RBA’s payment shake-up: implications for merchants and payment service providers

New proposals aim to drive competition and efficiency 7 min read

The Reserve Bank of Australia (RBA) has published a consultation paper setting out its proposed changes to the standards regulating interchange fees and merchant surcharging, following consultation on the Merchant Card Payment Costs and Surcharging Issues Paper that it published in October 2024.

In this Insight, we outline what you need to know about the RBA's proposed changes to merchant payment costs and surcharging.

Key takeaways 

• Surcharging changes ahead: the RBA proposes allowing card schemes to ban surcharges, shifting competitive pressure to payment service provider (PSP) pricing rather than consumer payment choices.
• Lower fee caps: Interchange fee caps would be reduced for domestic cards, with new caps introduced for international transactions.
• More fee transparency: Card schemes and large acquirers would need to publish detailed cost and fee data to support merchant decision-making.
• Impact and timing: Changes may reduce issuer revenue and increase price competition among PSPs. Feedback is due by 26 August 2025, with changes starting from mid-2025.

What you need to know

The RBA's preferred position, as set out in the consultation paper, would involve:

• removing surcharging on all designated credit, debit and prepaid card systems (ie Visa, Mastercard and eftpos), by removing the current prohibition on no-surcharging rules;
• reducing caps on domestic interchange fees and introducing caps on international interchange fees; and
• increasing transparency of card payment costs by:
  • requiring scheme administrators to publish aggregate interchange fee and scheme fee data, broken down by key transaction types, on a quarterly basis;
  • requiring large acquirers to publish their merchants' average costs of acceptance, broken down by merchant size and card type, on a quarterly basis; and
  • requiring more information to be included in acquirers' cost of acceptance reporting on merchant statements—adding a breakdown of domestic and international transactions, in addition to the currently required breakdown of fees by card network.

The RBA proposes that the surcharging, interchange fee cap and merchant-level disclosure changes would take effect on 1 July 2026, and the scheme operator and acquirer data reporting changes from 1 July 2025 and 1 January 2026 respectively (but in both cases, the first publication date being 30 July 2026).

Surcharging

The consultation paper notes that the surcharging framework currently in the standards is no longer best supporting competition and efficiency in the payments system, with its effectiveness undermined by:

• consumers being less able to avoid surcharges as cash use has fallen;
• the increasing prevalence of single rate plans for merchants, who in turn impose a uniform surcharge on consumers, despite different cards having different underlying costs;
• inadequate disclosure of surcharges by merchants and excessive surcharging by some merchants, which has been difficult for the ACCC to enforce;
• the cost of card acceptance possibly being lower than the cost of accepting cash; and
• PSPs bundling non-payment services and other incentives into the cost of acceptance on the basis that the higher costs of acceptance can be passed through to consumers, reducing the incentive for merchants to shop around for lower cost payment services.

The RBA floats the following options for addressing this problem:

• retaining the current surcharging framework but narrowing the scope of permitted surcharges to cover only 'wholesale' fees (interchange and scheme fees).
• removing the no-surcharging prohibition for designated debit and prepaid card schemes only.
• removing the no-surcharging prohibition for designated credit, debit and prepaid card schemes.

The RBA considered removing the no-surcharging prohibition on all designated card schemes, rather than only debit and prepaid as foreshadowed in media and government commentary to date, as it would be less complex and less costly for PSPs to implement across all card schemes compared to debit and prepaid schemes only. For driving competition and efficiency, the focus would shift from consumers' payment choices to merchants' service provider choices—without the ability to pass on costs of acceptance, merchants would have an incentive to seek out lower cost PSPs. Further, the RBA does not envisage no-surcharging rules preventing merchants from offering discounts to consumers who use a particular payment method.

The consultation paper contains a markup of Standard No.3 of 2016: Scheme Rules Relating to Merchant Pricing for Credit, Debit and Prepaid Card Transactions, which shows that the RBA proposes to remove the provisions prohibiting the rules of a scheme from forbidding or deterring merchant surcharging and limiting merchant surcharges to their cost of acceptance. The RBA would be relying on the scheme operators to introduce no-surcharging scheme rules—if this does not occur, a legislative response from government may be needed.

It was also noted that removing the prohibition on no-surcharging rules would enable card schemes to better compete with higher cost payment methods that do not allow surcharging, such as 'buy now, pay later' products.

Interchange fee regulation

The RBA proposes to reduce the interchange fee caps for domestic debit, credit and prepaid card transactions as follows:

• domestic debit and prepaid: weighted-average benchmark of $0.06 per transaction, with a cap of $0.06 or 0.12% of transaction value; and
• domestic credit: cap of 0.3% of transaction value, with the current weighted-average benchmark to be removed.

Additionally, the RBA proposes to introduce caps on foreign-issued card transactions acquired in Australia. The proposed caps are:

• debit: 0.2% of transaction value for card-present transactions, 1.15% of transaction value for card-not-present transactions; and
• credit: 0.4% of transaction value for card-present transactions, 1.5% of transaction value for card-not-present transactions.

The net compensation prohibition would remain, but would be expanded to apply to Australian card issuers sponsored by overseas scheme participants (expanding the definition of 'Direct Issuer Participant' to facilitate this) and to include in Direct Issuer Participant Benefits and Direct Issuer Participant Receipts the benefits and costs that relate to transactions with overseas merchants acquired by an overseas acquirer.

Fee transparency

Scheme operators

Interchange fees and scheme fees have become more complex over time, creating challenges for PSPs in pricing and communicating their services to merchants. The complexity of scheme fees also makes them difficult to apply in real time to individual transactions to provide least-cost routing.

To address this, the RBA proposes requiring card networks to publish aggregate interchange fee and scheme fee data, broken down by key transaction types. The consultation paper contains a markup of proposed changes to Standard No.1 of 2016: The Setting of Interchange Fees in the Designated Credit Card Schemes and Net Payments to Issuers and Standard No.2 of 2016: The Setting of Interchange Fees in the Designated Debit and Prepaid Card Schemes and Net Payments to Issuers, setting out the information items and the format for reporting. Broadly, the standards would require the scheme operator to publish total interchange and fees (as distinct items), total transaction value and the total number of transactions for each of domestic and international credit and debit/prepaid, and within each category the breakdown by card-present and card-not-present transactions, and within each of those subcategories the amount relating to mobile wallet transactions.

This information would be required to both be reported to the RBA and published on the card scheme's website.

Acquirers

The RBA found that the lack of consistent, publicly available information about fees charged by acquirers makes it more difficult for merchants to compare pricing across PSPs, and for PSPs to assess their competitors' offerings. In an attempt to strike a balance between price transparency to increase competition and legitimate concerns about the effects of requiring fees, costs and margins to be published, the RBA proposes that 'large acquirers'—who acquire more than $10 billion in card payments annually—would be required to publish their average cost of acceptance across card types (debit/prepaid and credit, and domestic and international within each kind of card) and, for each card type, a breakdown by merchant types (all of their merchant customers, small merchants with aggregate transaction values of less than $1 million in the last 12 months, medium-sized merchants with aggregate transaction values of between $1 million and $10 million in the last 12 months—each of the latter two categories being applied on a pro rata basis for the last quarter in relation to a merchant who was not an acquirer's customer for the whole of the last 12 months).

Implications and next steps

We expect the following implications if the RBA implements its preferred proposals.

Actions you can take now

The RBA is seeking feedback on the proposals in the consultation paper until 26 August 2025.

Please reach out to any of the contacts below if you would like to discuss the RBA's proposals or would like assistance in preparing a submission to the RBA.