Card fees skyrocket to record levels, forcing higher surcharges on consumers
The cost of card fees levied on businesses is at record levels, forcing higher surcharges for consumers in a cost of living crisis.
Independent Payments Forum (IPF) analyst Peter Drennan said new Reserve Bank of Australia (RBA) data showed that average merchant card fees charged by banks and other payment service providers (PSPs) was now at record highs for both debit and credit cards.
The fee jump comes in the midst of the RBA’s Review of Merchant Card Payment Costs and Surcharging, which is considering “whether regulatory settings could be adjusted to put further downward pressure on merchant card payment costs and whether the RBA’s surcharging framework remains fit for purpose”.
The new data shows that eftpos debit fees jumped 33.3% on last quarter. Visa debit is up 6.1% and Mastercard debit is up 7.7%.
Credit card fees jumped as well. Visa was up 5.5% to 0.96%, Mastercard was up 6.7% to 0.96%.
Drennan said the new RBA data is based on expanded coverage to directly includelarger payment facilitators and additional acquirers, most likely to be international players and local fintechs.
“Many of these companies have recently increased market share and often charge high blended rates that combine debit and credit card fees, leading to higher surcharges for consumers,” Drennan said.
Drennan said the new data came at a time when Australian were using cards for more than ever before.
Debit cards in particular were being used as the “new cash” for everyday shopping.
Card purchases in 2024 reached $1.04 trillion, with both debit and credit at record highs.
Debit card purchases grew by 8.1% over the course of 2024 to $609 billion.
“The new data shows a 0.96% average fee for Visa and Mastercard transactions, the highest it has ever been,” Drennan said. “Although the new reporting entities mean that it isn’t directly comparable with previous quarters, the 5-year trend was already up.”
IPF C-Founder Brad Kelly said the surge in card fees directly contradicts recent claims from some sections of the industry that card fees are getting cheaper.
Kelly said small businesses that can least afford it bore the brunt of excessive card fees and led to increased surcharging for consumers.
“Until these fees can be brought under control, any ban on surcharging is simply unfair and damaging to Australian small business,” Kelly said. “The current situation costs every single one of us way too much, every time we shop.
“Currently small businesses and their customers pay the lion’s share of these fees, with big business cutting special deals with the banks and card schemes. These unfair fees turn up for consumers as surcharges.”
