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West Australian
3 days ago
- Business
- West Australian
JACKSON HEWETT: As cash moves toward extinction, it's time to lift the veil on payment costs
As Bitcoin — a completely unnecessary piece of tech — soars to $A180,000 on little more than FOMO, it's worth revisiting what its spruikers once promised. Remember blockchain? The decentralised online record book that everyone can see, no one can change, and that updates automatically as transactions happen, was billed as the promised land of friction-less payments. Crypto evangelists told us Bitcoin, and the slew of derivative cryptocurrencies, were vital for the digital age because they were the gateway to a future of real-time, AI-powered transactions and seamless capitalism. A big claim. Yet here we are on outdated payment platforms, still forking out $60 a year each in sneaky surcharges — or $1.2 billion across the country. So credit to the Reserve Bank for taking the bit between the teeth and proposing to scrap surcharges altogether. In an era where the country is crying out for productivity-boosting reforms, here's one that delivers for consumers and may even force some long-overdue innovation in how payments are processed. 'Removing surcharging would make card payments simpler, more transparent and help to increase competition in the card payments system,' the RBA says in its review of merchant card payment costs. Alongside the surcharge ban, the Bank has proposed capping interchange fees, mandating least-cost routing, and requiring banks and payment providers to clearly disclose the fees they charge merchants. The aim: expose a murky system to sunlight and stop billions in hidden costs being quietly passed onto the public. Because it's always the least powerful who end up clipped — and nowhere is that clearer than in how card issuers treat small businesses. The RBA highlights the stark disparity in fees. Large merchants with scale and savvy payments teams can negotiate all-in processing costs well below 0.5 per cent. Small businesses — your local butcher, café or florist — often pay two or three times that. Total fees of 1.5 to 2 per cent per transaction aren't uncommon. That's why it's often the corner store that has to slap a handwritten sign next to the EFTPOS machine spelling out the surcharge. They cop the higher fees — and the customer complaints. The Council of Small Business Organisations Australia says removing surcharges won't fix the problem, just bury it in the price tag. 'The reality is that these fees will still be paid, just not disclosed. That cost will be baked into the price of coffee, groceries, and services across the country,' said COSBOA chair Matthew Addison. So how much should the customer be footing, really? According to the RBA, the average fee for a small business is around 1.6 per cent. That's an extra $1.60 on the $100 flowers you bought mum for Mother's Day. But the wholesale cost of that transaction — the actual interchange fee — is just 8 cents today, and could fall to 6 cents for debit cards and 0.5 per cent for credit if the RBA gets its way. Multiply that margin across the 1.3 billion card transactions processed every month in Australia and the scale of extraction becomes clear. EFTPOS provider Tyro, whose shares briefly fell on the news before rebounding, welcomed the shake-up. Chief executive John Davey said the changes would force bundled service providers to get real about their pricing. 'Businesses are suddenly going to be invoiced on a monthly basis with a fee. And I would expect that they'll be looking for the best deal they can get, and that will create competition and opportunity,' he said. But there's a twist in the tale for consumers: those fees help bankroll credit card reward schemes. 'One of the things about interchange that's probably not well understood is that it is funding a lot of the rewards programs that many of us use day to day,' Mr Davey said. 'So yes, maybe I'm being surcharged, but it's also funding a benefit I'm receiving.' In other words, expect reward points to get stingier if those margins tighten. Until then — and with changes not likely to come in before 2027 — consumers may be better off using a reward credit card rather than debit, so long as they pay it off in full each month. According to the RBA's retail payments data, EFTPOS still offers the cheapest route for merchants at 0.42 per cent per transaction, compared with 0.49 per cent for Visa and 0.56 per cent for Mastercard. AMEX, with its more generous reward structure, averages 1.35 per cent. But it's not just card costs under pressure. Cash is quickly vanishing — down to 13 per cent of all transactions and expected to fall to just 4 per cent by the end of the decade. Its infrastructure is in crisis: Armaguard, which moves 90 per cent of Australia's physical money, has had to be bailed out twice in two years by the banks and major retailers just to keep the wheels turning. Even the RBA and the banks concede the system is unsustainable. But they also acknowledge that cash still matters — as a backup, a store of value, and a critical tool for vulnerable communities. Which is why getting the card payment system right is so important. We're building the rails of a near-cashless economy, and too much of the current system is riddled with hidden margins and soft monopolies. If we want a more productive economy — one that's fairer, more competitive, and more efficient — it's time to bring payment costs down and transparency up. The blockchain crowd promised that. The Reserve Bank might actually deliver it.
Sky News AU
3 days ago
- Business
- Sky News AU
COSBOA warns against RBA's call to ban credit and debit card surcharges, arguing the change 'doesn't solve' underlying problem
The Reserve Bank of Australia's push to ban credit and debit card surcharges 'doesn't solve' the underlying problem surrounding the fees, a small business leader has warned as debate rages over the payments. The central bank on Tuesday revealed a three-tiered approach to tackling surcharges: Banning customer surcharges, capping interchange fees (which are paid by businesses to shoppers' banks) and provide greater transparency around the fees. Businesses will be able to shop around for better deals if there is greater transparency, and removing interchange fees could save businesses $1.2b annually, the RBA estimates. The call received a mixed response from the Council of Small Business Organisations Australia chair Matthew Addison, who warned the complexities of card surcharging meant simply removing the fees for consumers could be counterproductive. 'We have a very opaque system. A lot of the costs are buried in the detail,' Mr Addison said on Business Now. 'We look forward to this consultation of the Reserve Bank (and) surfacing some of the better options. Banning surcharges alone doesn't solve it.' He also warned the 'surcharges aren't going anywhere' as the RBA promotes banning businesses from charging these additional costs to their customers. 'Hiding those costs by banning them simply puts them into the overheads or the operating costs of the small businesses,' Mr Addison said. 'Hiding the cost doesn't remove them.' COSBOA supported reductions to the interchange fee as it could save many businesses and consumers money. It also backed the RBA demanding further transparency over the costs and argued this could result in merchant service providers - which are companies that allow businesses to accept card payments - to pitch for businesses. 'If we can get more transparency and we can also get the merchant service providers actually pitching for the small business, (it gives) them a number of options,' Mr Addison said. ''Here's the plan you're on. Here's a plan that will actually save you some money'.' The RBA's call also met backlash from the Australian Restaurant & Cafe Association (ARCA) which labelled it a 'short-sighted, anti-small business policy' and argued it would force establishments to pass costs onto consumers. 'Who the hell does the RBA think will bear the cost of this ridiculous decision?' ARCA chief executive Wes Lambert said. 'First, merchants and then customers, through higher menu prices in the middle of a cost of living crisis. 'No matter how low merchant fees go based on the RBA's intention to save businesses $1.2 billion dollars, with no surcharging, businesses who previously paid net $0 in merchant fees, will now be faced with the bill.' The RBA will continue to seek feedback on the changes until late August before handing down a final proposal at the end of the year. Changes will be introduced from the beginning of next year and enforced from July 1. Major Australian banks and the Australian Banking Association have called for interchange fees not to be lowered as they help counteract fraud and cover chargeback rights – which allows banks to reverse certain payments. It comes as Treasurer Jim Chalmers last year vowed to ban debit card surcharges to ease cost of living pressures, but does not extend to credit card purchases. 'This is all about getting a better deal for consumers, reducing costs for small businesses and promoting a more competitive payments system,' Mr Chalmers said in October.
Sky News AU
4 days ago
- Business
- Sky News AU
Reserve Bank of Australia calls for end to debit, credit card surcharges costing Aussie shoppers $1.2 billion annually
The Reserve Bank of Australia has called for surcharges on eftpos, Mastercard and Visa cards to be scrapped in a move that could save shoppers $1.2 billion each year. The central bank on Tuesday revealed a three-tiered approach to tackling niggly debit and credit card surcharges that ping consumers. Alongside demanding an end to surcharging, the RBA also called for the cap on interchange fees, which are paid by businesses to shoppers' banks, and demanded greater transparency around these fees. The latter, the RBA said, will make it easier for businesses to shop around for better-value payment deals. Removing interchange fees could save businesses $1.2b annually and about 90 per cent of local businesses are estimated to be better off under the central bank's proposal, according to the RBA. It would 'benefit small businesses the most' as they generally pay higher interchange fees. The RBA's call, however, was met with backlash from the Australian Restaurant & Cafe Association (ARCA) which labelled it a 'short-sighted, anti-small business policy' and argued it would force establishments to pass costs onto consumers. 'Who the hell does the RBA think will bear the cost of this ridiculous decision?' ARCA chief executive Wes Lambert said. 'First, merchants — and then customers, through higher menu prices in the middle of a cost of living crisis. 'No matter how low merchant fees go based on the RBA's intention to save businesses $1.2 billion dollars, with no surcharging, businesses who previously paid net $0 in merchant fees, will now be faced with the bill.' Similarly, the Council of Small Business Organisations Australia said the proposal was a 'mixed bag' as it welcomed reforms to transparency and fee reductions but warned there were 'serious unintended consequences by eliminating the right to surcharge'. 'Removing surcharges doesn't remove all the cost, it simply hides it,' COSBOA chair Matthew Addison said. 'For small businesses already managing tight margins, this means those costs would have to be absorbed into base prices, making it harder for businesses to be transparent and for consumers to make informed choices.' Australian Payments Plus, which covers BPAY and eftpos in Australia, said it welcomed the RBA's submission and stressed a surcharge bank will 'simplify the payment experience for customers and bring consistency across the industry'. 'It also means merchants will need to absorb these costs, making efficient payment routing and competitive and transparent pricing more important than ever,' Australian Payments Plus chief payments and schemes officer Adrian Lovney said. The RBA will continue to seek feedback on the changes until late August before handing down a final proposal at the end of the year. Changes will be introduced from the beginning of next year and enforced from July 1. Major Australian banks and the Australian Banking Association have called for interchange fees not to be lowered as they help counteract fraud and cover chargeback rights – which allows banks to reverse certain payments. It comes as Treasurer Jim Chalmers last year vowed to ban debit card surcharges to ease cost of living pressures, but does not extend to credit card purchases. 'This is all about getting a better deal for consumers, reducing costs for small businesses and promoting a more competitive payments system,' Mr Chalmers said in October.
