The Reserve Bank will reveal its recommendations on card payment fees on Tuesday

Paying those extra couple of cents when tapping your card to pay for a cup of coffee or the morning newspaper could soon be a thing of the past, but not everyone is happy. The Reserve Bank of Australia is set to announce a major overhaul of the card payment system when it release its findings of the merchant card payment costs and surcharging review on Tuesday. The review, examining removing surcharge fees for tapping a card on eftpos, Mastercard and Visa., was supposed to be finalised by December 2025 but was pushed back until March. While this is a step further than the federal government’s proposed ban on fees for debit transactions, the RBA said it would bring the Australian payment market in line with the rest of the world. Richard Wormald, Mastercard’s former division president for Australasia and now president, previously told NewsWire he supported removing surcharge costs with card payments. “Australia is an outlier. The Reserve Bank has regulated the cost of payments for more than 20 years and yet we still allow surcharging,” he said. “We have some of the lowest payment costs in the world and they have been regulated down multiple times. “Card payments are safe, efficient and the cheapest way for retailers to get paid. So it feels odd that we still allow a practice that adds friction for consumers and damages trust.” The major card companies say surcharges should be removed, prices should be accurately reflected on the tickets but do not want interchange fees touched. To offset these costs of removing surcharges to business the RBA proposed a reduction in interchange fees, which are what the payment terminals charge businesses. Independent Payments Forum Brad Kelly told NewsWire the Reserve Bank should use this review to mandate what is known as dynamic least-cost routing – automatically moving customers to the cheapest network available. “The RBA must also immediately ban sneaky tricks like blended rate pricing – where debit and credit card fees are blended together in one high percentage rate of up to 2 per cent,” he said. “This practice hides the real cost of card fees and exposes all consumers to high credit card fees in a market where 80 per cent of transactions are made on debit cards.” Critics say removing surcharges drives inflation One of these critics is the Independent Payments Forum, which in a scathing submission called the RBA’s model “flawed”, “inadequate dated” and “inaccurate information provided by the banks about the activities of small businesses”. IPF represents 120,000 retail shop fronts, newsagents, community pharmacies, restaurants, cafes, pubs, clubs, service stations, convenience stores, gift shops, independent cinemas, supermarkets, hardware stores and liquor outlets across Australia. The business group used their submission to the RBA last year saying costs would rise above the surcharge price. “In a high inflation environment, percentage based fees just serve to boost the profits of banks, payments platforms and credit card schemes at everyone else’s expense,” Mr Kelly said. “As prices rise, they make more money. It’s that blatant. In the back-end, transactions cost the same no matter how high the amount of money spent.” Mr Wormald says critics who say the banning surcharges are inflationary arguments do not stack up. “Businesses adjust their pricing all the time in response to changing costs like coffee beans, electricity or wages,” he said. “Consumers are already paying for payments through surcharges, so including that cost in the sticker price does not change what they pay, it just makes it more transparent.” To offset these costs the RBA proposed a reduction in interchange fees, which are what the payment terminals charge businesses. The card network providers including Visa and Mastercard are not in favour of removing these fees. Everyone should pay the same There are also calls to flatten the prices everyone pays, to help small businesses compete with the larger companies. Currently, how much businesses pay greatly differs, with some larger businesses able to negotiate better rates. Mr Kelly says it’s time the RBA put an end to the rort that currently sees small businesses and their customers paying up to 1000 per cent more in card fees than big companies. “In this tough economic climate, these fees are bad for competition, efficiency and add to our inflation problems, on every single transaction we make,” he said. “For example, a lot of small businesses are paying 8 to 10 cents in debit interchange fees, while (major businesses) pay 1c.”