as part of its ongoing review into merchant card payment costs and surcharging.  Following public feedback from an issues paper released in October last year, the RBA’s payments system board has formed a preliminary view that removing surcharges on Eftpos, Mastercard and Visa cards is in the public interest.  The bank claims that surcharging costs Australian consumers around A$1.2 billion annually and is no longer serving its original purpose of steering consumers toward lower-cost payment methods, particularly as cash usage declines and surcharge rates are often applied uniformly across card types. In addition to the proposed surcharge ban, the RBA is also considering lowering the cap on interchange fees paid by businesses, which it says would save merchants A$1.2 billion annually.  According to the RBA, the reforms are expected to benefit around 90 per cent of businesses, particularly small businesses, since their fees tend to be closest to the current caps.  The RBA is also proposing mandating greater fee transparency by requiring card networks and large acquirers to publish their charges.  In a media release, the RBA called for feedback on these proposals by August 26 and said it “intends to publish these conclusions and an implementation timeline for any regulatory steps by the end of the year.” Issues identified by the RBA: Surcharging no longer steers consumers to cheaper payment methods due to declining cash use and uniform surcharge rates across debit and credit cards. Interchange fees paid by businesses to card providers remain substantially high, particularly impacting small businesses. Lack of transparency makes it difficult for businesses to compare fees and shop around for better card payment deals. Key proposals: Remove surcharges on Eftpos, Mastercard and Visa cards to save consumers approximately A$1.2 billion annually. Reduce interchange fees paid by businesses. Require card networks and large acquirers to publish fees charged. If implemented, the RBA’s proposed reforms could significantly impact Australian retailers, in particular, small independent businesses and operators that are already grappling with rising costs.  While the central bank ascertains that eliminating surcharges and reducing fees will lower costs for most businesses, certain groups warn that the reality may be more complex. Small business concerns The Council of Small Business Organisations Australia (COSBOA) and the Independents Payment Forum have voiced concerns over the Reserve Bank of Australia’s proposed removal of card surcharges.  While the reforms aim to simplify payments and reduce costs, these small business advocates warn the changes could mask fees rather than eliminate them, ultimately forcing merchants to absorb hidden expenses. COSBOA has responded cautiously. In a press release, Matthew Addison, COSBOA chair, described the proposals as a mixed bag for small businesses, welcoming reforms aimed at greater transparency and fee reductions but warning of “serious unintended consequences” from 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,” he added.  He also dismissed the RBA’s claim of A$1.2 billion in consumer savings as a mirage, noting that while reduced interchange fees are positive, merchant fees include many other charges that will simply be “baked into the price of coffee, groceries, and services across the country.” COSBOA also highlighted the real-world challenges small businesses face, from rising costs to wage pressures, and warned that removing surcharges without addressing root causes risks imposing hidden costs that ultimately hurt both businesses and consumers. The Independent Payments Forum has also criticised the proposed reforms, warning they will do little to curb the A$6.4 billion in annual processing fees borne disproportionately by small businesses.  In response to the RBA’s consultation paper released today, IPF co-founder Bradford Kelly said in a press release that the proposals “fail small businesses and the local communities they serve,” instead favouring “big business, big banks and big offshore companies.” According to IPF, small businesses pay up to 400 per cent more in card fees than their larger counterparts, a cost ultimately passed on to consumers.  The group argues that merchant fees (typically charged as a percentage of total sales) act as a bank tax that may eat into already thin margins.  “Without fundamental reform and more legislative intervention, these unfair and inflated fees will continue to decimate small business profit margins, increase prices, reduce productivity and possibly lead to closures,” Kelly said. Visa backs ban but warns on cuts Visa has welcomed the Reserve Bank of Australia’s recommendation to remove card surcharges on designated networks. “A recent study by Visa showed 95 per cent of Australians wanted more action taken on surcharging. To this end, the RBA’s recommendation to ban surcharging on designated networks is a great outcome,” Alan Machet, group country manager for Visa Oceania, said in a press release.   However, he raised concerns about the RBA’s parallel proposal to sharply reduce interchange fees, by as much as 88 per cent in some cases.  “This is a dramatic shift that would have ripple effects far beyond payments,” Machet said, cautioning that the move could undermine local investment in fraud prevention and innovation, ultimately weakening the digital payments ecosystem. Visa’s research, conducted by Lonergan Research, also revealed a gap between what Australians believe about surcharging and how it actually works. While 56 per cent of people said they understood the rules, only 25 per cent correctly identified when surcharges are permitted. Notably, 85 per cent of respondents said they preferred surcharges to be built into the upfront price of goods and services. As the RBA moves toward reshaping the future of payment systems, the divide between cost transparency and consumer convenience is at the forefront.  While some argue that removing surcharges will streamline transactions and reduce consumer frustration, industry stakeholders warn of unintended consequences that could shift hidden costs back onto retailers and customers.  With consultation underway and reforms slated for next year, the months ahead will be pivotal in determining whether the final framework strikes a fair balance between efficiency, competition and economic sustainability for Australia’s retail sector. Further reading: Australian retail faces a perfect storm of economic and political pressures