Merchant Card Payment Costs and Surcharging – Consultation Paper –
July 2025 Scheme Fees

Scheme fees have risen over time, putting upward pressure on card payment costs for merchants. On average, scheme fees account for around one-quarter of merchants’ domestic debit card transaction costs and around one-sixth of domestic credit card transaction costs. For domestic transactions, scheme fees are higher for credit than for debit card transactions. Several submissions to the Issues Paper questioned the extent to which these circumstances reflected a lack of competitive pressure rather than differences in the cost and/or quality of services provided by the networks. Unlike interchange fees, scheme fees are not currently subject to regulatory caps.

Submissions from merchants and PSPs generally supported regulatory limits on scheme fees. Several submissions suggested that intervention was particularly needed in the credit card market. This may partly reflect less competitive tension in this market, relative to the debit card market, given the absence of dual-network cards and LCR functionality in the credit card market. Limits on scheme fees may also be more appropriate in an environment without card payment surcharging to act as a restraint on costs.

The international card networks argued that scheme fees are necessary to fund key services such as fraud prevention and security and they remain a small part of the overall cost of acceptance.

5.1 Policy options

Option 1: Maintain the status quo

The RBA would continue to use its information-gathering powers under section 26 of the PSRA to monitor scheme fees.

Option 2: Set an expectation that any further increases in scheme fees require adequate explanation by schemes

The PSB would set an expectation that average scheme fees per transaction should not increase without clear explanation, based on the specific cost or quality of services provided.

Option 3: Set a cap on scheme fees

Under this option, the PSB would set a cap on the level of scheme fees. The cap would be informed by a targeted study on scheme fees, prior to consulting with the industry on any proposed regulation.

5.2 Considerations

The PSB is concerned by the current level of scheme fees in the Australian market and the pace of their growth over recent years. Given that scheme fees grow organically as transaction volumes and values rise, it is not obvious that card networks should need to raise scheme fees at a faster rate than growth in transaction values to maintain current services (Graph 8). It is also not clear that the large existing difference between scheme fees on credit and debit transactions is justified. The PSB’s view is that increases in scheme fees (beyond transaction-value-based increases) should reflect some reasonable increase in the unit costs of delivering specific services and/or in the quality of the services provided.

The PSB is also mindful of the risk that card networks may seek to increase scheme fees if competitive pressures were to lessen following a removal of card surcharging. Similarly, additional measures to increase the transparency of scheme fees could increase the risk of upward price coordination. These risks suggest that it is appropriate for the PSB to consider regulatory action on scheme fees as part of a broader policy package.

Setting a clear expectation that scheme fees should not rise without justification (Option 2) may be sufficient to address concerns over growth in scheme fees without the need for the RBA to take more material action at this stage. This approach would complement steps to increase the transparency of scheme fees, as it would allow the market to more easily scrutinise any growth in scheme fees relative to transaction values and changes in the services delivered by card networks. Such a justification (provided to PSPs and issuers, as appropriate) could outline reasons for increases in existing fees or the introduction of new scheme fees, such as higher processing costs for schemes or specific additional value propositions funded by the fees. For behavioural fees, justification could include what inefficient behaviours the fees seek to disincentivise and how they do so in an efficient and effective manner. Should issuers or PSPs seek additional information from the card networks on new or increased fees, the PSB would expect the networks to reasonably respond to such requests.

The PSB considers that a regulatory cap on the level of scheme fees relative to transaction values could address excessive growth in scheme fees in sectors of the market that may be subject to less competitive pressure, such as the credit card market or international transactions. Many submissions supported a cap on scheme fees. However, the submissions provided limited feedback on how a cap on scheme fees should be set. Introducing a cap would be complex and require careful consideration, including through extensive consultation with industry, to avoid unintended consequences or adverse incentives for participants in the card payments system. The RBA is not aware of the existence of any such cap on scheme fees in comparable jurisdictions.

The PSB could also explore mandating dual-network credit cards and extending LCR to credit card transactions should scheme fee growth be excessive in the credit market. This would likely increase competitive pressures on scheme fees and would be a potential alternative to imposing a cap on scheme fees.

5.3 Preliminary assessment

The PSB proposes to set a regulatory expectation that scheme fees should not rise relative to transaction values without clear explanation. The PSB’s preference is that card networks and market participants seek a satisfactory industry-led solution in the first instance. However, should scheme fees continue to grow faster than transaction values, the PSB would consider further potential measures to contain their growth including introducing a cap on scheme fees or mandating dual-network credit cards and extending LCR to credit card transactions.