee next week.
“I think that Australians have now begun to ask themselves; ‘why are we even being charged these fees at all?’” said Laxale.
There are a few protection measures in place for consumers. For example, businesses are prohibited from applying a surcharge if they don’t accept cash. They also aren’t allowed to add a surcharge more than what it costs them to process the payment. The Australian Competition and Consumer Commission (ACCC) has powers to investigate businesses which breach these rules.
