Australia is on the cusp of its most significant payment reform in over two decades – with substantial implications for merchants. Australia’s card payment regulation has remained largely unchanged since 2003,¹ when the Reserve Bank of Australia (RBA) implemented world-leading reforms that capped interchange fees and lifted a ban on merchant surcharging imposed by the global schemes. The aim was to promote competition, combat excessive merchant fees, and increase efficiency of the payment landscape.

However, the regulatory framework was built for a payment landscape dominated by cash registers and plastic cards – not contactless terminals and digital wallet dominance. The growing misalignment between regulation and market reality triggered the RBA to launch its most significant legislative review in twenty years into merchant card payment costs and surcharging rules² to ensure the regulation remains fit for purpose.

What’s proposed?

Following a consultation period with industry stakeholders, the RBA outlined a series of proposed reforms with the intent of applying downward pressure on pricing and improving transparency of merchant fees.³ The proposed landmark reforms include a reduction to interchange caps on debit and credit cards (established in 2003 and reduced in 2016),⁴ removal of weighted interchange caps, reinstating card scheme rules that prohibit surcharging, and greater scrutiny of opaque underlying payment costs. If implemented, the reforms would materially reshape how card acceptance costs are structured.

Why now?

It’s no secret that cash usage has declined in Australia, with card payments now accounting three-quarters of all consumer payments (2022).⁵ The exponential growth of card volumes means that minor basis point changes in interchange or scheme fees now represent significant impacts to a merchant’s bottom line. The web of merchant service fees lying behind every transaction remain opaque and complex, making it difficult for merchants to navigate and scrutinise their payment costs, while limited public information on underlying payment costs and peer costs makes informed changes to their payment setup a challenge.

Similarly, the shifting landscape in favour of card payments has brought card surcharging back into the spotlight. In 2003 the RBA prohibited card schemes from applying surcharge bans in Australia, effectively endorsing and allowing the possibility of a surcharge to be applied on each transaction to account for the higher cost of card acceptance. However, as card usage has increased, surcharges have become more visible to consumers, raising public concern on the extent and application of surcharges. In 2023/4, for example, each card-using adult spent approximately $60 on surcharges.⁶ This is a key concern the RBA raised in their consultation papers, with suggestions the surcharge ban will now be allowed by Australian authorities.

Conclusion

We anticipate the RBA to release the reforms in March 2026, with implementation to follow later this year.

The team at CMSPI have significant experience supporting merchants through regulatory developments in Australia and other regions, allowing our clients to navigate the changes and ensure full pass through of any cost adjustments while mitigating potential challenges. With the potential to impact payments budgets by as much as 40%, it’s never been more important for merchants to keep on top of the upcoming RBA release.

In part 2, we’ll examine the final reforms proposed and what this means in practice for merchants and industry stakeholders – and how best to prepare ahead of implementation.