RBA Surcharge Ban Takes Effect: Costs Left to Smallest-Margin Small Merchants, Banks Unmoved

The Reserve Bank of Australia's (RBA) ban on card surcharges, formally implemented on October 1, is shifting a bill that could previously be passed on from consumers onto the books of small merchants operating on razor-thin margins, while banks have not taken on any corresponding responsibility in this redistribution.

According to ABC News, the central bank-driven ban prohibits merchants from adding surcharges to credit or debit card payments via EFTPOS, Mastercard, Visa, and American Express. The central bank's stated rationale is that the move serves the "public interest," aimed at making the payments system more transparent and reducing inconvenience to both consumers and merchants. A week after the ban took effect, small merchants in New South Wales are grappling with another problem: the merchant service fees charged by banks have not been reduced by a single cent, while the legitimate channel they had previously used to pass on these costs has been cut off.

Philip Barbaro, who runs a Sydney coffee shop group, pays roughly A$150,000 in merchant service fees to banks each year. In an interview with ABC News, he put it bluntly: "For our group, we pay about A$150,000 in merchant service fees every year. That's a significant hit to my business." Barbaro said he has not raised coffee prices in Sydney's competitive city centre, but this week he had to adjust the prices of other items on the menu to offset the burden of bank fees.

Chris Skuce, owner of Jamaican Patty Bakehouse in Sydney's Inner West, opened his shop only a year ago and is still absorbing the cost himself. He told ABC News: "I haven't passed the cost on yet, but I'll probably raise prices at some point in the new year."

Paul Nicolaou, executive director of industry advocacy group Business Sydney, told ABC News that small merchants are under multiple pressures: "Rising interest rates, rising energy costs, and then reduced discretionary spending for households and businesses." He believes price hikes have already become a universal industry choice. "Business owners have to cover their costs, and unfortunately someone has to pay — and that someone is the consumer." Nicolaou also pointed the finger at banks and payment platforms: "Everything is electronic now — does this still need to come with a fee?"

Notably, the Australian Competition and Consumer Commission (ACCC) permits merchants to incorporate service fees into their overall pricing structure, provided they do not "mislead consumers about prices or the reasons for price changes." Merchants may also offer discounts to consumers using specific payment methods such as cash or PayID, but the discount information must be clearly disclosed before consumers place orders or make payments, and the discounted price must not be displayed more prominently than the full price.

Barbaro is already considering such a workaround: "I'm currently thinking about offering discounts to cash-paying customers. Cash is king — the old saying still holds." But Skuce does not plan to follow suit. He told ABC News that most customers want to pay by card and handling cash is too much hassle, so "consumers won't see any net benefit, and prices will end up going up." He is puzzled by the ban: "Another blow to the bottom line, in my view completely unnecessary."

The central bank claims the ban serves the "public interest," but the ABC News report does not present an independent cost-benefit assessment to verify this claim. Whether banks will correspondingly lower merchant service fees after the surcharge ban, or simply let small merchants quietly absorb these costs without raising prices, remains unclear. The small-merchant sample cited in the report is concentrated in Sydney, and differences in actual impact across industries and regions nationwide are also unknown.