The Australian Government has put banks and card providers on notice that it plans to ban excessive debit card surcharges by January 1, 2026.
This is part of its commitment to transparency in payment processing costs, which aims to shield consumers and small businesses from additional fees when using cards for transactions.
Toll on wallets
With Australians increasingly opting for digital payments, Assistant Treasurer Stephen Jones emphasised that the current surcharges were taking a significant toll on consumers' wallets.
“We’re sending a signal both to the banks and to the card payment providers that the government is willing to move unless they change their behaviour,” Jones said.
Although exact figures are unclear, estimates suggest Australians lose between $1 billion and $4 billion annually to these charges.
While the RBA’s review of merchant card payment costs and surcharging is underway, the government has made it clear that unless banks and payment providers curb excessive surcharges, it is prepared to legislate a ban.
The Australian Competition and Consumer Commission (ACCC) has been allocated A$2.1 million to monitor illegal and unfair surcharging practices, as well as to improve compliance and education.
Cashless economy
Jones pointed out that despite the shift towards a cashless economy, where only 12% of transactions are now made using cash, the savings from reduced cash handling costs are not being passed on to small businesses or consumers.
Instead, businesses are often subjected to higher charges for processing card payments, particularly smaller retailers, who are charged up to twice as much as large corporations like Coles and Woolworths.
The pandemic accelerated the shift to card payments, with only 13% of Australians now using cash compared to 27% five years ago.
This trend has made card surcharges more prevalent, prompting the government's intervention.
The crackdown does face a number of hurdles, one of which is that it's contingent on the ongoing review by the Reserve Bank of Australia (RBA).