JACKSON HEWETT: As cash moves toward extinction, it's time to lift the veil on payment costs

West Australian

15-07-2025

As Bitcoin — a completely unnecessary piece of tech — soars to $A180,000 on little more than FOMO, it's worth revisiting what its spruikers once promised.
Remember blockchain? The decentralised online record book that everyone can see, no one can change, and that updates automatically as transactions happen, was billed as the promised land of friction-less payments.
Crypto evangelists told us Bitcoin, and the slew of derivative cryptocurrencies, were vital for the digital age because they were the gateway to a future of real-time, AI-powered transactions and seamless capitalism.
A big claim. Yet here we are on outdated payment platforms, still forking out $60 a year each in sneaky surcharges — or $1.2 billion across the country.
So credit to the Reserve Bank for taking the bit between the teeth and proposing to scrap surcharges altogether.
In an era where the country is crying out for productivity-boosting reforms, here's one that delivers for consumers and may even force some long-overdue innovation in how payments are processed.
'Removing surcharging would make card payments simpler, more transparent and help to increase competition in the card payments system,' the RBA says in its review of merchant card payment costs.
Alongside the surcharge ban, the Bank has proposed capping interchange fees, mandating least-cost routing, and requiring banks and payment providers to clearly disclose the fees they charge merchants. The aim: expose a murky system to sunlight and stop billions in hidden costs being quietly passed onto the public.
Because it's always the least powerful who end up clipped — and nowhere is that clearer than in how card issuers treat small businesses.
The RBA highlights the stark disparity in fees.
Large merchants with scale and savvy payments teams can negotiate all-in processing costs well below 0.5 per cent. Small businesses — your local butcher, café or florist — often pay two or three times that. Total fees of 1.5 to 2 per cent per transaction aren't uncommon.
That's why it's often the corner store that has to slap a handwritten sign next to the EFTPOS machine spelling out the surcharge.
They cop the higher fees — and the customer complaints.
The Council of Small Business Organisations Australia says removing surcharges won't fix the problem, just bury it in the price tag.
'The reality is that these fees will still be paid, just not disclosed. That cost will be baked into the price of coffee, groceries, and services across the country,' said COSBOA chair Matthew Addison.
So how much should the customer be footing, really?
According to the RBA, the average fee for a small business is around 1.6 per cent. That's an extra $1.60 on the $100 flowers you bought mum for Mother's Day.
But the wholesale cost of that transaction — the actual interchange fee — is just 8 cents today, and could fall to 6 cents for debit cards and 0.5 per cent for credit if the RBA gets its way.
Multiply that margin across the 1.3 billion card transactions processed every month in Australia and the scale of extraction becomes clear.
EFTPOS provider Tyro, whose shares briefly fell on the news before rebounding, welcomed the shake-up.
Chief executive John Davey said the changes would force bundled service providers to get real about their pricing.
'Businesses are suddenly going to be invoiced on a monthly basis with a fee. And I would expect that they'll be looking for the best deal they can get, and that will create competition and opportunity,' he said.
But there's a twist in the tale for consumers: those fees help bankroll credit card reward schemes.
'One of the things about interchange that's probably not well understood is that it is funding a lot of the rewards programs that many of us use day to day,' Mr Davey said. 'So yes, maybe I'm being surcharged, but it's also funding a benefit I'm receiving.'
In other words, expect reward points to get stingier if those margins tighten.
Until then — and with changes not likely to come in before 2027 — consumers may be better off using a reward credit card rather than debit, so long as they pay it off in full each month.
According to the RBA's retail payments data, EFTPOS still offers the cheapest route for merchants at 0.42 per cent per transaction, compared with 0.49 per cent for Visa and 0.56 per cent for Mastercard.
AMEX, with its more generous reward structure, averages 1.35 per cent.
But it's not just card costs under pressure.
Cash is quickly vanishing — down to 13 per cent of all transactions and expected to fall to just 4 per cent by the end of the decade. Its infrastructure is in crisis: Armaguard, which moves 90 per cent of Australia's physical money, has had to be bailed out twice in two years by the banks and major retailers just to keep the wheels turning.
Even the RBA and the banks concede the system is unsustainable.
But they also acknowledge that cash still matters — as a backup, a store of value, and a critical tool for vulnerable communities.
Which is why getting the card payment system right is so important. We're building the rails of a near-cashless economy, and too much of the current system is riddled with hidden margins and soft monopolies.
If we want a more productive economy — one that's fairer, more competitive, and more efficient — it's time to bring payment costs down and transparency up.
The blockchain crowd promised that. The Reserve Bank might actually deliver it.