Restaurant industry rejects debit surcharge ban
The Albanese government's proposed ban on debit card surcharges has drawn strong opposition from the restaurant and cafe industry. The Australian Restaurant & Cafe Association (ARCA) warns that such a move would force businesses to increase menu prices to offset lost revenue.
In a submission to the Reserve Bank of Australia (RBA), ARCA highlighted the potential inflationary impact of the ban. With credit card surcharges likely to rise, and nearly 40% of restaurant meals paid for by credit card, consumers could face a double whammy of higher prices and increased fees.
Fuel retailers and convenience stores have also expressed concerns, arguing that the disparity in transaction costs between large and small businesses needs to be addressed before any ban is implemented.
ARCA's survey data reveals that a significant majority of restaurants and cafes currently charge surcharges to cover merchant fees. A ban on debit surcharges would likely lead to price hikes, with menu prices potentially increasing by more than the cost of processing the payment.
The industry's resistance to the proposed ban underscores the complex interplay between consumer costs, business profitability, and government regulation in the payments landscape.
“Banning debit surcharges on transactions could lead to major unintended consequences, ultimately leading to not only higher costs but also higher menu prices and overall transaction costs for consumers,” the submission which was obtained by The Australian Financial Review noted. It was sent to the RBA on Tuesday.
“Given the sector’s reliance on [payments] services, and the current stagnant trading environment, allowing merchants to offset these costs is critical to their survival.”
The RBA is currently garnering opinion payment costs, which includes removing the ability for merchants to charge consumers at the point of sale to cover the cost of accepting a payment.
Prime Minster Anthony Albanese has claimed that if he wins the next election he intends to outlaw debit card surcharges.
ARCA, however, argues the move could increase insolvencies, noting that, according to CreditorWatch, one in 11 hospitality businesses is expected to close in the next 12 months.
“Without the ability to pass on merchant fees, this number could increase,” ARCA’s submission said.
According to ARCA, many restaurants and cafes would be forced to increase menu prices by 10¢ to 25¢ for a $5 coffee, a substantial increase compared to the current average debit surcharge. This could also lead to a reduction in staff hours and portion sizes, as businesses struggle to maintain profitability.
The industry group has raised concerns about the fairness of the current system, arguing that small businesses are paying disproportionately high fees for card payment processing compared to larger retailers.
The Australasian Convenience and Petroleum Marketers Association has echoed these concerns, calling on the Reserve Bank to publicly disclose merchant fees, similar to the way it does for fuel prices.
Jonathan Jackson, 4th December 2024
