Visa in dispute with RBA over card fee cuts
The Reserve Bank of Australia wants to sharply reduce the interchange fees that merchants pay when customers use credit cards, aiming to cut payment costs for small businesses but Visa and the banks say this shift could make card lending less viable and nudge borrowers into more expensive forms of credit. The central bank is working to finalise its position by around April and the debate has turned into an intense behind the scenes battle over who ultimately bears the cost of the changes - banks, merchants or cardholders.
Right now, card issuers in Australia can charge merchants up to 0.80% of a transaction or about 8 cents on every $10 spent and the RBA wants to slash that cap to 0.30% as part of its broader push to support the federal government’s ban on excessive payment surcharges. That cut would wipe out an estimated $900 million a year in interchange revenue for domestic banks and card networks say the pressure on the economics of credit cards is already high after years of regulatory tweaks and rising compliance costs. The RBA, however, is focused on ensuring that small and medium businesses are not stuck with high fees they can no longer pass on once surcharge limits fully bite.
Banks and card schemes are telling policymakers that if interchange revenue falls this far they will need to recoup money elsewhere by raising annual card fees, lifting interest rates on balances, trimming rewards like frequent flyer points or tightening who can qualify for a credit card. Some lenders warn that business charge and commercial cards, which many companies use for day to day working capital, could become harder to get or less attractive even as the RBA leaves separate scheme fees charged by networks like Visa and Mastercard outside the scope of this proposed cut. Fintechs looking to launch new cards also appear to be stepping back, with several smaller players reportedly shelving Australian card projects because the lower fee cap would leave too little margin to cover risk and technology costs.
The broader impact looks likely to extend beyond just banks and retailers, touching how millions of Australians access credit and how competitive the payments market remains. If mainstream cards become more expensive or selective some customers could be pushed toward higher cost borrowing and unregulated players such as American Express may gain share because they sit outside the specific interchange rules the RBA is tightening. A parliamentary economics committee plans to grill the major card schemes in hearings expected in late February before the central bank locks in its final framework so the eventual outcome still seems open but the direction points to a trade off between cheaper payments for merchants and potentially leaner benefits and tighter access to credit for cardholders.
