SMALL BUSINESSES HIT WITH HIGHER CARD FEES, INQUIRY REVEALS

Small businesses in Australia are paying significantly higher debit and credit card fees compared to large retailers, according to submissions to the Reserve Bank of Australia’s (RBA) review of merchant payment costs and surcharging.

The Independent Payments Forum (IPF) has criticised banks and card schemes for maintaining what it describes as an unfair fee structure.

IPF claims that small businesses are often charged three to five times more than major retailers, based on RBA data.

“This skewed approach to fees is a betrayal of small businesses and their customers who want to access their own money at the lowest possible cost,” said IPF co-founder Brad Kelly.

Some banks and US card schemes have pushed to protect all aspects of their fees – interchange, scheme fees and margin – while hiding them by banning surcharging, according to submissions made to the RBA.

IPF argues that such a move would obscure the real cost of card payments for businesses and consumers.

“In the end, this is all about banks and card schemes maintaining their record profits and sweetheart deals with big retailers and supermarkets, while attempting to hide the high fees they levy on small businesses by banning surcharges,” Kelly said.

Despite an increase in card payments and regulatory intervention on interchange rates, debit card fees have remained high over the past decade.

Australians now make 15.3 billion card payments worth $1.02 trillion annually, with debit card transactions accounting for 76 per cent of total purchases.

Warwick Ponder, co-founder of the IPF, warned that abolishing surcharging without addressing the underlying fees would harm small businesses.

“Abolishing surcharging without addressing fees will simply mask this market failure and result in price increases and job losses at small businesses that will ultimately be detrimental to consumers,” Ponder said.

The Australian Competition and Consumer Commission (ACCC) has also acknowledged the disparity, stating in its submission that “the current retail payments system appears to have shifted the greatest costs to small businesses and consumers, who are the actors in the system with the least bargaining power.”

Major retailers, including Coles, Woolworths, and Chemist Warehouse, have not provided public submissions to the inquiry.

Meanwhile, the Australian Banking Association suggested that some merchants may use surcharging as a revenue stream rather than a cost-recovery mechanism.

Kelly rejected that claim, stating that small businesses do not profit from surcharges.

“When you tap your card for a $100 transaction at your local small business, that business gets $100.

The $1.60 surcharge goes to the payment provider to cover the cost of acceptance. If we ban surcharging, the small business will only get $98.40.

This is almost their entire profit margin,” he said.

IPF has urged the RBA to intervene to ensure fairer payment conditions for small businesses, arguing that banks and card schemes have disproportionate power in the market.

“Because of this market failure, we need and rely on the RBA to step in and ensure those with the least market and bargaining power get a fair deal,” Ponder said.

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