October 15, 2024 • 20 mins
The Government wants to crack down on “unfair and excessive card surcharges” in Australia. It's announced plans to ban debit card surcharges from 2026. The RBA estimates Australian businesses pay close to $2 billion a year to card networks, but the Opposition argues the Government's plan “won’t make a difference” for Australians facing a cost of living crisis. On today’s podcast, we’ll explain how these charges currently work, why they're a problem, and what lawmakers want to do about it.
Hosts: Sam Koslowski and Emma Gillespie
Producer: Orla Maher
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Already and this is the daily this is the daily ours.
Speaker 2 (00:05):
Oh now it makes sense.
Speaker 1 (00:14):
Good morning and welcome to the Daily OS. It's Wednesday,
the sixteenth of October. I'm sam, I'm emma. Three of
Australia's major economic forces, the RBA, the arible C and
the federal government are coming together to crack down on
card surcharges. This week, the Albaneze government said it was
sending a message to payment providers like Visa, MasterCard and
(00:36):
American Express that the days of unfair or excessive surcharges
on credit and debit card payments by consumers by US
were numbered. On today's podcast, we're going to explain how
these charges currently work, why it's a problem, and what
the government is suggesting that we do about it. But first,
m what is making headlines.
Speaker 3 (00:59):
The Federal government has updated its travel advice for Israel
and the occupied Palestinian territories amid concerns the security situation
there could deteriorate rapidly. Foreign Affairs Minister Penny Wong has
urged anyone in the region to leave now if it
is safe to do so, and mid concerns commercial flights
could be suspended. The official advice, per the Department of
(01:20):
Foreign Affairs Smart Traveler website, is do not travel to
the region due to the quote volatile security situation, armed conflict,
civil unrest and terrorism. The latest advice warned there was
an ongoing threat of missile and rocket attacks in Israel
and stressed quote terrorist attacks can occur anywhere at any time.
(01:41):
It follows days of escalations between the Israeli military and
Hesbala forces in Lebanon.
Speaker 1 (01:48):
Melbourne's crownd Casino has been fined two million dollars for
allowing hundreds of Victorians who'd signed up to a self
exclusion gambling register to place bets at the casino. National
gambling harm prevention measures mean it's illegal for casinos to
allow anyone who is self excluded to enter gambling venues.
The Victorian Gambling Watchdog alleges Crown allowed almost two hundred
(02:10):
and fifty people on an exclusion register to place bets
at their venue between October of twenty twenty three and
May this year. The state regulator said Crown Melbourne's actions
were also in breach of their obligation quote to protect
people at risk of gambling harm.
Speaker 3 (02:28):
US rapper Sean Diddy Combs is facing a new wave
of lawsuits that accuse him of further sexual misconduct. At
least six new lawsuits were filed this week in the
Federal court in New York. The legal action has been
launched by four anonymous men and two anonymous women who
have detailed alleged incidents dating back as far as the nineties.
(02:48):
In a statement to US news outlet CNN, Comb's lawyer
said the US rapper and producer has quote never sexually
assaulted anyone. Monday's legal action joins a growing list of
lawsuits again it's the rapper, accusing him of a range
of sexual misconduct and other illegal activity, which he has denied.
Combs currently remains in custody after his arrest in New
(03:09):
York last month on sex trafficking charges, to which he
has pleaded not guilty.
Speaker 1 (03:17):
And Today's Good News, an environmental group has gathered in
New South Wales to plant its one millionth tree. Since
twenty twenty, members of the Foundation for National Parks and
Wildlife have come together in Sydney's Northwest to continue what
it calls its Landscape Resilience Program. It's a national project
focused on maintaining the health of natural areas threatened by
(03:38):
bushfires and floods. Since the twenty nineteen twenty twenty bushfires,
the group has saved more than six hundred thousand hectares,
two hundred and ninety six plant species, and twenty five
threatened wildlife species. The group has lofty aims. They plan
to plant eight million trees by twenty thirty.
Speaker 3 (03:58):
Okay, Sam, today talking about something that well and truly
impacts each and every one of us. Card surcharges.
Speaker 1 (04:06):
I go as far as saying it impacts us all
every day.
Speaker 2 (04:09):
Yeah, truly. You know what I'm talking about.
Speaker 3 (04:12):
If you've ever been at the checkout, you take your
card out, you're about to pay for something, and all
of a sudden, the price jumps up.
Speaker 1 (04:20):
Just because just a couple of cents.
Speaker 3 (04:22):
Yeah, well, a couple of cents depending where you are,
maybe astronomically for reasons that you can't explain. So before
we dive into what this all means, where it all
comes from, let's start with what a surcharge actually is.
Why do these little extra payments on top of our
transactions exist.
Speaker 1 (04:41):
Well, basically, it's an amount or a percentage that a
business adds to the price of a product or a service.
So you're buying your coffee, it's four dollars. You get
to the checkout, it's four dollars and seven cents. And
that cost covers for the business, either partially or sometimes
the entire cost the fee that the business has to
pay to their payment facilitator. And when we say payment facilitator,
(05:03):
we're talking about the master cards, the visas, the American Expresses,
you know, the people who provide them with the payment
gateways to collect payment from us and then funnel it
back into a bank account.
Speaker 3 (05:13):
Got it. So we've got us the consumer, the bank,
the business, and the provider exactly.
Speaker 1 (05:20):
And for a business to use Visa, let's say, to
collect payments, Visa has to make money somehow, and so
they make money on every transaction. Now, big businesses will
cover that transaction because they kind of don't want to
go through the routine that the checkout of you realizing
there's a bit extra, so you go to let's say
(05:40):
a department store or a big pharmacy chain. They'll actually
just absorb that themselves. It's more the small businesses, say
hospitality or small retail, that will add that on top. Now,
the surcharge does vary based on if you've inserted your card,
if you've tapped your card, it's generally more more expensive
to tap your card, and who the payment facilitator is. Now,
(06:04):
I'm sure you might recognize from kind of shop windows
that American Express is always a bit more expensive for
businesses to accept. They often pass that on to a consumer,
and consumers like using American Express because there's rewards programs
and extra incentives. Now, according to a recent article from
the RBA, you can expect to be charged an extra
point two percent on the average FPOs transaction, but an
(06:27):
AMEX fee will normally be about an average of one
point four percent, So it can be quite a range.
Speaker 3 (06:32):
And one thing that I've noticed more and more, especially
with online purchasing, you might get to the checkout and
you'll see, you know, a whole range of payment options,
whether that's PayPal, a buy now, pay later, credit card,
whatever it is. And I've appreciated and been surprised by
the clarity of the specific surcharge amounts. You can really
see that a couple of different options that might all
(06:56):
kind of seem like they're coming from the same place
or going to the same place can be charged between
zero points something to two percent on those different options,
and I think consumers a starting to get more savvy
on okay, which payment option is going to screw me
over the least.
Speaker 1 (07:11):
Here definitely, And I think for the RBA and the
ahrip'll see, they are really closely regulating this space. So
I think those examples online that you're talking about, that's
probably not by the choice of the retailer. It's now
a really important area of compliance. But before we go on,
I just want to make one quick distinction, because you
just mentioned it. It's really important to remember the difference
(07:32):
between a credit card and a debit card, and credit
card fees and debit card fees. So a debit card
is a card that gives you access straight to your bank,
and the big thing we're talking about today are the
fees attached to that credit card fees when you're spending
money that technically isn't yours and then you pay it
back monthly or at an interval, those fees are kind
(07:53):
of out of scope for this discussion.
Speaker 3 (07:55):
Yeah, and we're talking as well about transaction fees, so
the cost of buying something in the moment using an
electronic payment method for that, rather than a credit card
fee that might be associated with just owning the credit
card exactly.
Speaker 1 (08:09):
And I think if you really boil it down, and
if you're feeling like you're getting a bit lost in
all of this financial talk, the big question being asked
by government is should you be charged a fee to
access money that's already yours.
Speaker 3 (08:22):
So there is some regulation in this space that you've
touched on a little bit. It's not just the wild West, right, Yeah.
Speaker 1 (08:30):
So the RBA sets the rules un surcharging. The HPLEC
enforces those rules. Merchants, as you see online and in
real life, they are allowed to surcharge, but it's only
up to what's called the cost of acceptance for that
particular type of card. This kind of benchmark set for
a Visa versus an AMEX versus a master card. It's
(08:51):
a really complex system. Some different cards have different costs.
Sometimes those differences are communicated to consumers in different ways.
Sometimes they are a flat sometimes there are a percentage.
You know, I'll often see a cafe do a flat fee,
and let's say that your flat fee is fifty cents
for a transaction. They might say a minimum of ten
dollars for an FPOs machine charge. You can go under that,
(09:13):
but you have to pay fifty cents. If you're paying
fifty cents on a four dollar coffee, then you're paying
an extra twelve and a half percent on your coffee.
So there's a lot of variability here, and I think
that's kind of what the government wants to talk about.
Speaker 3 (09:26):
Okay, so it's not illegal for businesses to impose these
card surcharges, But basically what you're saying is excessive payment
surch charges are not allowed. The surcharge has to kind
of be justifiable within reason that it's got to sort
of reasonably cover the business's cost to run that transaction exactly.
Speaker 1 (09:47):
But as we're using cash less and less, I mean,
the latest stats is that about thirteen percent of retail
transactions are done by cash. The rest is all electronic payments.
I think what's reason and what's not probably needs a
little bit more exploring from the consumer perspective.
Speaker 3 (10:05):
Because it doesn't really feel optional for the consumer.
Speaker 2 (10:09):
If, like you say, you know, we're moving towards a
cashless society.
Speaker 3 (10:12):
Most young people are not walking around with a spare
twenty bucks in their pocket to pay for that coffee
to avoid that twelve point five percent so charge example.
But despite it being a couple of cents here and there,
I'm sure that that adds up for the individual, for
the economy. Do we know how much it adds up?
Speaker 1 (10:31):
Well, the RBA estimates it's between one billion dollars in
search charges, and some estimates are putting it up to
as high as four billion dollars. It's costing businesses, So
the businesses that are absorbing those costs themselves. It's costing
businesses two billion dollars a year to make those payments
to payment company. So we're talking a lot of money here.
(10:51):
I know it doesn't feel like a lot because it's
in such tiny increments, but it really does add up.
Speaker 3 (10:56):
It certainly does add up. And it's interesting you mentioned
they're the cost to businesses. I think us consumers can
sometimes have a bit of a perspective that it's the
businesses trying to roop us off, rather than there being
a whole chain of transactional stakeholders I guess from your
visas to the businesses. So either way you cut it,
the consumer or the business ends up paying for these
(11:19):
fees to the payment providers just to make the purchases
in their everyday life, and even though it is five
cents here or there, it does add up. So you
said this week that the government has made big announcements
about how to regulate this space.
Speaker 2 (11:33):
What have they suggested.
Speaker 1 (11:34):
Well, the governments come out strong this week about debit
card transaction searcharges. They did allude to a closer look
at credit card transaction search charges, but the big focus
here is on debit cards and what they're proposing is
to ban debit card search charges entirely from the first
of January twenty twenty six. They're going to wait for
a review currently underway by the Reserve Bank before that
(11:57):
legislation would be tabled. The government does seem pretty keen
to take steps before the review is delivered. So they've
additionally committed two point one million dollars to the a
Triple C to boost investigations into illegal and unfair search charging,
and they said they want to increase consumer education as well.
Speaker 3 (12:16):
Yeah, that does seem like a big gap aside from
the regulation space, you know, actually telling consumers what their
rights are, what is reasonable, what is excessive when it
comes to those fees. The big move though, is this
potential ban on debit card seurch charges from twenty twenty six.
But considering that these fees impact all of us every
(12:36):
day into the billions of dollars every year, why does
it need to.
Speaker 2 (12:40):
Take that long.
Speaker 1 (12:41):
It's an interesting one, isn't it, Because I mean we've
got the federal election sometimes before May, and this kind
of reform is traditionally pretty popular in Australia. I mean,
we're going to make everything cheaper for you across the board.
But the government knows they need to be careful with
this and that's why they're waiting for the Reserve banks,
because it could have adverse effects on businesses and they
(13:04):
need to strike a balance between protecting consumers but also
making sure that the businesses have access to payment services.
I mean, the last thing that you would want if
you owned a small business is the payment provider saying well,
because we don't want to operate in this environment anymore,
we're taking away our visa service or our MasterCard service.
The government also wants to make sure that it's not
(13:25):
businesses who are copying the fees and penalties themselves. And
whilst there might be a law that means that consumers
can't be charged unless they do it in a proper
kind of financial modeling kind of way. They wouldn't want
the businesses to be taking that cost on.
Speaker 3 (13:41):
Yeah, and part of this ties into a really interesting
conversation that's happening in the US at the moment, where
the government is suing Visa, accusing it of this debit
card monopoly. Because when we consider those costs, you know,
whether it's the consumer absorbing it or the business absorbing it,
it's all ultimately two or three key players who set
(14:02):
the agenda for these transactions. And this case in the
US from the Department of Justice has essentially said that
Visa has kind of taken advantage of its market dominance
to control quote.
Speaker 2 (14:14):
The price of nearly everything.
Speaker 3 (14:17):
So that lawsuit is going to be a really interesting
one to watch play out.
Speaker 1 (14:22):
Well. The US is a really interesting space in this
regard because they don't have federal law about credit card
or debit card search charges. There's these lawsuits that are
popping up now more commonly, but it's state based, and
so what you find in the US is that you
might be buying something from an online company that's based
in another state and you have to kind of understand
what their surcharges are. But this is being discussed all
(14:43):
over the world. I mean in the UK, they banned
all surcharges on credit and debit card payments back in
twenty eighteen, and that was part of this EU wide
initiative to end excessive card charges. The UK's ban actually
went further than the current proposal by the Australian government
because it covered both debit and credit cards.
Speaker 3 (15:03):
Okay, interesting that I remember being kind of controversial at
the time in the UK. When we think about the
business community back here in Australia, how have they reacted
to this.
Speaker 1 (15:15):
Well, it's a mixed bag. So small businesses have expressed
those concerns. I mentioned earlier that a potential surcharge ban
might mean that they would have to absorb the costs themselves.
There are other businesses that are saying this is a
really positive move and you know, it's about time the
government stands up to, as you said before, these two
or three major players in the payment space. It's been
(15:38):
really interesting looking at some of the corresponding developments from
the really big retailers. So I read a report in
the Australian Financial Review this week about chemist Warehouse and
they're introducing this new system where they're putting up stickers
of QR codes at the counter. You can scan it
and kind of bank transfer chemist Warehouse really and that's
their attempt to get around paying the credit card surcharges
(16:02):
and debit card surcharges themselves. They say they're spending about
fifteen million dollars a year on payment search charges.
Speaker 3 (16:08):
That is really interesting the example of a chemist Warehouse
kind of figuring out a workaround for customers.
Speaker 2 (16:15):
I also just heard about this other app.
Speaker 3 (16:17):
That's called Ping that consumers can use at the checkout
to kind of work around these charges. And I do
feel like it's a space that's waiting for a little
bit more.
Speaker 1 (16:27):
Disruption, definitely. And the payments giants know that themselves, and
I mean, in response to all of this, they've come
out globally and said things along the lines of we're
providing a really effective service to businesses big and small.
We're ensuring that you can have clear reporting on how
much money you're making. We are ensuring that it gets
to your bank accounts fast, and just like any other
(16:50):
business in the world, we need to make money by
doing that. So there are many sides to this discussion,
and I'm sure that they're not going to want to
lose a major income stream as well, so they'll continue
to kind of prove their case. But I think the
consumer is going to be central to how the government
plays this.
Speaker 3 (17:08):
These changes proposed in Australia do seem fairly moderate. I
think it's worth mentioning, you know, we're not trying to
completely reinvent the wheel. Some other more significant changes in
overseas markets that you've touched on. So what's the response
been like to the announcement here in Australia from a
regulatory standpoint? To start with, have we heard from the
A Triple C.
Speaker 1 (17:28):
Well, the A Triple C has welcomed the announcement. They
described excessive card surcharging as a key concern for consumers
and small businesses. They acknowledge that while businesses aren't banned
from charging a surcharge for card payments, consumer and competition
legislation means that the charge must not be more than
what it costs a business to use that payment. They said,
(17:49):
if a business charges a card payment surcharge, it must
be able to prove the costs. It's based on and
I think that's probably a good starting point for all
of these investigations and deeper dives to go. Is our
business is making a margin from these payments.
Speaker 3 (18:03):
Yeah, and of course Australian consumer law dictates that, you know,
businesses can't be misleading customers on their pricing tactics. This
is a government announcement. It's all kind of hypothetical at
the moment while we await that review, have we heard
anything from the opposition.
Speaker 1 (18:18):
The Opposition came out really strongly yesterday against the announcement.
We've got a statement from Susan Lee, she's the Deputy
Leader of the Opposition, and Angus Taylor, the Shadow Treasurer.
They called the announcement quote another desperate attempt by the
government to address a cost of living crisis that they'd
say it has caused. And their core criticism of the
announcement is that this is only a proposed change from
(18:40):
twenty twenty six and that it didn't provide short term
relief to Australians who are struggling financially.
Speaker 3 (18:46):
So it's not that the Coalition are necessarily saying they
are against reform here. It's more that they think that
this action doesn't go far enough quick enough.
Speaker 1 (18:53):
Well, in my surprise, you remembered to hear that politicians
are politicking. But I think the real discussion that the
moment for the opposition is what's the government doing short
term to help Australians in this cost of living and
housing crisis. We've got an election, as I said, sometime
before May, economics and cost of living is going to
be I dare say, probably the key topic for a
(19:15):
lot of voters.
Speaker 2 (19:16):
So what happens from here then? In the meantime, so.
Speaker 1 (19:19):
The Reserve Bank is set to release a consultation paper soon,
and that's not the final report from the Reserve Bank.
It's kind of a status update on how they're going
might foreshadow how they're thinking about implementing changes, what potential
impacts on consumers and businesses could look like. From there though,
we'll have to wait for that final report. Then we'll
get proposed government legislation, then it will be discussed in
(19:42):
Parliament and then we might see some change.
Speaker 2 (19:44):
So don't hold your breath.
Speaker 1 (19:46):
Don't hold your breath and keep tapping away.
Speaker 2 (19:48):
Brilliant.
Speaker 3 (19:49):
Thank you so much for breaking all of that down
for us, Sam, really really helpful. And as we mentioned,
this is obviously one of those stories that impacts everyone.
Speaker 2 (19:57):
We will keep you across.
Speaker 3 (19:58):
It as anything changes. Thank you so much for listening
to today's episode of The Daily os. If you learned something,
please send it on to a friend. Don't forget to
subscribe or follow us wherever you listen to the podcast
or if you're watching over on our YouTube. We will
be back with another one tomorrow, but until then, have
a great day.
Speaker 1 (20:19):
My name is Lily Maddon and I'm a proud Arunda
Bungelung Cargoton woman from Gadighl Country. The Daily oz acknowledges
that this podcast is recorded on the lands of the
Gadighl people and pays respect to all Aboriginal and Torres
Strait Island and nations. We pay our respects to the
first peoples of these countries, both past and present.
Already and this is the daily this is the daily ours.
Speaker 2 (00:05):
Oh now it makes sense.
Speaker 1 (00:14):
Good morning and welcome to the Daily OS. It's Wednesday,
the sixteenth of October. I'm sam, I'm emma. Three of
Australia's major economic forces, the RBA, the arible C and
the federal government are coming together to crack down on
card surcharges. This week, the Albaneze government said it was
sending a message to payment providers like Visa, MasterCard and
(00:36):
American Express that the days of unfair or excessive surcharges
on credit and debit card payments by consumers by US
were numbered. On today's podcast, we're going to explain how
these charges currently work, why it's a problem, and what
the government is suggesting that we do about it. But first,
m what is making headlines.
Speaker 3 (00:59):
The Federal government has updated its travel advice for Israel
and the occupied Palestinian territories amid concerns the security situation
there could deteriorate rapidly. Foreign Affairs Minister Penny Wong has
urged anyone in the region to leave now if it
is safe to do so, and mid concerns commercial flights
could be suspended. The official advice, per the Department of
(01:20):
Foreign Affairs Smart Traveler website, is do not travel to
the region due to the quote volatile security situation, armed conflict,
civil unrest and terrorism. The latest advice warned there was
an ongoing threat of missile and rocket attacks in Israel
and stressed quote terrorist attacks can occur anywhere at any time.
(01:41):
It follows days of escalations between the Israeli military and
Hesbala forces in Lebanon.
Speaker 1 (01:48):
Melbourne's crownd Casino has been fined two million dollars for
allowing hundreds of Victorians who'd signed up to a self
exclusion gambling register to place bets at the casino. National
gambling harm prevention measures mean it's illegal for casinos to
allow anyone who is self excluded to enter gambling venues.
The Victorian Gambling Watchdog alleges Crown allowed almost two hundred
(02:10):
and fifty people on an exclusion register to place bets
at their venue between October of twenty twenty three and
May this year. The state regulator said Crown Melbourne's actions
were also in breach of their obligation quote to protect
people at risk of gambling harm.
Speaker 3 (02:28):
US rapper Sean Diddy Combs is facing a new wave
of lawsuits that accuse him of further sexual misconduct. At
least six new lawsuits were filed this week in the
Federal court in New York. The legal action has been
launched by four anonymous men and two anonymous women who
have detailed alleged incidents dating back as far as the nineties.
(02:48):
In a statement to US news outlet CNN, Comb's lawyer
said the US rapper and producer has quote never sexually
assaulted anyone. Monday's legal action joins a growing list of
lawsuits again it's the rapper, accusing him of a range
of sexual misconduct and other illegal activity, which he has denied.
Combs currently remains in custody after his arrest in New
(03:09):
York last month on sex trafficking charges, to which he
has pleaded not guilty.
Speaker 1 (03:17):
And Today's Good News, an environmental group has gathered in
New South Wales to plant its one millionth tree. Since
twenty twenty, members of the Foundation for National Parks and
Wildlife have come together in Sydney's Northwest to continue what
it calls its Landscape Resilience Program. It's a national project
focused on maintaining the health of natural areas threatened by
(03:38):
bushfires and floods. Since the twenty nineteen twenty twenty bushfires,
the group has saved more than six hundred thousand hectares,
two hundred and ninety six plant species, and twenty five
threatened wildlife species. The group has lofty aims. They plan
to plant eight million trees by twenty thirty.
Speaker 3 (03:58):
Okay, Sam, today talking about something that well and truly
impacts each and every one of us. Card surcharges.
Speaker 1 (04:06):
I go as far as saying it impacts us all
every day.
Speaker 2 (04:09):
Yeah, truly. You know what I'm talking about.
Speaker 3 (04:12):
If you've ever been at the checkout, you take your
card out, you're about to pay for something, and all
of a sudden, the price jumps up.
Speaker 1 (04:20):
Just because just a couple of cents.
Speaker 3 (04:22):
Yeah, well, a couple of cents depending where you are,
maybe astronomically for reasons that you can't explain. So before
we dive into what this all means, where it all
comes from, let's start with what a surcharge actually is.
Why do these little extra payments on top of our
transactions exist.
Speaker 1 (04:41):
Well, basically, it's an amount or a percentage that a
business adds to the price of a product or a service.
So you're buying your coffee, it's four dollars. You get
to the checkout, it's four dollars and seven cents. And
that cost covers for the business, either partially or sometimes
the entire cost the fee that the business has to
pay to their payment facilitator. And when we say payment facilitator,
(05:03):
we're talking about the master cards, the visas, the American Expresses,
you know, the people who provide them with the payment
gateways to collect payment from us and then funnel it
back into a bank account.
Speaker 3 (05:13):
Got it. So we've got us the consumer, the bank,
the business, and the provider exactly.
Speaker 1 (05:20):
And for a business to use Visa, let's say, to
collect payments, Visa has to make money somehow, and so
they make money on every transaction. Now, big businesses will
cover that transaction because they kind of don't want to
go through the routine that the checkout of you realizing
there's a bit extra, so you go to let's say
(05:40):
a department store or a big pharmacy chain. They'll actually
just absorb that themselves. It's more the small businesses, say
hospitality or small retail, that will add that on top. Now,
the surcharge does vary based on if you've inserted your card,
if you've tapped your card, it's generally more more expensive
to tap your card, and who the payment facilitator is. Now,
(06:04):
I'm sure you might recognize from kind of shop windows
that American Express is always a bit more expensive for
businesses to accept. They often pass that on to a consumer,
and consumers like using American Express because there's rewards programs
and extra incentives. Now, according to a recent article from
the RBA, you can expect to be charged an extra
point two percent on the average FPOs transaction, but an
(06:27):
AMEX fee will normally be about an average of one
point four percent, So it can be quite a range.
Speaker 3 (06:32):
And one thing that I've noticed more and more, especially
with online purchasing, you might get to the checkout and
you'll see, you know, a whole range of payment options,
whether that's PayPal, a buy now, pay later, credit card,
whatever it is. And I've appreciated and been surprised by
the clarity of the specific surcharge amounts. You can really
see that a couple of different options that might all
(06:56):
kind of seem like they're coming from the same place
or going to the same place can be charged between
zero points something to two percent on those different options,
and I think consumers a starting to get more savvy
on okay, which payment option is going to screw me
over the least.
Speaker 1 (07:11):
Here definitely, And I think for the RBA and the
ahrip'll see, they are really closely regulating this space. So
I think those examples online that you're talking about, that's
probably not by the choice of the retailer. It's now
a really important area of compliance. But before we go on,
I just want to make one quick distinction, because you
just mentioned it. It's really important to remember the difference
(07:32):
between a credit card and a debit card, and credit
card fees and debit card fees. So a debit card
is a card that gives you access straight to your bank,
and the big thing we're talking about today are the
fees attached to that credit card fees when you're spending
money that technically isn't yours and then you pay it
back monthly or at an interval, those fees are kind
(07:53):
of out of scope for this discussion.
Speaker 3 (07:55):
Yeah, and we're talking as well about transaction fees, so
the cost of buying something in the moment using an
electronic payment method for that, rather than a credit card
fee that might be associated with just owning the credit
card exactly.
Speaker 1 (08:09):
And I think if you really boil it down, and
if you're feeling like you're getting a bit lost in
all of this financial talk, the big question being asked
by government is should you be charged a fee to
access money that's already yours.
Speaker 3 (08:22):
So there is some regulation in this space that you've
touched on a little bit. It's not just the wild West, right, Yeah.
Speaker 1 (08:30):
So the RBA sets the rules un surcharging. The HPLEC
enforces those rules. Merchants, as you see online and in
real life, they are allowed to surcharge, but it's only
up to what's called the cost of acceptance for that
particular type of card. This kind of benchmark set for
a Visa versus an AMEX versus a master card. It's
(08:51):
a really complex system. Some different cards have different costs.
Sometimes those differences are communicated to consumers in different ways.
Sometimes they are a flat sometimes there are a percentage.
You know, I'll often see a cafe do a flat fee,
and let's say that your flat fee is fifty cents
for a transaction. They might say a minimum of ten
dollars for an FPOs machine charge. You can go under that,
(09:13):
but you have to pay fifty cents. If you're paying
fifty cents on a four dollar coffee, then you're paying
an extra twelve and a half percent on your coffee.
So there's a lot of variability here, and I think
that's kind of what the government wants to talk about.
Speaker 3 (09:26):
Okay, so it's not illegal for businesses to impose these
card surcharges, But basically what you're saying is excessive payment
surch charges are not allowed. The surcharge has to kind
of be justifiable within reason that it's got to sort
of reasonably cover the business's cost to run that transaction exactly.
Speaker 1 (09:47):
But as we're using cash less and less, I mean,
the latest stats is that about thirteen percent of retail
transactions are done by cash. The rest is all electronic payments.
I think what's reason and what's not probably needs a
little bit more exploring from the consumer perspective.
Speaker 3 (10:05):
Because it doesn't really feel optional for the consumer.
Speaker 2 (10:09):
If, like you say, you know, we're moving towards a
cashless society.
Speaker 3 (10:12):
Most young people are not walking around with a spare
twenty bucks in their pocket to pay for that coffee
to avoid that twelve point five percent so charge example.
But despite it being a couple of cents here and there,
I'm sure that that adds up for the individual, for
the economy. Do we know how much it adds up?
Speaker 1 (10:31):
Well, the RBA estimates it's between one billion dollars in
search charges, and some estimates are putting it up to
as high as four billion dollars. It's costing businesses, So
the businesses that are absorbing those costs themselves. It's costing
businesses two billion dollars a year to make those payments
to payment company. So we're talking a lot of money here.
(10:51):
I know it doesn't feel like a lot because it's
in such tiny increments, but it really does add up.
Speaker 3 (10:56):
It certainly does add up. And it's interesting you mentioned
they're the cost to businesses. I think us consumers can
sometimes have a bit of a perspective that it's the
businesses trying to roop us off, rather than there being
a whole chain of transactional stakeholders I guess from your
visas to the businesses. So either way you cut it,
the consumer or the business ends up paying for these
(11:19):
fees to the payment providers just to make the purchases
in their everyday life, and even though it is five
cents here or there, it does add up. So you
said this week that the government has made big announcements
about how to regulate this space.
Speaker 2 (11:33):
What have they suggested.
Speaker 1 (11:34):
Well, the governments come out strong this week about debit
card transaction searcharges. They did allude to a closer look
at credit card transaction search charges, but the big focus
here is on debit cards and what they're proposing is
to ban debit card search charges entirely from the first
of January twenty twenty six. They're going to wait for
a review currently underway by the Reserve Bank before that
(11:57):
legislation would be tabled. The government does seem pretty keen
to take steps before the review is delivered. So they've
additionally committed two point one million dollars to the a
Triple C to boost investigations into illegal and unfair search charging,
and they said they want to increase consumer education as well.
Speaker 3 (12:16):
Yeah, that does seem like a big gap aside from
the regulation space, you know, actually telling consumers what their
rights are, what is reasonable, what is excessive when it
comes to those fees. The big move though, is this
potential ban on debit card seurch charges from twenty twenty six.
But considering that these fees impact all of us every
(12:36):
day into the billions of dollars every year, why does
it need to.
Speaker 2 (12:40):
Take that long.
Speaker 1 (12:41):
It's an interesting one, isn't it, Because I mean we've
got the federal election sometimes before May, and this kind
of reform is traditionally pretty popular in Australia. I mean,
we're going to make everything cheaper for you across the board.
But the government knows they need to be careful with
this and that's why they're waiting for the Reserve banks,
because it could have adverse effects on businesses and they
(13:04):
need to strike a balance between protecting consumers but also
making sure that the businesses have access to payment services.
I mean, the last thing that you would want if
you owned a small business is the payment provider saying well,
because we don't want to operate in this environment anymore,
we're taking away our visa service or our MasterCard service.
The government also wants to make sure that it's not
(13:25):
businesses who are copying the fees and penalties themselves. And
whilst there might be a law that means that consumers
can't be charged unless they do it in a proper
kind of financial modeling kind of way. They wouldn't want
the businesses to be taking that cost on.
Speaker 3 (13:41):
Yeah, and part of this ties into a really interesting
conversation that's happening in the US at the moment, where
the government is suing Visa, accusing it of this debit
card monopoly. Because when we consider those costs, you know,
whether it's the consumer absorbing it or the business absorbing it,
it's all ultimately two or three key players who set
(14:02):
the agenda for these transactions. And this case in the
US from the Department of Justice has essentially said that
Visa has kind of taken advantage of its market dominance
to control quote.
Speaker 2 (14:14):
The price of nearly everything.
Speaker 3 (14:17):
So that lawsuit is going to be a really interesting
one to watch play out.
Speaker 1 (14:22):
Well. The US is a really interesting space in this
regard because they don't have federal law about credit card
or debit card search charges. There's these lawsuits that are
popping up now more commonly, but it's state based, and
so what you find in the US is that you
might be buying something from an online company that's based
in another state and you have to kind of understand
what their surcharges are. But this is being discussed all
(14:43):
over the world. I mean in the UK, they banned
all surcharges on credit and debit card payments back in
twenty eighteen, and that was part of this EU wide
initiative to end excessive card charges. The UK's ban actually
went further than the current proposal by the Australian government
because it covered both debit and credit cards.
Speaker 3 (15:03):
Okay, interesting that I remember being kind of controversial at
the time in the UK. When we think about the
business community back here in Australia, how have they reacted
to this.
Speaker 1 (15:15):
Well, it's a mixed bag. So small businesses have expressed
those concerns. I mentioned earlier that a potential surcharge ban
might mean that they would have to absorb the costs themselves.
There are other businesses that are saying this is a
really positive move and you know, it's about time the
government stands up to, as you said before, these two
or three major players in the payment space. It's been
(15:38):
really interesting looking at some of the corresponding developments from
the really big retailers. So I read a report in
the Australian Financial Review this week about chemist Warehouse and
they're introducing this new system where they're putting up stickers
of QR codes at the counter. You can scan it
and kind of bank transfer chemist Warehouse really and that's
their attempt to get around paying the credit card surcharges
(16:02):
and debit card surcharges themselves. They say they're spending about
fifteen million dollars a year on payment search charges.
Speaker 3 (16:08):
That is really interesting the example of a chemist Warehouse
kind of figuring out a workaround for customers.
Speaker 2 (16:15):
I also just heard about this other app.
Speaker 3 (16:17):
That's called Ping that consumers can use at the checkout
to kind of work around these charges. And I do
feel like it's a space that's waiting for a little
bit more.
Speaker 1 (16:27):
Disruption, definitely. And the payments giants know that themselves, and
I mean, in response to all of this, they've come
out globally and said things along the lines of we're
providing a really effective service to businesses big and small.
We're ensuring that you can have clear reporting on how
much money you're making. We are ensuring that it gets
to your bank accounts fast, and just like any other
(16:50):
business in the world, we need to make money by
doing that. So there are many sides to this discussion,
and I'm sure that they're not going to want to
lose a major income stream as well, so they'll continue
to kind of prove their case. But I think the
consumer is going to be central to how the government
plays this.
Speaker 3 (17:08):
These changes proposed in Australia do seem fairly moderate. I
think it's worth mentioning, you know, we're not trying to
completely reinvent the wheel. Some other more significant changes in
overseas markets that you've touched on. So what's the response
been like to the announcement here in Australia from a
regulatory standpoint? To start with, have we heard from the
A Triple C.
Speaker 1 (17:28):
Well, the A Triple C has welcomed the announcement. They
described excessive card surcharging as a key concern for consumers
and small businesses. They acknowledge that while businesses aren't banned
from charging a surcharge for card payments, consumer and competition
legislation means that the charge must not be more than
what it costs a business to use that payment. They said,
(17:49):
if a business charges a card payment surcharge, it must
be able to prove the costs. It's based on and
I think that's probably a good starting point for all
of these investigations and deeper dives to go. Is our
business is making a margin from these payments.
Speaker 3 (18:03):
Yeah, and of course Australian consumer law dictates that, you know,
businesses can't be misleading customers on their pricing tactics. This
is a government announcement. It's all kind of hypothetical at
the moment while we await that review, have we heard
anything from the opposition.
Speaker 1 (18:18):
The Opposition came out really strongly yesterday against the announcement.
We've got a statement from Susan Lee, she's the Deputy
Leader of the Opposition, and Angus Taylor, the Shadow Treasurer.
They called the announcement quote another desperate attempt by the
government to address a cost of living crisis that they'd
say it has caused. And their core criticism of the
announcement is that this is only a proposed change from
(18:40):
twenty twenty six and that it didn't provide short term
relief to Australians who are struggling financially.
Speaker 3 (18:46):
So it's not that the Coalition are necessarily saying they
are against reform here. It's more that they think that
this action doesn't go far enough quick enough.
Speaker 1 (18:53):
Well, in my surprise, you remembered to hear that politicians
are politicking. But I think the real discussion that the
moment for the opposition is what's the government doing short
term to help Australians in this cost of living and
housing crisis. We've got an election, as I said, sometime
before May, economics and cost of living is going to
be I dare say, probably the key topic for a
(19:15):
lot of voters.
Speaker 2 (19:16):
So what happens from here then? In the meantime, so.
Speaker 1 (19:19):
The Reserve Bank is set to release a consultation paper soon,
and that's not the final report from the Reserve Bank.
It's kind of a status update on how they're going
might foreshadow how they're thinking about implementing changes, what potential
impacts on consumers and businesses could look like. From there though,
we'll have to wait for that final report. Then we'll
get proposed government legislation, then it will be discussed in
(19:42):
Parliament and then we might see some change.
Speaker 2 (19:44):
So don't hold your breath.
Speaker 1 (19:46):
Don't hold your breath and keep tapping away.
Speaker 2 (19:48):
Brilliant.
Speaker 3 (19:49):
Thank you so much for breaking all of that down
for us, Sam, really really helpful. And as we mentioned,
this is obviously one of those stories that impacts everyone.
Speaker 2 (19:57):
We will keep you across.
Speaker 3 (19:58):
It as anything changes. Thank you so much for listening
to today's episode of The Daily os. If you learned something,
please send it on to a friend. Don't forget to
subscribe or follow us wherever you listen to the podcast
or if you're watching over on our YouTube. We will
be back with another one tomorrow, but until then, have
a great day.
Speaker 1 (20:19):
My name is Lily Maddon and I'm a proud Arunda
Bungelung Cargoton woman from Gadighl Country. The Daily oz acknowledges
that this podcast is recorded on the lands of the
Gadighl people and pays respect to all Aboriginal and Torres
Strait Island and nations. We pay our respects to the
first peoples of these countries, both past and present.
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