Australia has unveiled plans to ban debit card surcharges, a move aimed at alleviating financial pressure on households, Prime Minister Anthony Albanese announced.
The ban, set to take effect in 2026, could save consumers nearly 1 billion Australian dollars ($671m) annually, according to estimates from the Reserve Bank of Australia (RBA).
Albanese emphasized that reducing the cost of living is a top priority for his government. “This is another step to protect Australians from unfair charges,” he said. Treasurer Jim Chalmers echoed this sentiment, stating the move would provide a “better deal” for both consumers and small businesses. “People shouldn’t be penalized for using cards or digital payments, and small businesses shouldn’t face hefty fees just to get paid,” Chalmers said.
The ban aligns Australia with other regions, such as the European Union, which eliminated debit card surcharges in 2018. The shift towards cashless payments, which accelerated during the COVID-19 pandemic, has made surcharges increasingly burdensome. RBA data shows cash transactions fell from 32 percent in 2019 to 16 percent in 2022, highlighting the growing reliance on digital payments.
Impact on SMEs
The planned ban on debit card surcharges in Australia will have both positive and challenging impacts for SMEs:
- Increased Consumer Spending: Without surcharges, customers may use debit cards more freely, boosting sales for SMEs.
- Fairer Competition: SMEs can compete more evenly with larger businesses that already absorb transaction fees.
- Better Customer Relationships: Removing surcharges improves satisfaction and loyalty, as customers won’t feel penalized for using digital payments.
Katie Wilson, Head of Policy, FinTech Australia said: “While FinTech Australia welcomes any policy that works towards the betterment of consumers, we’re concerned about the broader implications of fully stamping out surcharges for debit cards. Any proposed policy reform needs to be carefully considered to ensure it supports competition and innovation in payments. Without this, small businesses lose the right to choose how to allocate their costs and we risk jobs and innovation in the fintech industry, to consumers’ ultimate detriment.
Fintechs have already made significant improvements in this space as the payments ecosystem has innovated and broadened access to smaller merchants. For instance, by offering no or low cost eftpos solutions and simplified flat pricing models: charging merchants a predictable flat rate for different types of card transactions, often with value-added services.
“There’s also a risk here of the issue being oversimplified amid the political debate. Merchant fees support more than just banks. If a merchant is charged 20c per transaction, a bank may see 10c and the rest may be split across multiple other parties, including Australian fintechs who manage a smaller part of the payment process. Further to the intricacies of these systems, removing debit surcharges will do nothing to reduce the cost of acceptance for businesses.
“We also know there are broad views across our ecosystem on this issue. We intend to canvass them and form a detailed view to present to Canberra. We also welcome any dialogue from policymakers on this topic, given our engagement with them on other issues at Intersekt last month.”
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