CommBank cuts merchant fees before Australia’s surcharge ban

Commonwealth Bank of Australia said on September 2 that it will reduce its merchant service fee from 1.1 percent to 0.99 percent per transaction for in-store payments on flat-rate pricing plans, effective October 1, according to a company statement. Existing customers move to the new rate automatically.

The change lands on the day the Reserve Bank of Australia’s ban on card surcharging takes effect. From October 1, businesses can no longer add surcharges to payments made with debit, prepaid or credit cards on the eftpos, Mastercard and Visa networks. American Express, JCB and UnionPay have confirmed they will remove surcharging from the same date.

The RBA set out the reforms in a conclusions paper on March 31, following an 18-month review of merchant card payment costs. “Surcharging is no longer achieving its intended purpose,” the central bank said, noting that consumers find it increasingly difficult to avoid surcharges and that the rules are widely regarded as complex and poorly disclosed.

The package also lowers interchange fee caps. The cap on domestic consumer credit cards falls from 0.8 percent to 0.3 percent and the debit cap from 0.2 percent to 0.16 percent, while the commercial credit card cap stays at 0.8 percent. Foreign-issued cards face a 1 percent cap from April 1, 2027. From October 30, card networks and large acquirers must publish average merchant service fees quarterly.

The RBA estimates the reforms will save consumers about 1.6 billion Australian dollars a year in surcharge fees, with businesses saving a further 200 million dollars, according to ABC News.

Not all parties support the changes. Small business groups have opposed the surcharge removal, arguing that acceptance costs do not disappear but shift from customers to merchants, leaving businesses to absorb them or raise prices, according to ANZ. Card rewards programmes are also expected to weaken as interchange revenue falls.

Cash accounted for about 15 percent of Australian transactions last year, down from almost 70 percent in 2007. The RBA has said it will examine the fees charged by buy now, pay later providers separately.