Review of Merchant Card Payment Costs and Surcharging – Phase 3 8. Impact and Implementation

8.1 Summary of the RBA’s policy package of reforms

The PSB’s view is that competition and efficiency in the payments system will be best enhanced by implementing the following policies, without increasing risk to the financial system.

8.2 Implementation

Table 10 outlines the dates on which each policy will become effective.

The PSB considers that the removal of surcharging and the amendments to interchange regulation on domestic-issued card transactions acquired in Australia should come into effect at the same time to maximise the benefits of the reforms and to balance the interests of consumers and merchants. A broader removal of surcharging is more straightforward to implement than alternative options involving a partial removal of surcharging. Given the delay to releasing the final conclusions of this Review, the PSB has taken this into consideration when setting implementation dates for the reforms.

The PSB had initially proposed an implementation period of six months across the whole suite of reforms. Many stakeholders submitted that six months would not be adequate time to implement the entire package of reforms. Several stakeholders submitted that a longer implementation period would be required to allow them to adjust their business or offerings in response to the changes to surcharging and interchange. By contrast, consumers preferred the removal of surcharging to come into effect sooner.

The PSB has decided that the removal of surcharging and changes to interchange on domestic-issued card transactions acquired in Australia should be implemented in six months’ time. This will include the RBA lifting its prohibition on no-surcharge rules with effect on 1 October 2026. Based on past experience, the card networks would be likely to impose no-surcharge rules shortly after this occurs. Changes to interchange caps and benchmarks on domestic-issued card transactions acquired in Australia will also come into effect on 1 October 2026. The PSB has decided that six months is enough time for merchants and payments industry participants to implement these changes; the industry has been on notice that such changes were being seriously considered since October 2024. The PSB considers that it would not be in the public interest to further delay implementation of these important reforms in order to provide additional time requested by issuers for them to fully adjust their business models to maximise their profits.

The PSB also considers that the publication of fees charged by acquirers and card networks should include periods prior to the changes to interchange regulation, to allow the public to monitor the effects of the policy reforms on these fees. These measures include:

• card networks publishing their quarterly interchange fees
• card networks publishing their quarterly scheme fees
• acquirers publishing their quarterly merchant service fees.

These publication requirements will come into effect on 1 October 2026, with publication by 30 October 2026 of one-quarter of data from prior to the interchange reductions on domestic-issued cards.

The PSB expects the card networks to take steps to simplify their scheme fee schedules and improve their fee billing practices. The PSB considers that each of the designated card networks should start consulting as soon as possible with their participants to determine the steps it will take to achieve the principles outlined in Chapter 4: Scheme Fees and publish their Scheme Fee Roadmaps by 1 April 2027.

The PSB considers that acquirers should publish a measure of interchange pass-through following the changes in interchange. Acquirers will need to publish a measure of pass-through of interchange reductions on a quarterly basis for the first four quarters beginning on 1 October 2026. The first publication of data will occur by 30 January 2027, following the first quarter of transactions under the new interchange caps on domestic-issued card transactions acquired in Australia. The third and fourth quarters will also align with reductions in interchange on foreign-issued card transactions acquired in Australia.

The PSB’s view is that there is a case to extend the implementation timeline for changes to the information provided on merchant statements as well as the introduction of interchange caps for foreign-issued card transactions acquired in Australia to 1 April 2027. The PSB took into account stakeholder feedback noting the work required to apply these changes consistently across numerous merchants and multiple jurisdictions. The PSB considers a longer 12-month implementation period to be more appropriate for these aspects of the reforms.

8.3 Impact on stakeholders

This section discusses the expected impact of the policy reforms on stakeholders in the payments system.

Consumers are expected to benefit from the policy reforms, directly from the removal of surcharging and indirectly through the lowering of merchants’ wholesale costs. Card payments are extremely popular with Australian consumers, with around three-quarters of transactions being made by credit and debit cards. Under the current surcharging framework, consumers pay an estimated $1.6 billion of the total $1.8 billion in card surcharges each year on designated card networks. Consumers report being frustrated by surcharges and expressed a preference for merchants to incorporate the cost of payments in their advertised pricing.

These reforms will benefit consumers in the following ways:

• Upon the removal of surcharging from eftpos, Mastercard and Visa cards, consumers will benefit from having greater certainty of the final price at the checkout.⁷² Consumers will no longer need to calculate the total price including the surcharge or to work out whether a surcharge may be excessive.
• Most merchants do not surcharge and already incorporate their payment costs into their advertised prices, so consumers are not expected to experience increased advertised prices at these merchants. Many of these merchants would benefit from reduced fees, which may result in lower prices for consumers.
• Consumers are already paying surcharges, so shopping at merchants that currently surcharge should not result in a material change in the total price paid by consumers. While some merchants may decide to round up pricing, the RBA expects this inflationary impact to be negligible. Merchants are expected to benefit from reduced payment costs, which should reduce the extent to which they need to increase their prices when surcharging is removed.
• Removing surcharging on both debit and credit cards, rather than just on debit cards, will be less confusing for consumers, who will not need to distinguish between their debit and credit cards at the checkout to avoid payment surcharges. This will be particularly beneficial for the eight million cardholders with combination cards (that have credit or debit functionality depending on the way they are presented at the checkout). This would result in less friction for consumers at the checkout.
• Consumers that use cheaper payment methods such as debit cards would be cross-subsidising users of expensive cards (and their benefits such as rewards points) to a lesser extent than the status quo due to the new interchange caps, which will reduce the average difference in interchange between consumer debit and credit cards from 0.4 percentage points to around 0.25 percentage points.
• While merchants’ ability to surcharge would be removed, consumers could still take advantage of any discounts offered by merchants for using a particular payment method that merchants wish to encourage.

Most small merchants are expected to benefit from the policy reforms due to wholesale payment costs being lowered, as interchange reductions will mostly accrue to those without access to strategic rates. A majority of small merchants (85 per cent) do not surcharge and will not be impacted by the removal of surcharging. Merchants that currently surcharge will need to incorporate their payment costs in their advertised prices. The RBA will also be engaging with the federal, state and territory governments to inform relevant regulators about the removal of surcharging for goods and services that they price regulate.

Some of the expected impacts on merchants include:

• Small merchants that do not surcharge are expected to benefit from interchange reductions that should reduce their total merchant service fees paid to their PSP. The RBA is also taking a range of measures to encourage greater competition among acquirers to pass through the interchange savings to merchants. Merchants are encouraged to shop around to find a better deal to maximise their savings.
• Small merchants tend to pay higher interchange fees closer to the current interchange caps and are expected to gain the most from reduced interchange caps.
• Merchants that surcharge will need to incorporate their payment costs into their advertised price. However, most consumers prefer to be shown the all-inclusive price of goods or services rather than a separate payment surcharge. This will reduce friction in the checkout process for merchants and eliminate the cost of complying with complex surcharging rules.
• Small merchants will benefit from increased transparency of merchant fees, which will enable them to more easily compare pricing with public information and also receive more comprehensive information on their regular statements. Acquirers that specialise in servicing small merchants tend to provide the least information on their merchant statements currently; this means that small merchants will be able to use the additional information to obtain more accurate quotes from other providers.
• Small merchants will retain the option to choose single-price or blended pricing plans and continue to benefit from the simplicity and certainty offered by these plans.
• Some merchants may switch to offering discounts instead of using surcharges to steer consumers to other payment methods.

Large merchants are expected to similarly experience a reduction in their overall card payment costs. A majority of large merchants do not surcharge (89 per cent). Compared with small merchants, large merchants tend to have greater bargaining power, pay lower fees and benefit from strategic interchange rates. Some large merchants are on strategic interchange rates that are below issuers’ eligible costs, which has resulted in cross-subsidisation of large merchants’ fees by small merchants.

The expected effects of the policy reforms on large merchants include:

• Large merchants should benefit from interchange reductions on foreign-issued card transactions acquired in Australia, which are currently not subject to interchange regulation. Large merchants are more likely to be on unblended plans and therefore receive automatic pass-through of interchange reductions.
• Some large merchants reported that while they do not surcharge, they are able to use surcharging as a bargaining tool to receive lower fees from their PSP. However, it will still be possible for merchants to offer discounts for preferred payment methods as an alternative to surcharging.
• The merchants that currently surcharge will incur costs to update their advertised pricing to cover their payment costs. However, these merchants will also no longer need to incur costs to comply with the complex surcharging framework.

Acquirers and other PSPs will incur some costs to implement the reforms, but some may also benefit. Acquirers and PSPs offer a diverse range of business models and pricing plans to cater for the varied needs of Australian merchants.

Some of the expected effects of the reforms on PSPs include:

• PSPs are expected to incur around $25 million across the industry to implement the removal of surcharging for debit and credit cards. This is lower than the cost of the alternative option of removing debit cards only.
• PSPs will retain the ability to offer pricing models that blend debit and credit card fees together, which many providers stated would not be viable if surcharging was only removed on debit cards. PSPs can continue to attract merchants that prefer these types of plans.
• PSPs will no longer be able to offer ‘fee free’ payment plans that rely on automatically surcharging consumers. This would likely motivate merchants currently using these plans to find a lower cost provider, which could incentivise these PSPs to lower their fees to remain competitive.
• Large acquirers will incur additional costs to implement the public transparency measures. PSPs will incur costs to upgrade the information provided on merchant statements.
• The simplification of scheme fee schedules and reform of scheme fee billing practices should particularly benefit acquirers and other PSPs, which have raised concerns about these issues in the Review.
• Acquirers retain the choice to implement their preferred method of LCR, since the RBA is not requiring them to implement dynamic LCR.

Domestic issuers of debit, prepaid and consumer credit cards are expected to receive less interchange revenue on transactions acquired in Australia. Many issuers have been receiving interchange revenue above efficient levels and incentivising consumers to use payment methods that increase costs for merchants and the payments system more broadly.

The expected impacts on domestic issuers include:

• Issuer interchange revenue is expected to be reduced by an estimated $660 million per year (assuming no other changes in behaviour), with the bulk of this reduction affecting issuers of consumer credit cards.
• Adjustments by consumers and networks are expected to partly offset the reduction in interchange for issuers. In response to the removal of surcharging, some consumers are expected to shift from cash towards greater card use, which would boost issuers’ revenue. Issuers’ revenue could also increase if the networks choose to raise the interchange fees that are currently below the proposed caps, such as strategic interchange rates paid by large merchants.
• Issuers have indicated that they could respond to a reduction in interchange revenue by reducing the benefits available on their consumer credit cards, such as lowing rewards points, shortening interest free periods or raising credit card interest rates. However, if issuers respond in this way, it would be expected to result in consumers using credit cards less frequently, which will reduce interchange revenue.
• Issuers of commercial credit cards will largely be unaffected, since the RBA will retain a higher cap for commercial credit cards to promote competition in the commercial credit card segment, where American Express is the dominant issuer.

Small issuers may also experience the following impacts:

• Some small issuers, such as customer-owned banks, focus predominantly on debit card issuing and have limited credit card offerings. A more modest reduction in the debit interchange caps and benchmark than initially proposed in the Consultation Paper will help small issuers that tend to have higher costs of issuing. Small issuers will also continue to benefit from being able to issue single-network debit cards, while large issuers incur the higher cost of having to issue DNDCs.
• Many small issuers, including fintechs, focus on issuing commercial credit cards. Retaining the higher interchange cap for these cards means that these issuers can continue to innovate and compete against American Express and other large issuers.

Card networks are expected to benefit from increased card use due to the removal of surcharging but incur some costs to implement the reforms. The card networks will incur some costs to publish their interchange and scheme fees, but this is expected to be small given they already publish or provide similar data to the RBA. The card networks will incur some costs to simplify their fee schedules and enhance their fee billing practices. However, networks that already have simple fee schedules will incur lower costs to adhere to the roadmap.

8.4 Evaluation and monitoring

The RBA will continue monitoring developments in the payments system to assess whether the policy reforms are achieving their intended purpose and whether participants are complying with the new regulations from the effective dates. This monitoring would include a continuation of data collection and monitoring as well as new initiatives. The RBA will:

• continue its regular liaison with stakeholders to understand the impacts of its regulation and whether regulatory expectations are being met, particularly on the card networks’ progress on the roadmap for scheme fees.
• work closely with other regulators and government agencies to monitor the process of the removal of surcharging to assess whether further government action is required. This will include engagement with the federal, state and territory governments regarding the implications of the removal of surcharging for merchants selling goods and services with regulated prices.
• monitor developments in the card payments system and assess compliance with regulations through regular or new data collections.
• publish new findings and analysis to raise awareness of issues, evaluate the impact of the reforms and assess whether further regulatory action is required.
• monitor international developments and regulatory initiatives overseas relating to payments regulation.

The RBA will continue conducting regular reviews of its retail payments regulation to ensure they remain fit for purpose and consider appropriate regulatory action if there is evidence of non-compliance with its regulations.

8.5 Future reviews

Throughout this Review, the RBA has heard strong feedback from some stakeholders that there are issues not within the scope of the current Review that should be addressed following the 2025 amendments to the PSRA that expand the remit of the RBA’s regulatory powers. The PSB decided to complete this Review given the importance of addressing the issues within its scope in a timely way.

The passage of the amendments to the PSRA in December 2025 expands the scope of the RBA’s powers to regulate payments systems and their participants. Accordingly, the RBA is planning to commence another review in mid-2026 seeking stakeholder views on which issues should be prioritised under the new regulatory remit. This upcoming review is intended to cover issues that are not within the scope of this current Review, including public interest issues raised by developments in online payments, mobile wallets, three-party card networks and BNPL providers.

Endnotes

72 Non-payment related surcharges (such as weekend and public holiday surcharges) are beyond the scope of this Review.