RBA’s Push to Scrap Surcharges: What It Means for Small Businesses

The Reserve Bank of Australia is moving to overhaul the way Australians pay, with reforms aimed at scrapping card surcharge fees. While consumers are likely to cheer, small businesses, who are already under pressure from rising costs, are bracing for change.

Australians Paying $1.2 Billion a Year in Surcharges

The shift from cash to digital payments has been dramatic. RBA data shows that more than 80% of all transactions in Australia are now cashless, with debit cards the most common form of payment. In just the past decade, the number of Australians using cash for everyday purchases has halved.

With this shift has come a surge in fees. Australians now pay an estimated $1.2 billion annually in surcharges- small add-ons at the checkout that range from 1–3% when using credit or debit cards. Originally introduced to allow businesses to recover the costs of card processing, surcharges have become widespread across industries, from airlines and utility companies to cafés and hairdressers.

Why the RBA Wants Change

The RBA argues that surcharges have become a pain point for consumers, particularly as digital payments are no longer a luxury but a necessity. Consumer groups have long criticised the practice as “paying to pay,” especially at a time when households are battling high inflation and rising interest rates. By eliminating surcharges, the RBA aims to simplify payments, increase transparency, and reduce frustration at the checkout. For consumers, this would mean paying the advertised price, without last-minute surprises.

The Small Business Challenge

For small businesses, however, surcharges aren’t about extra revenue, they’re about survival. Consider a local café in Sydney that processes $500,000 in annual card payments. At an average merchant service fee of 1.5%, that’s $7,500 a year in costs just to accept payments. Airlines or supermarkets can negotiate fees closer to 0.5%, but small businesses lack that bargaining power.

If surcharges are scrapped, many operators will face two unappealing options:

• Absorb the costs: cutting into already tight margins at a time of rising rent, wages, and supply costs.
• Increase prices: spreading fees across all products and services, which risks alienating cost-sensitive customers.

Industry groups, including the Council of Small Business Organisations Australia (COSBOA), have warned that unless banks and card networks lower merchant service fees, small operators will be disproportionately impacted.

What Businesses Can Do to Prepare

With reforms on the horizon, small business owners can take proactive steps to soften the blow:

1. Renegotiate Merchant Fees
   Review contracts with banks or payment providers. Even a 0.2% reduction can save thousands over time. Some fintech payment providers already offer competitive flat-rate options.
2. Encourage Debit Over Credit
   EFTPOS and domestic debit card transactions are often cheaper to process. Subtle customer prompts (“Pay with debit to help us save on fees”) can shift payment behaviour without friction.
3. Revise Pricing Strategies
   Instead of visible surcharges, spread costs across pricing. For example, a café may raise coffee prices by 10–20 cents rather than adding a separate card fee.
4. Be Transparent with Customers
   Customers value honesty. If prices increase, explain that it’s due to bank processing fees, not business greed. Framing the narrative can help retain trust.
5. Stay Informed on RBA Updates
   The RBA is still consulting with industry and banks. Small business owners should monitor announcements closely, as reforms may include measures to cap or reduce merchant service fees.

The Bigger Picture

Australia is one of the fastest adopters of cashless payments globally. With that comes the challenge of ensuring the system is fair for both consumers and businesses. Scrapping surcharges could simplify payments and delight consumers, but without parallel reforms to reduce merchant fees, small businesses risk being left to foot the bill. The outcome will depend on whether the RBA can pressure banks and card networks to share the burden of a cashless future.

For now, one thing is certain: the days of paying extra at the checkout for using your own money are numbered. The challenge will be ensuring that in fixing one problem, we don’t create another for the businesses that keep our economy running.

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