Australian banks have expressed strong support for the proposed ban on debit and credit card surcharges, a move aimed at enhancing consumer experience. However, they caution that customers might face increased costs in other areas as a result of related proposals from the Reserve Bank of Australia (RBA).
In July 2023, the RBA proposed a ban on surcharges imposed by some merchants, which consumers pay when using credit and debit cards. To balance this change, the RBA suggested reducing the fees merchants pay to card issuers. The Australian Banking Association (ABA) submitted a comprehensive 70-page response to the RBA, asserting that Australia’s current surcharging framework is “clearly broken” and in need of reform.
The ABA highlighted that the practice of surcharging, once justifiable, has become cumbersome for consumers. It described the system as “opaque and arbitrary,” deviating from its original purpose of fostering market efficiency. ABA chief executive Simon Birmingham emphasized the need for certainty at the checkout, stating that a ban on surcharges has long been overdue.
Despite supporting the ban, the ABA raised concerns about the RBA’s plan to lower the cap on interchange fees from 0.8 percent to 0.3 percent for domestic credit card transactions. According to the ABA, this move could have unintended consequences for households and businesses. They warned that it could lead to reduced benefits for cardholders, including interest-free periods that many of Australia’s 17 million cardholders rely on to manage their bills between pay cycles.
The ABA argued that the RBA’s proposed fee reduction would primarily benefit multinational payment technology companies rather than consumers. In particular, they pointed out that the new cap on interchange fees would divert a significant portion of transaction fees from services like Apple Pay offshore, undermining local financial institutions.
While supporting the intent to eliminate surcharges, the ABA questioned whether this change would genuinely lead to savings for consumers. They suggested that merchants might simply increase prices to offset the absence of surcharges. The association noted that the RBA’s approach “treats a bookkeeping change in how costs are recovered as if it were a real income gain for consumers, which is not the case.”
The ABA posits that there are more effective methods to address the RBA’s concerns regarding the impact of interchange fees on small businesses. As discussions continue, the implications of these proposals will be closely monitored, with the potential for significant changes in the landscape of payment processing in Australia.
