The Reserve Bank of Australia has released a consultation paper proposing major reforms to the card payments system, with one industry body calling it a "mixed bag".
Key proposals from the RBA’s review include removing surcharges of eftpos, Mastercard and Visa, lowering interchange fee caps, and requiring greater transparency from card networks and large acquirers on the fees they charge. This is expected to offer consumer savings of around $1.2 billion.
The RBA is calling for feedback on the proposed policy options and draft standards by August 26, 2025, with final decisions and a regulatory timeline expected by year’s end.
The Council of Small Business Organisations Australia (COSBOA) responded to the proposals, with chair Matthew Addison calling it a “mixed bag” for small businesses, offering some welcomed reforms in transparency and fee reductions, but risking serious unintended consequences by eliminating the right to surcharge.
“Removing surcharges doesn’t remove all the cost, it simply hides it,” 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.”
“The RBA’s claim of $1.2 billion in consumer savings is a mirage. The reduced interchange fee is welcomed; however merchant fees include many other charges. 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.”
COSBOA has long advocated that the right to surcharge is essential to small business viability. The council added that forcing businesses to absorb processing fees, rather than passing them on to customers based on their payment choice, removes a critical cost management tool and risks reducing profitability for Australia’s smallest employers.
“Surcharging is not about penalising consumers, it’s about ensuring fairness and transparency,” Addison added.
“A blanket ban ignores the real issue: high and complex payment costs driven by opaque pricing and a lack of competition.”
Outside these issues, COSBOA welcomes the RBA’s move to reduce interchange fee caps, as well as improved transparency, and mandatory least-cost routing (LCR).
The Australian Retailers Association has yet to share a response on behalf of retailers, but has previously advocated for addressing unfair excessive card surcharges.
In its initial submission to the review last year, the peak body endorsed initiatives to reduce merchant payment costs.
“Australian merchants pay approximately $4.3 billion annually in card acceptance fees, and average merchant service fees range from 0.3 per cent to 1.8 per cent per transaction; these costs significantly impact merchant business operations.
“For smaller merchants, these fees can be even higher. It is crucial to preserve merchants' autonomy in managing these substantial expenses. Merchants should maintain the flexibility to implement reasonable cost recovery measures, including the ability to apply appropriate surcharges that reflect their actual payment acceptance costs.”
The ARA also called for more transparency in payment scheme fees and pricing decisions and the development of a diverse range of payment methods for merchants in Australia.
Regarding LCR, the ARA noted that the ability of merchants to be able to exercise choice on the routing of transactions is critical and encouraged the RBA to consider how the implementation of Least Cost Routing (LCR) across Australia's payment ecosystem can be further strengthened.
“While progress has been made in implementing Least Cost Routing (LCR) for in-store transactions, albeit that digital wallet transactions are still being addressed, significant opportunities exist to enhance its adoption in the online environment,” the ARA wrote in its submission.
“Current RBA data indicates that online transactions represent over 15 per cent of retail spending, yet we believe that the implementation of online LCR remains limited. Key barriers include technical complexity, lack of standardisation across payment providers, and merchant uncertainty about implementation costs and benefits."