What the RBA’s card surcharge ban means for Australian merchants

From October 1, 2026, Australian merchants can no longer add surcharges to eftpos, Mastercard, or Visa payments – debit, credit, or prepaid. We spoke with Anugrah Lazarus, Managing Director of BB Merchant Services Australia, about what the ‘ban’ covers, which merchants are most exposed, and how to prepare before October.

For those unfamiliar with the situation, what led to the Reserve Bank of Australia (RBA) imposing this rule, and what exactly does the ban cover?

A surcharge is the extra fee added to a consumer’s bill when they pay by card, allowing merchants to pass on the cost of accepting that payment method. The practice is common in Australia; an AUD 5 cup of coffee can end up costing anywhere between AUD 5.05 and AUD 5.10 once the fee is applied.

Source: Mastercard

Surcharging was originally designed to steer consumers towards cheaper ways of paying, but those alternatives have steadily disappeared. Cheques will be phased out entirely by 2030, bank branches continue to close, and cash has fallen from ~70% of in-person transactions in 2007 to ~15% in 2025, leaving most Australians with little practical choice but to pay by card.

The RBA has long taken a more hands-on approach to payments regulation than its counterparts in the UK, Europe, and the US. The RBA’s track record includes capping interchange fees in 2003, banning excessive surcharging in 2016, setting expectations for banks to offer Least Cost Routing (LCR) from 2019, and supporting the rollout of the New Payments Platform (NPP), which launched in 2018.

Following its July 2025 Consultation Paper, the RBA published its Conclusions Paper in March 2026, setting out the Payments System Board’s final decisions: surcharging on eftpos, Mastercard, and Visa cards will end on October 1, 2026; lower interchange caps on domestic card transactions will take effect the same day; and a new interchange cap on foreign-issued cards, as well as further transparency requirements for banks and payment service providers, will follow on April 1, 2027. Taken together, the reforms are designed to simplify payment costs for consumers and businesses alike.

The ban’s perimeter is narrower than international readers might expect. It applies to debit, prepaid, and credit cards only on the designated networks- eftpos, Mastercard, and Visa. American Express, Diners Club, PayPal, and Buy Now, Pay Later services such as Afterpay and Zip all sit outside it. 

Why this narrow application? As it happens, the RBA regulates only the payment systems it has formally designated under the Payment Systems (Regulation) Act 1998. And currently, only eftpos, Mastercard, and Visa carry that designation. American Express and Diners Club for e.g. operate as three-party schemes without the interchange arrangements that brought the four-party networks under the RBA’s standards, and hence are not designated networks as such.

Once the change takes effect on October 1, how is it enforced?

The extant arrangements may not last though. Reading between the lines, industry common wisdom is that the RBA will expand its focus to three-party schemes, BNPL providers, mobile wallets, and ecommerce platforms in the next phase of its review. In any case, Amex is voluntarily moving to end surcharging on its own cards from the same October 1 date rather than remain the visible exception at the checkout.

Interestingly, there is no current statute banning surcharges in Australia. Instead, since 2016 an RBA standard has prevented the designated schemes from prohibiting merchants from surcharging. The October 1 reform simply removes that prohibition! Essentially a return to the status-quo they had before the early 2000s reforms. Those rule changes will likely then flow down contractually from Schemes to Acquirers and onto merchant agreement. 

In practice, this means the ‘ban’ reaches merchants through their payment provider rather than through a regulator. Post October 1, any merchant who continues to surcharge could be in breach of the Scheme Rules, risking fines and ultimately, the loss of card acceptance functionality. 

This policing delegation of Schemes sits in contrast to the current regime, where the ACCC directly polices excessive surcharging and can pursue with infringement notices and penalties.

It’s important to note that the ban has not yet taken effect, and the industry’s read on how all these changes will function and operationalise rest on industry interpretation, some announcements, and a fair amount of magic 8-ball reading rather than lived experience. 

The prevailing view is that compliance will largely be engineered out of the merchant’s hands. Schemes have already instructed acquirers and terminal providers to switch off surcharging functionality from October 1, so for most businesses the option will simply disappear off of the point-of-sale hardware. Whether the schemes will pull the trigger on large scale contractual sanction on misbehaving merchants remains to be seen.

And any business tempted to rebadge the charge as a service or booking fee should note the ACCC’s warning that disguised surcharges (‘drip pricing’) are likely to constitute misleading conduct under the Australian Consumer Law. 

One further caveat for merchants counting on the offsetting benefit of the lower interchange caps that the RBA announced. The lower caps take effect on the same day as the ban, but interchange is a wholesale cost, and how quickly it reaches the merchant depends entirely on their contractual pricing structure with the acquirer. 

Businesses on IC++ arrangements will see the reduction flow through automatically. But the many smaller merchants on blended or single-rate plans will not because their headline rate only falls if their provider chooses to reprice. For the former cohort, October 1 delivers the cost of the ban immediately. For the latter, since the benefit of the interchange cuts kick-in at the sole discretion of the acquirer, it’s one more reason to review merchant agreements well before the deadline and ensure your arrangements maximise the benefits the October 1 reforms can deliver for you. More on that below.

The RBA estimates Australian consumers currently pay around AUD 1.6 billion a year in card surcharges. Will scrapping them actually translate into savings for consumers?

The RBA estimates consumers pay around AUD 1.6 billion of the AUD 1.8 billion in card surcharges levied each year, with businesses paying the remainder. 

The consumer appetite for change is clear. Research commissioned by the RBA, a JWS Research survey of 3,000 Australians conducted in September 2025, found that ~75% of consumers want surcharging to stop. With cards now the default way to pay, accounting for around three quarters of transactions in Australia, proponents argue the ban will help households manage rising living costs. The RBA adds that surcharging rules have become increasingly complex, with fees often poorly disclosed and difficult to compare at the point of purchase.

The growth of account-to-account (A2A) payments and Buy Now, Pay Later (BNPL) solutions also signal consumers’ increasing sensitivity to payment costs and their appetite for flexible, lower-cost alternatives to traditional credit products.

The underlying cost of card acceptance will not disappear when the ban takes effect, however. Merchants will still incur processing costs, and they may respond by either absorbing them, improving operational efficiency, negotiating lower payment costs through consultancies or brokers like BBMS, or building some of those costs into their overall pricing. 

On the merchant side, which types of businesses are most exposed once surcharging disappears, and why?

For the merchants that currently surcharge, the ban means absorbing a cost they previously passed on to consumers, and some of that cost can be expected to resurface in higher prices for goods and services. Small and medium-sized enterprises (SMEs) are likely to be disproportionately affected. Larger brands such as Coles and Woolworths already benefit from far more competitive merchant service rates, while smaller businesses have considerably less bargaining power with banks and payment providers. 

The most exposed will be businesses operating on thin margins, such as hospitality, retail, fuel and convenience; organisations with a high proportion of card-based transactions, including utilities, education providers and professional services firms; and online businesses where cards represent the overwhelming majority of sales.

The lower interchange caps, which take effect on the same day as the ban, should counteract some of these pressures, with the RBA estimating that around nine in ten small businesses will be better off under the new framework. The reforms should also encourage faster adoption of Least Cost Routing, under which eftpos, Australia’s domestic debit network, can often provide a cheaper alternative to the global schemes such as Visa and Mastercard.

Banks and payment service providers may nonetheless respond to the interchange caps with fee increases elsewhere in the merchant services supply chain, whether through higher scheme fees or increased rents on card terminals or the reintroduction of previously waived fees. 

That is why it is crucial for businesses of all sizes to review their merchant services agreements and costs carefully in the coming months. Offsetting higher acceptance costs will require a combination of pricing strategy, operational efficiency, payment optimisation, and the adoption of lower-cost payment methods such as A2A payments.

With surcharging gone, how should merchants be rethinking their payment mix and provider relationships ahead of October?

Most businesses sign a contract with their payment service provider and rarely, if ever, review the rates again. In the meantime, fees creep upwards, inefficiencies take hold, and newer, cheaper payment methods and technologies pass them by.

Pricing structure deserves particular attention. The majority of smaller Australian merchants sit on single-rate or blended plans, where every transaction attracts the same headline fee regardless of card type or network. These plans are marketed on simplicity, and there is a certain comfort in one tidy percentage on the statement each month. A blended rate averages the lower-cost transactions with the expensive ones, which means the merchant typically overpays on low-cost domestic debit to subsidise the pricier credit and international volume, and the provider keeps the difference. 

Analysis has found that merchants on these plans tend to pay higher rates than similar-sized businesses on unblended pricing, and, critically, they will not automatically receive the benefit of the interchange cuts arriving on October 1, 2026. Merchants on IC++ pricing, by contrast, pay the actual wholesale cost of each transaction plus a transparent provider margin, so every regulatory reduction in interchange flows straight through to them, and every component of their cost base is visible and negotiable. In a world without surcharging, that transparency is where IC++ really shines.

This is also the right moment for a broader audit of what payment acceptance is actually costing. Over the life of a typical merchant agreement, hidden costs accumulate quietly: inflationary fee increases applied without fanfare, terminal rentals that outlast the hardware’s value, compliance and statement fees, and bundled services the business never asked for and never uses. 

Individually these charges look trivial, which is precisely why they survive year after year. Collectively, they represent a significant drain on business profits and margins. Merchants should benchmark their payment fees against the wider market, and review them regularly to identify hidden or rising costs, billing errors, and savings opportunities.

With the ability to pass card costs directly on to consumers about to be removed, optimising payment acceptance costs is no longer a housekeeping exercise but an essential part of protecting margins.

Beyond the surcharge ban itself, what adjacent changes should be on Australian merchants' radar in the near future? 

While much of the attention has focused on the surcharge ban and interchange caps, merchants should not overlook the wider cost of card acceptance, which also includes scheme fees and acquirer margins. These vary by provider, card type, and transaction profile, with domestic debit typically the lowest-cost form of card acceptance, while premium consumer credit cards, commercial cards, and cross-border transactions can carry materially higher fees.

Interchange has been regulated in Australia for more than two decades, whereas scheme fees and acquirer margins remain far less transparent. Scheme fees alone now account for around one sixth of merchants’ domestic card transaction costs, according to the RBA’s Conclusions Paper, and have been growing faster than transaction values, which is why the RBA is now requiring greater transparency and disclosure from card networks and payment service providers.

As surcharging disappears, the cost differences between payment types will become less visible to consumers but no less important for merchants. Businesses that actively manage their payment mix, optimise routing, and regularly review provider pricing will be best positioned to minimise acceptance costs and protect profitability.

References:

Reserve Bank of Australia. (2025, July). Merchant card payment costs and surcharging: Consultation paper. Review of Retail Payments Regulation. 

Reserve Bank of Australia (2026), Review of Merchant Card Payment Costs and Surcharging – Conclusions Paper, Final decisions of the Payments System Board; includes consumer research conducted by JWS Research. 

About the author

Based in Sydney, Anugrah Lazarus (“Laz”) is the Managing Director of BB Merchant Services Australia. Laz holds a BCom in Accounting and an MBA in Banking & International Finance and brings with him over 20 years of experience across senior origination and leadership roles within corporate and institutional banking and correspondent and cross-border payments spanning Australia, New Zealand, and APAC. His track record includes leading national and global teams in sales, strategy, structuring, and product development, having served in senior roles at Standard Chartered Bank, National Australia Bank, Bank of New Zealand, Citi, and AP+.

 

About BB Merchant Services

First launched in Stockholm in 2008, BB Merchant Services has built a strong international business with offices worldwide and clients in every sector. They are one of the preferred partners for merchants globally seeking expert advice in all areas of payments, including RFP and Tender support. 

To date, they have delivered over 4,000 projects and secured more than GBP 600m (AUD 1bn) in recurring savings for clients including Just Eat Takeaway.com, Marks & Spencer, The Body Shop, Sainsbury's, Oxfam, Mapfre, Harrods, and Estée Lauder.