‘Time has come': Reserve Bank of Australia flags blanket ban on all debit and credit card surcharging
A consultation paper released by the nation's central bank on Tuesday proposes banning surcharging on eftpos, Mastercard and Visa cards, which currently cost consumers about $1.2 billion a year.
A review of merchant card payment costs and surcharging found it was no longer achieving its intended purpose of steering consumers to make more efficient payment choices.
The RBA found avoiding surcharges had become harder as consumers embraced card and digital payment methods over cash.
It also revealed businesses were increasingly charging the same surcharge rate across debit and credit and there were significant challenges with enforcing the current surcharging rules.
'Removing surcharging would make card payments simpler, more transparent and help to increase competition in the card payments system,' the RBA's payments system board said.
Shoppers have long complained of card surcharges, arguing there is little transparency on how the fees are applied. The RBA said it was also currently too hard for businesses to shop around for better deals.
The bank's issue paper, released in October, found retailers were paying more than $6.4b a year to banks, payment platforms and card companies such as Visa and Mastercard to process card payments.
The RBA's flagged changes would go a step further than the Federal Government's initial ban on fees for debit transactions and would bring the Australian payment market into line with the rest of the world.
RBA governor Michele Bullock said the payment landscape was always evolving, and it was important to keep pace and ensure Australia remained safe, competitive and efficient.
'We think the time has come to address some of these high costs and inefficiencies in the system,' Ms Bullock said.
'This could save consumers $1.2b annually, simplify payments and boost competition.'
The RBA has acknowledged any savings for customers would require businesses to absorb the costs. If businesses instead lifted prices, it could add about 0.1 per cent to inflation.
'Merchants that surcharge debit card payments would be faced with a choice of increasing their prices or absorbing their debit payment costs through reduced margins,' the RBA said.
Under the propose changes, card networks and banks would also be forced to publish the fees they charge.
The RBA said improving transparency and competition would 'help all players better understand the fees they are charged and make it easier for businesses to shop around for a better deal'.
In a blow for the major banks, the RBA also wants to lower interchange fees paid by businesses. These are wholesale fees a merchant's bank pays to a cardholder's bank, and are set by card networks like Mastercard and Visa.
The RBA said the interchange fees paid by businesses to card providers are too high, especially for small businesses.
'Around 90 per cent of Australian businesses are estimated to be better off under the proposed policies,' the RBA said.
'The proposed reductions to interchange caps would benefit small businesses the most, as they tend to pay fees closer to the existing caps.
'Introducing caps on foreign interchange fees would help to lower fees for all businesses accepting international cards.'
Public feedback on the proposals run until August 26, with a timeline for the changes due to be announced by the end of the year.
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