Review of Merchant Card Payment Costs and Surcharging – Phase 3 Executive Summary

The Reserve Bank of Australia (RBA) has conducted a Review of Merchant Card Payment Costs and Surcharging (the Review) as part of the RBA’s regular review of its retail payments regulation. Phase 1 of the Review began in October 2024 with the publication of an Issues Paper. Phase 2 followed with the publication of a Consultation Paper in July 2025 that outlined the preliminary decisions of the Payments System Board (PSB). This Conclusions Paper is Phase 3 (and final phase) of the Review. It presents the PSB’s final decisions and a set of variations to the RBA’s Standards that, in the PSB’s view, best promotes the public interest.

The Review has benefited from engagement with a wide range of stakeholders with diverse views on the issues associated with card payment costs and surcharging. The PSB has given careful consideration to the views and evidence provided to assess which regulatory actions would best support the public interest in line with the PSB’s responsibility to promote the efficiency and competitiveness of the payments system and control risk in the financial system.

This Executive Summary provides an overview of the key decisions of the PSB, covering how the decisions support the PSB’s mandate to act in the public interest and the expected impact of the policy reforms on stakeholders. Chapter 1 provides background on, and describes the process of, the Review. Chapters 2–7 cover the key issues for the Review: surcharging; interchange fees; scheme fees; transparency of wholesale fees; competition in card acquiring services; and least-cost routing of dual-network debit cards. Chapter 8 summarises the implementation timeline and impact of the policy reforms, as well as next steps for future reviews.

The PSB’s decisions

As part of the Review, the PSB examined public interest considerations regarding merchants’ card payment costs and the framework for surcharging, for each designated payment system and the payments system as a whole. Australians extensively use cards to pay for goods and services, and they benefit from the convenience and security provided by card payments. However, in an environment of heightened concern around the cost of living, card payment costs and surcharging have been attracting more attention from merchants and consumers. These issues are linked as merchants would be less likely to surcharge consumers if their card payment costs were lower.

The PSB’s assessment is that the surcharging framework, introduced more than two decades ago, is no longer achieving its intended purpose. The RBA’s Standards have prohibited the designated card networks² from imposing no-surcharge rules on their card transactions. One of the RBA’s key objectives when allowing surcharging was to provide price signals to consumers regarding the costs of payments and so incentivise them to choose lower cost payment methods. The PSB’s view is that the framework no longer achieves this objective effectively for three main reasons:

1. Single-rate payment plans for merchants that charge the same fees for all types of cards have become more prevalent.
2. It is difficult to enforce the surcharging rules to ensure that merchants adequately disclose and calculate their surcharges.
3. Consumers find it harder to avoid surcharges, with many consumers using less cash and the prevalence of card surcharging doubling since 2022.

Therefore, removing surcharging would enhance competition and efficiency in the payments system, without increasing risk to the financial system, by:

• making card payments simpler and more transparent for consumers and merchants. Consumers are estimated to be paying $1.6 billion of a total $1.8 billion in card payment surcharges charged each year on designated card networks. This estimate includes unexpected surcharges that obscure the total amount consumers are paying due to poor compliance with signage requirements, which make it difficult for consumers to make efficient choices. Removing surcharging aligns with strong feedback from a large majority of consumers that they would prefer payment costs to be incorporated in the advertised prices of goods and services. The PSB therefore anticipates that the 16 per cent of merchants that currently surcharge may increase their advertised prices to cover the cost of accepting card payments. Fully removing surcharging will be simpler for merchants than just removing surcharging on debit cards or continuing to comply with the existing surcharging framework.
• incentivising merchants to choose lower cost payments plans. Merchants that currently surcharge would be incentivised to review their payments plans and shop around for better deals so they can offer their customers the most competitive prices.
• being less costly for payments service providers (PSPs) to implement and less disruptive to existing business models than removing surcharging on debit cards only. The RBA estimated the system cost of removing surcharging would be around $25 million, based on feedback from PSPs. This is lower than the estimated cost of $45 million to remove surcharging on debit cards only, reflecting less substantial infrastructure upgrades and more straightforward communication with merchants. PSPs will also be able to continue offering the single-rate plans that some merchants value due to their simplicity and certainty of pricing. Removing surcharging on both credit and debit cards is likely to be less confusing for consumers and avoid adding friction at checkout.
• encouraging the use of lower cost payment methods. Recent studies suggest that cash is no longer clearly cheaper for merchants to accept than debit or credit cards, due to cash handling and back-office costs. Retaining surcharging on card payments does not reflect the relative cost of these payment methods. Merchants retain the ability to offer a discount for their preferred payment method, which allows them to incentivise the use of payment methods that they consider to be cheaper to accept. Consumers may choose to pay by card or cash without facing surcharges for card transactions.³
• enabling four-party card networks to compete on a more level playing field with higher cost payment methods that do not allow surcharging, such as some ‘buy-now pay-later’ (BNPL) products. Some merchants were concerned that they may lose the ability to surcharge American Express cards. This issue will be considered as part of the next RBA review planned for mid-2026, following the 2025 amendments to the Payment Systems (Regulation) Act 1998 (PSRA).

The RBA will lift the prohibition on ‘no-surcharge’ rules for all currently designated card networks (eftpos, Mastercard and Visa). Based on historical experience and arrangements in other jurisdictions, the RBA considers that this will likely be followed by the designated card networks imposing ‘no-surcharge’ rules. If surcharging continues after the prohibition on ‘no-surcharge’ rules is lifted, which would be counter to the spirit of the policy reforms, the RBA could recommend that the Government legislate a ban on surcharging.

The PSB’s view is that surcharging and merchant card payment costs are interconnected issues. Removing the ability of merchants to surcharge without introducing corresponding regulatory actions to lower their card payment costs would simply redistribute costs in the payments system onto merchants while allowing inefficiencies in card payment costs to remain. The PSB also recognises the case for addressing the large disparity in card payment costs between small and large merchants and the high costs for Australian merchants accepting foreign-issued card transactions.

The new and reduced caps on interchange fees for card transactions acquired in Australia would enhance competition and efficiency in the payment system, without increasing risk to the financial system, by:

• lowering wholesale card payment costs for merchants by around $910 million per year through reducing interchange caps on domestic-issued cards and introducing an interchange cap on foreign-issued cards. The RBA has set interchange caps using eligible issuer costs as a reference point. This is consistent with a ‘user pays’ philosophy, where merchants should not have to subsidise benefits, such as rewards points, that issuers offer their cardholders to encourage them to use more expensive credit cards. Lower card payment costs should eventually flow through to consumers, since merchants will be able to set lower advertised prices for their goods and services.
• reducing the disparity in card payment costs faced by small and large merchants. Small merchants tend to pay much higher interchange fees than large merchants, at or near the current regulatory caps, so lowering these caps would mainly benefit small merchants. This would improve the efficiency of the payments system by lessening the extent of cross-subsidisation of large merchants’ payment costs by small merchants.
• reducing the extent of cross-subsidisation of consumer credit cardholders by debit cardholders. Reducing the difference between the interchange caps on debit and consumer credit cards would reduce the extent to which merchants and debit cardholders are subsidising the benefits that issuers provide to their credit cardholders.
• preserving the competitive tension between card networks processing commercial credit cards. Allowing for a separate interchange cap for commercial credit cards supports a more even playing field between Mastercard, Visa and American Express. American Express is the largest issuer of commercial cards and on average these cards cost more for merchants to accept than cards processed through the Mastercard and Visa credit networks. The RBA plans to commence a further review in mid-2026, following the 2025 amendments to the PSRA, which will include consideration of public interest issues involving American Express.

The RBA is also taking action to support the interchange reductions being passed on to merchants in full (see below).

The PSB’s view is that pricing within the payments system is overly complex and opaque. More transparency and simplification of the fees charged by the card networks would promote competition and better enable PSPs to scrutinise fee changes. Currently, many merchants, particularly small merchants, are not equipped with relevant information to compare payment fees easily across providers and may not be aware they are paying significantly higher fees than other merchants of a similar size.

The PSB’s view is that these transparency measures would promote competition and efficiency in the payments system, without increasing risk to the financial system, by:

• providing merchants with more useful and consistent information on the fees charged by PSPs. The measures will increase the transparency of acquirers’ pricing and require them to provide more information to merchants about their payment costs. This would enable merchants to better understand the fees they are charged and how they compare with those charged to similar merchants. Merchants will be better placed to compare providers’ pricing and shop around for better deals.
• increasing competitive pressure among acquirers to pass on savings from interchange reductions by requiring them to publish their merchant service fees and publish a measure of interchange pass-through. Doing so will make it easier for merchant customers to identify acquirers that pass on interchange reductions in full, and can help inform their decision to switch to those providers. The RBA plans to implement additional measures to closely monitor pass-through and highlight acquirers that fail to pass on these savings to merchants.
• increasing competitive pressure on the card networks by requiring each network to publish their interchange and scheme fees, reduce the complexity of their scheme fees and justify any increases in scheme fees in disclosures to PSPs. Less complex scheme fees would make it easier for PSPs to understand, reconcile and manage their scheme fees, and scrutinise fee changes. PSPs can use the published information to negotiate better deals from the card networks and pass on the savings to merchants and consumers.

Broader payments policy issues

The RBA will start a public consultation in mid-2026 to assess the public interest case for regulating areas of the retail payments system that are not covered under this Review. This next consultation will seek feedback on a range of competition, efficiency and safety issues including those related to mobile wallets, three-party card networks (such as American Express), BNPL services and e-commerce platforms.

Some stakeholders urged the PSB to give weight to funding investment in Australian payments infrastructure as part of the Review. However, the PSB judged these concerns to not be persuasive in forming a public interest case as part of the RBA’s legislative mandate under the PSRA. Separate to this Review, the RBA is involved in several other initiatives that support ongoing investment in critical Australian payments infrastructure. The RBA has been working closely with industry to modernise account-to-account payments. The RBA also supports the Australian Government’s policy objective of ensuring cash remains a viable means of payment for as long as Australians want or need to use it. In addition, the RBA continues to conduct research and assess the policy case for central bank digital currency.

Expected impacts of the policy reforms

The PSB has considered how the policy reforms would affect participants and end users in the payments system.

Consumers would benefit from the reforms as they would no longer have to pay surcharges on designated cards.⁴ They would be able to make more informed payment choices because a merchant’s advertised price will be the price they pay. While the advertised prices at merchants that currently surcharge are expected to go up to cover their payment costs, consumers should end up paying less overall. This is because under the policy reforms, payment costs for merchants should come down and this should flow through to lower prices for goods and services than would be the case without the reduction in interchange fees. Lowering interchange fees on consumer credit cards will also reduce the extent to which lower income cardholders cross-subsidise benefits received by holders of premium credit cards (which are held primarily by higher income households). Some card issuers have indicated they would choose to boost their profitability in response to interchange reductions by reducing the benefits they provide to their consumer credit cardholders or by increasing card fees and interest rates.

Merchants that do not surcharge currently, which is the large majority of small and large merchants, are expected to benefit from the reforms. Merchants that currently surcharge would be able to include their payment costs in their advertised prices (as they do with other costs they incur in generating sales), and they no longer would need to comply with the existing complex surcharging rules.

• Small merchants are expected to benefit the most from the reduction in interchange fees, which should significantly lower their payment costs. The RBA is implementing a range of measures to strongly encourage payment providers to pass those savings on to merchants. The new transparency measures will help small merchants monitor whether their provider is passing on savings from interchange reductions, and more broadly, to assess whether their payment plan is giving them value for money. The many merchants that currently pay significantly higher fees than comparable merchants would be able to use the information published on the RBA website to seek to negotiate lower fees with their existing provider or to search for a better-value payment plan at another provider.
• Large merchants are expected to benefit from the reduction in interchange fees on foreign-issued card transactions. Large merchants are typically on unblended plans and will receive automatic pass-through of interchange reductions on foreign-issued card transactions.

PSPs will incur some costs to implement the policy reforms, though the costs are substantially lower than under alternative proposals considered by the PSB. PSPs are estimated to incur costs of $25 million across the industry to implement a removal of debit and credit card surcharging, which is less than the estimated cost of $45 million of removing surcharging on debit cards only. PSPs would also retain the ability to offer a variety of pricing plans, including those that blend debit and credit pricing together. PSPs would incur additional costs to implement transparency measures relating to the fees they charge merchants. However, PSPs are expected to benefit from less complex scheme fees, which should reduce their operational burden, as well as more competition between card networks due to greater transparency of wholesale fees.

Large domestic issuers will experience a reduction in interchange revenue, though to a lesser extent than initially proposed in the Consultation Paper. The interchange reductions will redistribute costs in a more efficient way by limiting the capacity of issuers to pass on the costs of consumer credit card rewards and loyalty programs to merchants. The PSB has decided to retain a higher cap for commercial credit cards to promote competition in the issuance of commercial credit cards. The ultimate effect on issuers would depend on whether the card networks adjust individual interchange rates under the new caps, how issuers respond to the reduction in interchange revenue and any changes in the volume and composition of card payments upon the removal of surcharging. In response to the interchange reductions, some issuers have suggested they would reduce the benefits they provide to their consumer credit cardholders or increase card fees and interest rates.

Small domestic issuers would mostly experience a lower reduction in interchange revenue than initially proposed in the Consultation Paper. Many small issuers, such as customer-owned banks, mainly provide debit cards, where the reduction in the interchange cap has been halved relative to the Consultation Paper. These small issuers also continue to benefit from being able to issue single network debit cards, while large issuers incur the additional cost of issuing dual-network debit cards (DNDCs). Small domestic issuers that provide innovative commercial credit card services, including some fintechs, will not be affected, as the interchange cap on commercial credit cards acquired in Australia is being retained at its current level.

Card networks would be expected to benefit from increased use of cards following the removal of surcharging, but would incur some costs to implement the reforms. The expected cost to publish interchange and scheme fee data is likely to be small given similar data are already provided to the RBA. Simplifying fee schedules may result in additional costs, but networks that already have simpler fee schedules would incur lower costs to adhere to the regulatory expectations.

Endnotes

2 Designated cards refer to the debit, prepaid and credit cards of the eftpos, Mastercard and Visa card networks.

3 The RBA is committed to supporting the Australian Government’s policy objective of ensuring cash remains a viable means of payment for as long as Australians want or need to use it as cash is a critical part of an inclusive and resilient payments system. See Bullock (2026).

4 This is based on the RBA anticipating that no-surcharge rules would be imposed by the designated card networks after the RBA removes its prohibition on such rules for the eftpos, Mastercard and Visa debit, prepaid and credit card networks.