Small business groups warn RBA’s proposed card surcharge ban won’t eliminate fees, just hide them in higher prices.
The Reserve Bank of Australia’s bold move to eliminate card surcharges has sparked fierce pushback from small business advocates, who warn the changes could backfire spectacularly.
The Council of Small Business Organisations Australia (COSBOA) delivered a scathing response to consultation paper, arguing that removing surcharges on eftpos, Mastercard and Visa transactions would create a dangerous illusion of savings while forcing costs underground.
Matthew Addison, Chair of COSBOA, didn’t mince words about the proposals, calling them a “mixed bag” for small businesses that offers some welcomed reforms but risks serious unintended consequences.
The hidden cost problem
“Removing surcharges doesn’t remove all the cost, it simply hides it,” said Mr Addison.
The fundamental issue, according to COSBOA, lies in basic economics. When businesses can’t pass payment processing fees directly to customers who choose more expensive payment methods, those costs don’t vanish into thin air.
“For small businesses already managing tight margins, this means those costs would have to be absorbed into base prices, making it harder for businesses to be transparent and for consumers to make informed choices.”
The RBA has trumpeted potential consumer savings of $1.2 billion, but COSBOA argues this figure is misleading. While reduced interchange fees are welcome, merchant fees encompass far more than just interchange costs.
“The RBA’s claim of $1.2 billion in consumer savings is a mirage. The reduced interchange fee is welcomed; however merchant fees include many other charges. The reality is that these fees will still be paid, just not disclosed. That cost will be baked into the price of coffee, groceries, and services across the country.”
Fighting for fairness
COSBOA has consistently championed surcharging as a fundamental business right, arguing it’s essential for small business survival in an increasingly challenging economic environment.
“Surcharging is not about penalising consumers, it’s about ensuring fairness and transparency,” said Mr Addison.
The organization contends that forcing businesses to absorb processing fees removes a critical cost management tool and threatens profitability for Australia’s smallest employers. More concerning is the potential for unintended market distortions.
“A blanket ban ignores the real issue: high and complex payment costs driven by opaque pricing and a lack of competition.”
What’s Really at Stake
COSBOA’s response highlighted several key concerns that could reshape how Australians pay for goods and services:
- Banning surcharges will disguise card payment costs rather than eliminate them, potentially misleading consumers while forcing small businesses to raise prices across all products and services.
- Without surcharging options, many operators may need to increase menu and service prices, potentially reducing competitiveness or pushing them toward cash-only models that create new operational risks.
- The proposed redefinition of ‘consumer’ creates confusion, as small business operators often function as both merchants and consumers within the payment system, risking unfair cost shifts without addressing structural problems.
Despite the criticism, COSBOA isn’t entirely opposed to the RBA’s reform agenda. The organization supports several key elements of the proposed changes.
Lower interchange fees represent a positive step forward, as does improved transparency through increased disclosure of acquiring, scheme, and interchange fees to help small businesses make informed decisions.
COSBOA continues advocating for mandatory least-cost routing (LCR) across all payment types to help lower transaction costs for merchants, plus ensuring all businesses can access the lower merchant costs currently awarded to larger enterprises.
“If the RBA and government are serious about helping small business, the focus should be on increasing competition, enforcing least-cost routing, and regulating payment providers, not restricting merchant rights,” said Mr Addison.
The organization emphasized that any meaningful reform must acknowledge the real-world pressures facing small business owners, including rising costs, wage pressures, and complex regulatory burdens. Removing surcharging without addressing root causes risks creating hidden costs that ultimately harm both businesses and consumers.
The consultation period runs until 26 August 2025, with implementation expected from July 2026.
For more information, visit www.cosboa.org.au.
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