RBA Targets $2.4 Billion in Savings with Sweeping Payment System Reforms

The Reserve Bank of Australia has unveiled a proposal to ban credit and debit card surcharges for tap transactions, a measure expected to save Australian consumers $1.2 billion annually. This initiative goes beyond the government’s previous focus on debit transaction fees, aiming to align Australia’s payment market with global standards.
RBA Governor Michele Bullock emphasized the need to adapt to the evolving payment landscape, stating, “We think the time has come to address some of these high costs and inefficiencies in the system.” She believes these changes will not only save consumers money but also simplify payments and boost competition. The RBA aims to finalize consultations with the industry by the end of the year, with a target implementation date of next July for the removal of surcharges.
While consumers stand to benefit, merchants will need to absorb these costs. The RBA acknowledges that businesses might respond by raising prices, which could potentially add 0.1 percent to inflation. This presents merchants with a choice: increase prices or absorb debit payment costs through reduced margins.
In addition to the surcharge ban, the RBA is proposing two other significant changes. One is to lower the cap on interchange fees, which could save businesses an additional $1.2 billion a year. This particular change is expected to benefit small businesses the most, as they often pay fees closer to the current cap. The RBA estimates that approximately 90 percent of Australian businesses would be better off under this proposed reduction.
The RBA is also consulting on a requirement for card networks and large acquirers to publish their fees. This move is intended to improve transparency and competition, empowering businesses to better understand the fees they are charged and enabling them to shop around for more competitive deals.
Australian Treasurer Jim Chalmers has noted that the decline in cash use and the rise of electronic payments have resulted in more Australians being “slugged” for using their own money. He views the RBA’s review as a crucial step towards reducing costs for consumers while managing the impact on small businesses and the broader economy. The RBA expects to implement these changes under its own powers, pending the outcomes of its consultation.