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Australia's ban on credit and debit card surcharges takes effect Thursday, but business groups warn many small and migrant-run shops are still unaware of the new rules and may keep charging surcharges.
Australia's ban on credit and debit card surcharges takes effect on Thursday, but business lobby groups warn that many smaller shops, especially those run by migrants, are still in the dark on how the new payment rules work.
Some Australians will likely still encounter card payment surcharges at the checkout despite the ban, as many small businesses have not received enough information from their banks or payment providers. The government confirmed in March it would ban credit and debit card surcharges from the beginning of October. The sweeping reforms are estimated to save consumers $1.6 billion annually.
Small Businesses Face Financial Pressures
Small business owners have expressed concern that the changes will leave them financially worse off and forced to absorb costs they previously passed on to customers. Different parts of the economy have scrambled to prepare in the six-month window between the changes to Australia's payments ecosystem being confirmed and the changes taking effect. Major banks have already wound back the generosity of credit card sign-on bonuses and rewards points earning rates, due to a lower cap on interchange fees.
These are fees merchants must pay to a customer's bank to accept a card transaction and have traditionally funded rewards perks. The changes have also prompted the Australian Taxation Office to remove credit cards as a payment method. The ATO said this would not affect most taxpayers. Only 2.3 per cent of tax payments in the 2024 financial year were made through a credit card, with the majority made by high net worth individuals or major organisations.
As a government agency, the ATO has decided it would not be appropriate for the cost of credit card merchant fees to be transferred to the community, it said in a statement. While larger firms and national chains appear to have adjusted to the changes, smaller businesses are less prepared for the new regime, or are not seeing its upsides.
Jewellery maker Iris Isaacs has spent months mulling different payment options for her online store, inSync design, in the post-surcharge era. It is getting tougher and tougher, she said. It is not enough to be creative. You have to be really creative in the way you run your business to keep it profitable, she said.
Jewellery Maker Struggles With Rising Costs
Lifting the price of the earrings, necklaces, rings and brooches she sells is not an option, with customers more sensitive to price rises than ever, she says. Other input costs, including gold prices, are also rising. She currently offers PayPal as well as the payment option provided by her webstore's host Shopify. While rivals Square and Revolut's fees appear more competitive, she will most likely stick with her current options as that is what her customers prefer to use.
Unlike the ATO, Isaacs is not moving to stop accepting credit card payments. At the end of the day, you have to supply all options the client actually wants, she said. But that costs me more. Brian Laul, founder of the newly-launched Australian Multicultural Community and Business Chamber, said shops run by migrants and those who do not speak English as a first language are at particular risk of unwittingly being in breach of the surcharge ban.
A lot of businesses are quite ill-prepared, from what I am hearing. There are still lots of queries about how it will work at the checkout, Laul said. Restaurant and Catering Industry Association CEO Wes Lambert said businesses with more modern card terminals might see their surcharge line item vanish automatically. A small business does not necessarily have the infrastructure to make these changes quickly, and they might need help, Lambert said.
Laul urged customers to be patient at shops if they believe they have been charged a surcharge. It may not be them trying to do the wrong thing, they may just not understand, he said. He also called for leniency from authorities for any breaches of the rules. The government needs to be kind and allow these businesses the latitude to get their house in order, Laul said.
Card Networks Enforce Surcharge Ban Rules
Ensuring compliance with the surcharge ban will be tricky due to the lack of uniformity in the various payment processing systems and deals small businesses have in place. The surcharge ban will not be enforced by the Reserve Bank or the ACCC. Rather, card networks like Visa, Mastercard and Eftpos and payment providers including Square, Tyro, Stripe and some banks are responsible for enforcing it. These providers and banks will be held responsible if surcharges continue.
They will have disabled the surcharge function on terminals they control by Thursday. Major card networks Visa, Mastercard and Eftpos have implemented a no surcharge rule, along with American Express, UnionPay and PayPal. Shopify, which is increasing fees for some merchants from 1.6 per cent to 1.7 per cent on Thursday, has been called out by the Reserve Bank.
The RBA said Shopify appears to steer shoppers towards its own payment option by charging merchant customers a third-party transaction fee for using a payment service provider other than Shopify Payments. Shopify has been contacted for comment. Wes Lambert, CEO at the Australian Restaurant and Cafe Association and a board director at the Council of Small Business Organisations Australia, said businesses with more modern card terminals integrated with point-of-sale systems might see their surcharge line item vanish automatically.
Merchants Caught Off Guard By Terminal Changes
They could be caught off-guard when their accounts are settled in coming weeks. For many, especially where English is not a first language, the surcharge ban will actually come as quite a surprise when it is just turned off at the terminal, and they receive less money, Lambert said.
However, businesses using older terminals, especially where a salesperson manually keys in a total amount into a machine, are unlikely to undergo an automatic update that would make it compliant with the surcharge ban. In those instances, businesses may unwittingly continue to charge a surcharge, he said. Many have not received a ton of communications from their bank or services provider about this.
brisbanetimes
smh:This story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
Card Payment Surcharges Small Business Interchange Fees Australian Payments Reform ATO Tax Payments Card Surcharge Ban Australia Payments Migrant Businesses RBA Surcharge
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