Restaurants could benefit from a cap on debit card fees
The Reserve Bank of Australia's potential move to cap the fees banks and payments providers charge for processing debit card transactions could positively impact businesses, particularly those in the hospitality sector who are struggling the most.
Any move on high bank charges and fees could be crucial for businesses already facing financial pressures.
The move would complement the federal government’s plan to ban retailers from passing on fees to customers through surcharges.
However, small business groups are concerned that the proposed changes might shift the burden of payment processing fees onto them, affecting their bottom line. Providers like Tyro Payments, Visa, and Mastercard charge businesses per transaction, which add to operational costs.
The wholesale cost of debit card payments is around 0.5% of the transaction value, and the RBA is seeking feedback by December on whether this fee could be reduced, which would cut into the income banks and payment networks earn from processing transactions. The RBA is also considering placing limits on scheme fees, which are another component of the total charges imposed by Visa, Mastercard, and Eftpos.
In a paper released Tuesday, the RBA highlighted growing concerns about the cost of living, drawing more attention to card payment fees and surcharges. "These issues are connected, as merchants would be less inclined to surcharge customers if card payment costs were lower," the paper noted.
Surcharges on debit and credit card use—banned outright in some countries like the United Kingdom—have become a contentious political issue. Big bank CEOs have criticised them as being non-transparent, while some Labor MPs have labelled them “kickbacks” and a “rort.”
Labor is not calling for a ban on credit card surcharges but is pushing to eliminate fees on debit cards, which are commonly applied when consumers use mobile tap payments. However, many small businesses, particularly in the hospitality industry, depend on surcharges to offset merchant fees. They are urging the RBA to cap the fees that banks and payment processors can charge per transaction.
“We are supportive of a ban on debit card surcharges but only if there is reform that effectively eliminates the current massive gap between what large and small business are paying,” said chief executive of the Australian Association of Convenience Stores Theo Foukkare, who represents thousands of petrol stations and 7-Elevens.
“Having a cap on debit card fees would even the playing field and give retailers certainty this is their cost.”
Australian Restaurant and Café Association chief executive, Wes Lambert agreed.
“Our fear is the government will ban surcharging – passing those merchant fees on – but not stop banks and payment service providers charging restaurants and cafés the same percentages,” Lambert said.
Shadow treasurer Angus Taylor has called for more detail.
Current laws allow businesses to add a surcharge to cover payment processing costs, but they are prohibited from charging more than the actual cost.
The legislation, introduced in the 1990s, was intended to encourage consumers to move away from high-fee credit cards to cheaper alternatives like Eftpos. However, it has not kept pace with industry changes, particularly the growing use of debit cards for tap-and-go payments.
Jonathan Jackson, 16th October 2024
