While the Australian government plans to scrap debit card surcharges to ease cost of living pressures, major businesses support the move, raising concerns that consumers may ultimately bear the brunt of the cost.
Australian consumers may continue to face card surcharges even if the Labor government scraps them, as many major businesses support the government's move. The Reserve Bank of Australia (RBA) released submissions into its review of merchant card payment costs on Friday, following the government's announcement several months earlier.
Merchant fees consist of three parts: interchange fees paid to the bank, scheme fees that go to companies like Visa and Mastercard, and acquirer margin, paid to the bank that supplies the physical payment terminal. The major banks have expressed differing viewpoints on the issue. Commonwealth Bank called on the RBA to abolish both credit and debit card surcharges, while Westpac only supported bans on debit surcharges. NAB opposes a blanket ban on surcharging, and ANZ advocates for a “uniform approach” to surcharges.Meanwhile, Visa and Mastercard have both called for an end to all surcharges, while Qantas and Virgin Australia both oppose them. The Australia Competition and Consumer Commission (ACCC), which received around 2,500 reports of businesses allegedly imposing illegal card surcharges in 2024, called for reform amid growing concerns about the payments. “Greater costs have fallen on the actors in the system with the least bargaining power – consumers and small business merchants,” the ACCC said in its submission. While the consumer watchdog backed smaller businesses, Brad Kelly, co-founder of the Independent Payments Forum, which strongly urged for more transparency into the merchant fee process in its submission, criticized the ACCC. “The ACCC needs to find its teeth because they're obviously the ones who can take action on this,” Mr Kelly told SkyNews.com.au. He said small businesses are hindered by high card surcharges, with some merchants facing flat fee rates of around one and a half to two percent, while the actual transaction cost is just one or two cents. Mr Kelly highlighted the enormous merchant fee disparities between major players and small businesses, calling for urgent overall reform.“The big merchants, like the two supermarkets and big box retailers, do not pay the same amount as a small business,” he said. “Supermarkets (are) getting away with one cent for a debit transaction, but your café is being charged two percent for the same thing.” He noted the large card surcharges and thin profit margins of small businesses, meaning outright scrapping the payment would ultimately leave Australian consumers in the same position. “Whilst it's all well and good to ban surcharges, the fact of the matter is that the cost will then be pushed back onto the small business,” Mr Kelly said. “For instance, in a café their margins are somewhere between two and four percent. If you charge a café 2 percent, you've taken their margin away from them.” Backing Mr Kelly's call was Ben Pfisterer, CEO of fintech start-up Zeller, who warned customers should expect to pay more as small businesses pass their costs along. “While consumers might feel better no longer seeing a surcharge applied, they would still be paying the increased costs and the industry would no longer have any visibility into payment costs,” Mr Pfisterer told SkyNews.com.au. “This would undo a lot of the work that has been implemented over the last decade to ensure costs are transparent and declining due to increased competition.” The Australian Restaurant & Café Association (ARCA) called for lower interchange fees to facilitate small businesses, which it said in its submission to the RBA, would lead to lower costs for customers. It also warned that outright scrapping debit surcharges without touching interchange fees would mean Australians end up paying the same amount. “Without any changes to interchange, simply banning debit surcharges will not likely lead to the desired consumer cost reduction outcomes, with ARCA Member and Industry Data from an extensive industry wide survey showing nearly 86 (per cent) restaurants & cafes would pass on merchant fees with increased menu prices if forced to absorb them,” ARCA said. Meanwhile, the CEO of the Council of Small Businesses Organisations Australia, Luke Achterstraat, echoed ARCA's sentiment, arguing a potential change would put small businesses in a precarious position. “Small businesses will be between a rock and a hard place and will be forced to increase their menu prices across the board to cover that cost,” Mr Achterstraat told SkyNews.com.au. He warned businesses would be forced to hike their prices if card surcharges were scrapped. “We are certainly cautioning the government to tread very lightly and tread very carefully before any sort of blanket bans are imposed on debit cards or credit cards,” he said.
CARD SURCHARGES COST OF LIVING CONSUMERS BUSINESSES GOVERNMENT POLICY AUSTRALIA
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