Reserve Bank of Australia Targets card costs

The Reserve Bank of Australia is preparing one of the most consequential interventions in the country’s retail payments market in years, unveiling a reform package that will ban merchant surcharging on cards and reduce interchange fees in a bid to improve competition and lower costs for businesses.

RBA targets card costs with surcharge ban

The measures follow an extended consultation process launched after the publication of the central bank’s consultation paper in July 2025.

The conclusion reached by the Payments System Board is that the existing framework, particularly around surcharging, no longer serves its original purpose and now risks undermining transparency and efficiency in the payments system.

At the centre of the changes is the decision to remove surcharging on debit, prepaid and credit cards across the designated eftpos, Mastercard and Visa networks.

For consumers, the shift is intended to make pricing clearer by ensuring that payment costs are incorporated into advertised prices rather than added at the till.

For policymakers, it represents an acknowledgement that the logic of the old regime has weakened in a market where cash use has declined sharply and many merchants now apply the same surcharge regardless of the payment method chosen.

Why the old surcharge model has lost credibility

Australia’s surcharging framework was introduced more than two decades ago to encourage consumers to use more efficient payment methods.

In theory, it was meant to send a pricing signal: if one payment instrument was more expensive for merchants to accept, the customer would see that cost and potentially choose a cheaper alternative.

In practice, that mechanism appears to have eroded. The Reserve Bank argues that surcharging has become less effective because many businesses now impose blanket surcharges across card types, reducing any meaningful behavioural signal.

At the same time, enforcement has proved difficult, while consumers have grown less tolerant of add-on fees appearing late in the purchasing journey.

The result is a regime that increasingly looks out of step with how people actually pay. By banning surcharges, the RBA is effectively deciding that simplicity and transparency now matter more than preserving an older pricing model.

Interchange caps and transparency rules aim to sharpen competition

Alongside the surcharge ban, the RBA will lower the caps on interchange fees paid by Australian businesses when they accept domestic and overseas card payments.

This is expected to reduce acceptance costs, with smaller merchants likely to benefit most because they tend to pay fees closer to the regulatory ceiling.

The reform package also includes stronger transparency requirements on card networks and payment service providers. The intention is to make fees easier to understand and compare, thereby improving merchants’ ability to negotiate or switch providers.

In a sector where pricing structures are often opaque, that could be as significant as the interchange changes themselves.

A broader regulatory agenda is taking shape

Most of the reforms, including the surcharge ban and lower domestic interchange caps, will come into force on 1 October 2026.

A later phase, beginning on 1 April 2027, will introduce an interchange cap on foreign cards and additional transparency measures, reflecting the greater implementation complexity involved.

More broadly, the RBA has signalled that this is not the end of the story. A further public consultation due in mid-2026 will consider whether regulation should be extended to mobile wallets, three-party card schemes, buy now, pay later providers and e-commerce platforms.

That suggests Australia’s payments policy debate is shifting from narrow card economics towards a wider reconsideration of how power, pricing and competition operate across the digital payments ecosystem.