The Reserve Bank of Australia (RBA) has released its much-anticipated conclusions paper outlining landmark reforms to the payment system in Australia following an 18-month review.

The headline reforms include lowering the caps on interchange fees charged to merchants and removing the prohibition on ‘no-surcharge’ rules for debit, prepaid, and credit cards. The RBA is also introducing measures aimed at improving the transparency and oversight of wholesale payment fees by establishing fee management practices.

The RBA estimates that the reduction in interchange fees will reduce merchant payment costs by approximately $910 million annually¹ – although the realised impact will be dependent on a multitude of factors, including transaction mix and pricing structures.

The implementation deadline for the core reforms is 1 October 2026 – meaning all merchants will need to work closely with their payment providers to facilitate a smooth transition period.

Surcharging

By removing the current prohibition on ‘no surcharge’ rules, the RBA is allowing the designated card networks to reintroduce rules that prevent merchants from surcharging card payments. This will be applied on all card transaction types: debit, prepaid, credit, and commercial. 

The RBA estimates that removing surcharges would save consumers up to $1.6 billion a year, which is higher than the estimated reduction in underlying payment costs.

Industry Reaction to Surcharging Ban:

There are mixed reactions in the industry regarding the surcharging ban. Some argue the ban will simplify checkout and payment experiences, improve price transparency, and align with international practices; others believe surcharging can strengthen merchants’ negotiating position and can discourage consumers from using more expensive cards such as premium credit cards.² More generally, there is an argument that surcharging has contributed to downward pressure on merchant services fees since 2003.³

While there’s concern that banning surcharges will ultimately lead to inflation if merchants incorporate the cost of card acceptance into prices, rather than applying it as a surcharge,. this is unlikely to be widespread given just 16% of merchants currently apply surcharges.⁴

Interchange

As proposed, interchange caps are being lowered significantly in an effort to reduce the gap between small and large merchant interchange costs.

The final outcome is as follows:

• Debit and prepaid has been capped at $0.08 or 0.16%, with a weighted benchmark of $0.08.
• Credit has had the benchmark removed and been capped at 0.30% for consumer and 0.8% for commercial.
• All international transactions have been capped at 1.0%.

Industry Reaction to Interchange Caps:

Many stakeholder groups have welcomed the cap reduction including consumers, merchants and acquirers. There has been opposition from card networks and issuers, and it remains to be seen how they will respond. In Australia and other jurisdictions, we have seen evidence of scheme fee increases following interchange caps as discussed further in the Merchant Impact section below. 

The reforms at this stage do not include three-party schemes, such as American Express (AMEX), however, it is noted AMEX will be subject to further review in mid-2026.

Fee Transparency

The RBA has gone further than initially proposed in strengthening oversight of wholesale payment fees. This includes four principles aimed at improving card network scheme fee management and transparency and establishing roadmaps that hold these principles to account. In addition, there are also requirements for card networks to publish aggregate data on scheme fees from October 2026. This is a significant development in an area that current has very limited public visibility and monitoring. 

Scheme fees remain one of the least transparent components of the merchant service fee and have grown steadily as a share of total acceptance costs in recent years as shown in the graph below. There also needs to be consideration for trends observed in other regions following interchange regulation: reductions in interchange fees may be offset by increased scheme fees, further highlighting the importance of establishing a robust regulatory framework while the reforms are implemented. 

What’s the Impact on Merchants?

The impact to merchants will be substantial – with payment budgets potentially shifting by up to 40% and a redistribution of costs within the market. Whether this translates into cost relief or margin pressure will ultimately depend on a multitude of factors, but how proactive merchants are in preparing for the implementation will be the most influential.

As an immediate action, all merchants will need to re-evaluate their card acceptance strategies to ensure they continue routing transactions through the lowest cost option. Similarly, merchants will need to review acquiring relationships and pricing structures applied; if a blended pricing structure is being applied, this will need to be re-calculated to factor in underlying cost changes. Lastly, for merchants currently applying a surcharge, absorbing the full cost of payments could represent millions in additional costs. This makes it paramount that payment setups are optimised to avoid a significant increase bottom line costs.

In addition, indirect market adjustments may also alter the economics of acceptance in ways that are not immediately visible. Global trends, such as in the European Union and the United Kingdom (see trends in graph and table below), show that whilst interchange regulation applies immediate downward pressure to payment fees, this tends to be offset by increases in other areas (scheme fee and acquiring), emphasising the importance of transparency and visibility alongside these measures.

The team at CMSPI are experienced in supporting merchants to proactively model scenarios, engage industry stakeholders, and increase fee transparency across payment supply chains in the face of major regulatory and economic changes. This will best position merchants to convert regulatory change into strategic advantage and minimise financial and consumer disruption.