The Federal Government says it plans to ban debit card surcharges from 2026, subject to a review underway by the RBA.
The Albanese Government also announced $2.1 million of new funding for the ACCC to tackle excessive card fees, crack down on illegal and unfair surcharging prices, increase education, and conduct compliance activities while the RBA’s review is underway.
Jim Chalmers, Treasurer, said this is all about getting a better deal for consumers, reducing costs for small businesses and promoting a more competitive payments system.
“Consumers shouldn’t be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves.”
As less Australians use cash and more turn to electronic payments, it means that more Australians are getting hit with surcharges even when they use their own money.
The announcement comes after founders and members of the Independent Payments Forum (IPF) met with members of parliament last week, including Stephen Jones, Minister for Financial Services and Assistant Treasurer, to propose a plan to tackle card fees.
Brad Kelly, co-founder of IPF, said cost of living pressure is a priority focus for Australian consumers and small businesses, and reducing the cost of card payments is an effective way to reduce costs on billions of purchases.
“More needs to be done to reduce the $6.9 billion* in card fees charged by Australia’s banks, payments platforms and card companies for providing simple card payment services to retailers and merchants.
“The lion’s share of this fee burden for card payments in Australia is currently shouldered by small businesses and their customers due to unfair pricing constructs, particularly for debit cards, which are marketed by banks to consumers as an alternative to cash to access their own money.”
Jones said these actions will give small businesses and consumers a fairer go.
“The surcharges pile up and punch a big hole in the wallets of customers and the takings of small businesses owners.
“This is good news for consumers and for small business owners and will help our payment systems keep up with the digital economy.”
Currently, Australian small businesses are paying $1.7 billion more in payment fees compared to big businesses like major supermarkets and often need to recoup these significant costs through surcharging.
Ponder said the current situation is made worse by wide-spread practices including fixed, blended and bundled pricing which result in cross subsidisation of high-cost credit cards being paid for by people who choose to use cheaper forms of payment such as debit cards and cash.
“Small merchants must be allowed to recoup transaction costs to remain competitive if big businesses, including supermarkets, continue to get sweetheart deals and don’t need to charge customers to recoup costs.
The RBA is responsible for regulating the payments system and is undertaking a review of merchant card payment costs and surcharging, with its first consultation paper released today.
*Average merchant fee of around 0.45% for debit cards and around 1% for credit cards. The Cost of Card Payments for Merchants, RBA, September 2022. At current levels, Debit $584b * 0.45% = $2.628b and Credit $425b * 1% $4.25b = $6.9 billion
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