Merchant Card Payment Costs and Surcharging – Issues Paper –
October 2024 Executive Summary

The Reserve Bank of Australia (RBA) is conducting a review of merchants’ card payment costs and surcharging. Australians use cards extensively to pay for goods and services and benefit from the convenience and security provided by card payments. However, in an environment of heightened concern around the cost of living and ongoing changes in payment preferences, merchants and consumers are increasingly focused on card payment costs and surcharging. These two issues are linked as merchants would be less likely to surcharge consumers if card payment costs were lower. Accordingly, it is timely to review whether the RBA could do more to put downward pressure on merchant card payment costs by promoting competition and efficiency and whether the RBA’s surcharging framework remains fit for purpose. This review also recognises that some years have now passed since the surcharging framework was introduced.

This issues paper provides a high-level overview of the RBA’s review and invites stakeholders to provide feedback on the RBA’s existing regulations and potential regulatory responses. Section 1 describes the background and process for this review. Section 2 highlights recent issues relating to card payments and discusses some potential regulatory responses that the RBA could consider, including whether:

• the RBA’s existing regulations and initiatives on interchange and scheme fees, least-cost routing (LCR) and surcharging continue to achieve their desired outcomes
• greater transparency in fees should be required from payment service providers (PSPs) and card schemes to promote competition and efficiency and put downward pressure on merchant card payment costs
• issues beyond the scope of this review have implications for the design of policies for card payments and vice versa.

Interested stakeholders are invited to provide written submissions by 3 December 2024. Section 3 provides details on how to make a submission.

Detailed assessments of stakeholder submissions and reform proposals will form the next stage of this review. If the Payments System Board forms a view that consultation on regulatory action is in the public interest, the RBA will further consult on any reform proposals prior to any decisions being made.