‘Where’s it come from?’: Business owners smashed by RBA surcharge change

One of Australia’s most hated hidden fees has been removed, but small businesses have warned this will simply lead to higher costs everywhere.

On Tuesday, the RBA released its long-awaited review of merchant card payment costs and surcharging, recommending three changes to Australia’s payment network.

These include removing surcharges which will be banned from October 1, with businesses now having to display the entire cost -including credit charges – as part of the sticker price.

To compensate for this the RBA says they are reducing interchange fees – which are paid by a business’ bank to the customer’s bank – will be lowered while the RBA promised to ensure increased transparency surrounding fees charged by card networks.

But business owners warn this is unlikely to be the case.

Chaos cafe owner in Neutral Bay and Mosman Kodar Eid told NewsWire the RBA’s removal of surcharging will smash small businesses, who will ultimately have to pass on higher costs to everyday Aussies.

Mr Eid says his costs will skyrocket by $22,000 a year from October 1, just from his Neutral Bay location alone.

“That $22,000 isn’t going to disappear, where do you think that is going from? What margin do you think I’m working with?, he questioned.

“Cost of living affects small businesses too.

“Small businesses absorb as much as they can, but if I take a $22,000 hit, I’ll be one of the businesses that are closing.”

Mr Eid - who has owned the Neutral Bay location for nearly 13 years – says for years his cafe has passed on card surcharges to customers, as it allowed him to hold menu prices meaning those paying with debit card or cash were not adversely affected.

“To keep customers coming through the door we’ve been forced to absorb many of the increases that are coming our way.

“Even now, suppliers are charging us a fuel levy and most cafes are absorbing that.

“When cost of living hits families, the first places that start to feel less customers come through the door is cafes… The stuff that people can live without.”

“We don’t want to accelerate this problem.

Mr Eid says it is a bad time to bring in these changes to surcharges, with the industry facing higher energy and supplier cost.

“The people in the room that made the decision, don’t they have a background in economics?,” he asked.

“We are supposed to be happy they slugged the banks 0.3 per cent - seriously.

“Why not tell the bank to absorb the 1.2 per cent and the small business can cop the 0.3 per cent.”

AMP Bank Go director John Arnott agrees, saying bank fees to businesses are simply too high.

“If surcharges are banned but bank fees stay high, small businesses are left carrying the cost. Australians will pay, just in less visible ways,” he said.

“You may not see a surcharge at the terminal, but you will start to see the surcharge flow through to the ticket. And small businesses are telling us they’ve got no choice. They’re already running on the smell of an oily rag.”

He says life for small business owners is only getting harder, while the big end of town makes billions.

“If banks don’t slash card fees, Australians will keep paying – full stop,” he said.

“At some point, enough is enough, and small businesses need to start voting with their feet. And the payments industry needs to walk the talk.”

AMP Bank Go says while this is the biggest change to card payments in 20 years, ultimately it is every day Australians will be forced to pay more for everyday goods and services.

“It’s tough for small business right now, and the way things are headed, there’s only going to be more pain,” Mr Arnott said.

“Supporting local businesses matters – they’re at the heart of our communities and local economies. It’s your mate, your cousin, your local barista.”

Cash and debit card users major loser in ban

Australians are slugged about $1.6bn in surcharge payments every year, while businesses pay $200m to card providers.

Cash Welcome founder Jason Bryce told NewsWire the RBA went a step too far by removing surcharges on both debit and credit card spending.

“I’m concerned cash users are going to end up paying for the frequent flyer points and the benefits that accrue to people using fancy credit cards,” he said.

“So who is losing, ordinary bank account holders with a debit card, cash users, people budgeting and I can’t see how small businesses are going to like this at all.”

Mr Bryce said the announcement did not get rid of surcharging. Instead, it simply hid the fees businesses paid to card providers.

“There’s no transparency, no little sign at the cash register that says if you pay this way it will cost you this much,” he said.

“Those signs, while very annoying, are very transparent.”

Meanwhile, survey data of 3001 Australians from comparison site Canstar found 33 per cent of Australians try to pay with cash when a shop charges a surcharge.

Canstar data insights director Sally Tindall said Australians had enough of getting “lumbered” with an extra hit at the till.

“These changes will simplify the system, stop any price-gouging and help consumers compare apples with apples at the checkout,” she said.

“It’s a tiny fee in isolation, but plonked on top of the cost of a flat white every day, is enough to make people see red.”

Mr Bryce disagreed, saying ultimately cash users would end up paying for credit card users due to higher prices.

“The RBA was very strong 25 years ago when they came up with these surcharge rules, making Australia a world leader in card transactions but no more,” he said.

“The Prime Minister first flagged as a cost of living measure he wanted to get rid of surcharges on debit cards, but this is going much further than he envisioned.

“This is covering those really expensive surcharges on credit cards.”