The RBA has banned card surcharging from 1 October 2026. COSBOA says removing surcharges before fees actually drop risks pushing more cost onto small businesses.
What’s happening: The Reserve Bank of Australia has decided to remove card surcharging from 1 October 2026, alongside measures to reduce payment costs and improve transparency.
Why this matters: For small business owners, card surcharging has been one of the only tools available to recover the cost of payment processing without absorbing it directly into margins.
The Reserve Bank of Australia has announced it will remove card surcharging from 1 October 2026, as part of a broader package of measures designed to reduce payment costs and improve transparency across the payments system.
For consumers, the change means the additional fee currently charged at the point of sale for paying by card will disappear. For small business owners, the picture is more complicated.
COSBOA Chair Matthew Addison welcomed the RBA’s focus on reducing payment costs but was direct about the risk embedded in the timing.
“If you ban surcharging without guaranteeing lower fees, small businesses have no choice but to absorb the cost and that will ultimately be reflected in prices,” Addison said.
Ian Boyd, General Manager ANZ, GoCardless said: “This decision creates a fairer system for Australian businesses, and the upside is transparency. The price customers see will be the price they pay. That means no more surprises at checkout.
The real question now is who absorbs the cost, because it doesn’t just disappear. SMBs are already in a cashflow crisis, and late payments alone cost them an average of $1,328 per month. That means businesses are left with the unenviable dilemma of either moving that transaction burden from the checkout to the price tag, or worsening their own cashflow crisis, potentially pushing them towards closure.
Banks have also warned they’ll cut rewards programs if interchange is reduced. On the surface, that seems like a partial admission that the current model depends on extracting value from merchants to fund cardholder perks.
This should accelerate the case for modernising Australia’s payment infrastructure. Bank payments, real-time account-to-account transfers, and other alternatives already exist. What’s missing is system-wide support to bring Australian payments in line with global best practice.”
The problem with the sequence
COSBOA’s concern is not with the destination. It is with the order in which the steps are being taken. Small businesses do not control how customers choose to pay, but they carry the cost of those payment methods. Surcharging has been the mechanism by which many small operators recover those costs rather than building them into base prices or absorbing them entirely.
“Surcharging has been one of the only ways small businesses can recover these costs,” Addison said. “If you remove that without fixing the underlying fees, you’re asking small businesses to wear them.”
The RBA’s package includes measures to reduce payment costs, but COSBOA said the critical question is whether those savings will actually flow through to small businesses in full.
“Lower fees are only meaningful if small businesses actually see the benefit in what they’re charged,” Addison said. “Without clear pass-through, this reform doesn’t deliver real relief.”
For small business owners already managing rising fuel costs, higher interest rates, insurance premiums and wage pressures, absorbing payment processing costs on top of everything else is not a theoretical concern. It is a direct hit to margins that are already under significant strain.
Addison put it plainly. “Banning surcharges before businesses can see lower fees and understand their costs is putting the cart before the horse.”
What transparency actually requires
COSBOA also addressed the transparency measures included in the RBA’s package, welcoming them in principle but flagging that they only deliver value if small businesses have time to act on them.
“Greater transparency is a positive step, but small businesses need time to see what their new costs are, understand them, and have the opportunity to shop around,” Addison said.
The concern is that removing surcharging before that process has played out compresses the window in which small businesses can make informed decisions about their payment providers and pricing structures.
“In a system without surcharging, transparency and least-cost routing become essential to keeping costs under control,” Addison said.
Least-cost routing, the ability for businesses to direct transactions through the lowest-cost payment network available, is identified by COSBOA as a critical tool for managing payment costs in a post-surcharge environment. COSBOA said wider availability of least-cost routing must be part of the reform package for it to deliver meaningful relief.
What COSBOA is calling for
COSBOA has outlined three conditions it says the reform package must deliver to work for small business owners.
Real reductions in payment costs that are passed through to small businesses in full. Clear and accessible pricing so businesses can compare providers and understand what they are being charged. And wider availability of least-cost routing to keep payment costs down in a system where surcharging is no longer available as a recovery mechanism.
On implementation, Addison said the timeline is as important as the policy itself.
“Small businesses will need time to see the impact of these changes, adjust their pricing, and update systems,” he said. “Without a practical transition, they risk being hit with the cost before the benefits arrive.”
COSBOA is calling for the implementation timeline to give small businesses the opportunity to realise lower costs, access clear pricing information and make informed decisions before surcharging is removed on 1 October 2026.
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