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Commonwealth Bank demands major change to payments in Australia

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CBA to inform Reserve Bank it will ban surcharges on credit and debit cards on Friday

Commonwealth Bank has urged the Reserve Bank to ban all surcharges for debit and credit card payments.

Under the RBA’s current surcharge laws, merchants can only apply surcharges that are equal to or less than the actual cost they incur from their payment facilitator for accepting card payments.

However, the Commonwealth Bank is calling for them to be scrapped entirely in a report to be published today.

It comes as the RBA reviews the future of the payments system to ensure it is fair and fit for purpose.

The review comes as the Albanese government works to address cost of living pressures, focusing on payment surcharges ahead of the next election.

Treasurer Jim Chalmers has indicated the government could suspend surcharges on all debit purchases over the next year, depending on the outcome of the RBA review.

Sources inside the bank told AFR that a complete ban on surcharges is the easiest way to address inequality in surcharges, a measure that has already been adopted in Europe and the UK.

Canstar research last year suggested the average Australian pays $140 a year in surcharges, with a total cost of $4 billion for all Australians.

CBA to inform Reserve Bank it will ban surcharges on credit and debit cards on Friday

While inserting a card into an Eftpos machine typically costs a merchant less than 0.5 percent per transaction, using contactless payments with Visa and Mastercard can amount to between 0.5 and 1 percent each time. for debit cards and between 1 percent and 1.5 percent for credit cards.

On a $100 purchase, the average added cost is 28c for EFTPOS, 52c to use the Mastercard network, 47c to use Visa and a whopping $1.88 for digital payments provider Square.

While some larger companies absorb these costs in the price of their goods and services, many smaller companies pass them on in the form of higher prices.

Supermarkets Coles and Woolworths absorb fees into their prices, while discount retailer Aldi charges a small standard fee on all card transactions.

A small business owner described the financial trouble he’s in with digital payments in a Facebook post.

‘I run a small business. We used Square to acquire Eftpos last financial year; It cost us $40,000 in fees and we simply cannot absorb the costs. “Cash is king,” they wrote.

Finder’s head of consumer research Graham Cooke said the long-term trend is to move away from using cash, even if it is cheaper.

“It seems Australians are choosing the convenience of plastic even though they have to pay these fees,” he said.

A Finder survey found that 74 per cent of Australians think banks and card issuers should pay the cost of card payment processing and just 6 per cent think the customer should fork out for it.

Jim ChalmersCommonwealth Bank

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