WHERE AUSTRIAN ECONOMICS MEETS REAL WORLD ACTION

You run a café in Brisbane.

Until 1 October 2026, when a customer tapped a premium rewards card, a small line on the receipt showed what that card cost you to accept, and they paid it. The customer who paid with cash didn’t.

Since 1 October 2026, that line is gone. The cost hasn’t gone anywhere. You’re just no longer allowed to show it.

So you face the decision every Australian business that surcharged now faces: absorb the cost, or put up the price of everything, including the flat white your cash customer buys.

And there’s no point looking for a way to take payment that will let you do otherwise. Visa, Mastercard, eftpos, American Express and UnionPay all now have the same rule, and PayPal joins them on 5 October.

Since 1 October 2026, Australian businesses can no longer add a surcharge to payments made on eftpos, Mastercard or Visa cards, whether debit, prepaid or credit.

The mechanism matters. There is no new law against surcharging. From 2003, the Reserve Bank of Australia (RBA) prohibited the card networks from banning surcharges. On 1 October 2026 it lifted that prohibition, and the networks each introduced their own no-surcharge rules. Enforcement runs through network rules and merchant contracts; the competition regulator, the ACCC, has said it will not be the one enforcing them. American Express, UnionPay and PayPal, none of which the RBA formally regulates, decided to remove surcharging too: American Express and UnionPay from the same date, PayPal from 5 October.

Businesses may still offer a discount for a particular way of paying, and may still apply clearly disclosed weekend or public holiday surcharges.

The ban comes with fee cuts. The RBA has lowered the caps on interchange, the fee paid on every transaction to the bank that issued the customer’s card. The cap on consumer credit cards falls from 0.8 per cent to 0.3 per cent of each payment. On debit cards, the cap is now a flat 8 cents per transaction, or 0.16 per cent where the fee is charged as a percentage. The cap on commercial credit cards stays at 0.8 per cent. A 1 per cent cap on foreign-issued cards follows on 1 April 2027. The RBA estimates the package cuts businesses’ wholesale card costs by around $910 million a year, with small businesses gaining most because they pay closest to the caps.

The RBA’s case for removing surcharges deserves to be stated at full strength. It allowed surcharging in 2003 to give consumers a price signal and steer them towards cheaper ways to pay. It now says that signal has stopped working.

Around 16 per cent of merchants surcharge, collecting about $1.8 billion a year, $1.6 billion of it from consumers. Most charge one flat rate on every card, so the signal says nothing about which card is cheaper; only about 5 per cent charge debit and credit differently. Surcharges are often poorly disclosed and hard to police. The RBA’s own analysis found the steering effect so weak that a merchant taking $1 million in card payments saves about $36 from surcharging. And three-quarters of consumers it surveyed said surcharging was unnecessary and should stop.

Grant all of that. The argument below doesn’t depend on any of it being wrong.

The only price the customer ever saw

A surcharge was a price set by the business that bears the cost. It could be changed tomorrow, and it told every customer, at the moment of choosing, what their way of paying cost.

An interchange cap is a different kind of number. It is set by a committee, based on its own study of what it judges to be banks’ eligible costs, and revisited at the next review. One is discovered at the till. The other is decided in Sydney.

Once the card cost is folded into every shelf price, neither the shop nor the customer can see which way of paying is expensive. The cost is still there. It has just stopped being visible.

The RBA’s answer is that shops can still offer a discount for cheaper ways to pay. They can. But a discount only works by building the card cost into the shelf price first and then giving some of it back. Steering a customer to a cheaper method used to be the default; now it takes effort from the shop.

The shop pays, and the shop doesn’t choose

Every card payment involves three parties: you, the shop, and the bank that gave you your card.

The networks don’t compete for shops. They compete for banks, because banks decide which logo goes on the cards they issue. The way to win a bank is to pay it more for every transaction, and that money comes from the shop. So the network that charges shops the most can pay banks the most, and win the most cards. The bank passes some of it back to you as points and perks, so you’re happy too.

Everyone in that chain is rewarded for higher fees except the one party who pays them, and the shop can’t refuse, because you’re already carrying the card.

The networks compete for whoever chooses the card. The shop pays, and the shop doesn’t choose.

This isn’t a theory imposed on the RBA. It is the RBA’s own description: networks competing for banks’ business produce an upward spiral in costs, because merchants have little bargaining power and little capacity to refuse cards.

The lever that vanished

Before 2003, the networks’ own rules generally stopped Australian shops from surcharging. The RBA overrode those rules for two stated reasons: to steer customers towards cheaper ways to pay, and to increase competitive pressure on the networks.

The second reason is the one that has quietly disappeared. The evidence that surcharges barely steered shoppers is real, and we’ve granted it. But the same review heard from large merchants that the threat of surcharging was an important tool for pushing down their fees, and that for American Express cards, which some regard as must-take, it was the only credible one.

A surcharge mattered less as a nudge to the shopper than as a lever against the network. That lever is what has gone.

To be clear, the 2003 rule was itself an intervention: it overrode a contract between the networks and the shops that accept their cards. Removing it would be a step towards a free market, if that were all that happened.

One rule, every network, the same day

For more than twenty years, the state’s position was that the networks may not stop shops pricing their service. Since 1 October 2026, its position is that they may. The RBA said in advance that it expected them to, “based on historical experience.” They did. American Express and UnionPay withdrew from their undertakings with the RBA and removed surcharging on the same date, and PayPal follows on 5 October. And had surcharging carried on regardless, the RBA said it could recommend that the government legislate a ban.

Removing a prohibition should mean the state stepping back. Here it didn’t. The RBA lifted one rule while setting the networks’ prices, said in advance what it expected them to do, and kept a law in reserve in case they didn’t. That isn’t the state leaving the market. It’s the state changing sides.

Call it what it is: parallel conduct, invited by the regulator. Nobody needed to agree on anything. The regulator removed the barrier, every network adopted the same rule, and the government holds legislation in reserve in case the rule doesn’t hold.

The result is a market in which the most useful competitive question can no longer be asked at the till: what does paying this way cost?

The RBA itself expects the card networks to benefit from greater use of cards once surcharges go. It isn’t hard to see why.

Must take cash. May not price the card.

Since January 2026, supermarkets and fuel retailers, other than small ones, have been required to accept cash for in-person purchases up to $500 between 7am and 9pm, with penalties enforceable from July. In the space of a year, shopkeepers have been told which payments they must take, and that they may not price the cost of the others. Neither rule asked the shopkeeper.

Why the networks don’t compete on price

Payment processors compete hard for merchants’ business. The card networks behind them don’t compete by lowering the merchant’s fee, and the reasons are structural. A card is only worth carrying if shops accept it, and shops only accept the cards people carry; once two networks reached that scale, challengers faced a chicken-and-egg problem no regulator caused. And both began as associations owned by the banks that collect the fees. Mastercard listed only in 2006, and Visa became majority publicly owned only after its 2008 listing.

The rulebook does the rest. A challenger needs licenses, prudential supervision at scale, and a way into payment systems that existing players operate, and licensing rules released in draft in March 2026 would bring more payment providers under financial services licensing. When Parliament widened the RBA’s powers in 2025 to reach newer players such as mobile wallets, the banks’ industry body welcomed it, saying tech firms would have to meet “the same standards as banks.” Austrian economists have long argued that market power lasting decades usually has a rule underneath it keeping challengers out. Network effects explain how the networks got big. They don’t fully explain why nothing has replaced them.

None of this is peculiar to Australia. Wherever a rule stops a business showing the buyer what a payment method costs, the cost doesn’t disappear. It is spread across every customer, including the one who paid cash.

This is general information, not financial, legal or tax advice. Check anything that affects your business with your own adviser.

The fix isn’t a better-designed rule. It’s fewer of them.

—       Let both sides contract freely. A network should be free to set rules for its cards, and a shop should be free to refuse those cards, price them, or steer customers elsewhere. The state should neither forbid the network’s rule nor stand behind it with a law in reserve.

—       Withdraw the threat of legislation. A rule that needs a law held in reserve is not a market outcome.

—       Lower the entry fee. Licensing for new payment providers should be the lightest consistent with protecting customers’ money, with fast and fair access to the systems that move money between bank accounts. Competition from new ways to pay is what eventually makes fee caps unnecessary. Identical rules from a handful of networks are only a problem when nobody can enter and offer something different.

—       Let the caps go as competitors arrive, rather than adding new ones at each review.

The test of intent is simple. If the goal is lower payment costs, does the policy make it easier or harder for a cheaper way to pay to win a customer at the till? This one makes it harder.

And notice the pattern. The 2026 reform exists because the 2003 one stopped working, and the next review opened in June 2026. Each round of regulation has become the reason for the next. The way out of that loop is to stop feeding it.

Stay free,

Jean-Pierre

The Austrian Actor

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