Australia's Card Payment System Just Reset. Here's What It Actually Means.
Three things are changing
On 31 March 2026, the Reserve Bank of Australia published its Conclusions Paper on merchant card payment costs. The most significant reform to Australian retail payments in over two decades.
The headlines focused on the surcharge ban. That is real and immediate. But the surcharge ban is the visible surface of a much deeper restructuring that touches every merchant, bank, fintech, and consumer in the country.
- Change 01 — Surcharges banned: From 1 October 2026, merchants cannot add surcharges to Visa, Mastercard, or eftpos transactions. American Express and BNPL are excluded pending a separate RBA review from mid-2026.
- Change 02 — Interchange fees cut: Consumer credit interchange drops from 0.80% to 0.30%. Debit and prepaid caps reduce from 10c to 8c. Foreign-issued cards get a new 1.0% cap from 1 April 2027.
- Change 03 — Fees made transparent: Card networks must publish scheme fees quarterly. Large acquirers must disclose MSF data by card type and merchant size. Payment pricing opacity ends.
Before and after: what a transaction actually costs
Every card payment passes through three cost layers: interchange (to the issuing bank), scheme fees (to Visa/Mastercard/eftpos), and the acquirer margin (to the payment processor). Here is how those layers change for a $100 transaction at an SME merchant:
| Component | Credit — Before | Credit — After | Debit — Before | Debit — After |
|---|---|---|---|---|
| Interchange fee | $0.80 (0.80%) | $0.30 (0.30%) | $0.10 (10c) | $0.08 (8c) |
| Scheme fee | ~$0.18 | ~$0.18 * | ~$0.05 | ~$0.05 |
| Acquirer margin | ~$0.25 | ~$0.25 | ~$0.15 | ~$0.15 |
| Total MSF | $1.23 | $0.73 | $0.30 | $0.28 |
| Surcharge (consumer) | ~$1.23 | $0.00 — banned | ~$0.30–0.50 | $0.00 — banned |
| Net cost absorbed by merchant | ~$0.00 | $0.73 | ~$0.00 | $0.28 |
* Scheme fees are not capped by October's reforms — the most important unresolved risk, discussed below.
Key Insight
Under the old regime, a surcharging merchant was effectively a financial pass-through — card costs hit near zero. Post-October 2026, the merchant is the terminal cost-bearer of every transaction. At $1,000 per transaction, the swing on credit alone is $5.00. That compounds significantly at scale.
The large merchant reality: a tale of two merchants
The $910 million savings figure deserves qualification. The RBA's March 2020 Bulletin confirmed that larger merchants benefit from strategic interchange rates negotiated directly with card schemes, often well below the regulatory caps. The RBA's Retail Payments Statistics also confirms that both Coles and Woolworths self-acquire, meaning they own their own payment switches and process transactions directly, bypassing standard acquirer margins entirely.
This produces an important structural outcome: the reforms may effectively narrow the playing field between large and small merchants on card acceptance costs for the first time.
- Large retailer (e.g. Coles, Woolworths): Self-acquiring. Strategic rates near or below the new cap already. The cut from 0.80% to 0.30% provides limited additional benefit. Card costs have long been absorbed into shelf pricing as a standard operating expense.
- SME merchant (café, local retailer, tradie): Standard acquiring. Rates near the cap. Greatest beneficiary. Previously paid close to 0.80% credit interchange due to limited bargaining power.
Who this really impacts and who it does not
All claims below are sourced directly from RBA publications, ACCC records, or formal industry submissions.
| Stakeholder | Outcome | What actually happens |
|---|---|---|
| Consumers | Mixed | No more surprise surcharges. However, consumers will indirectly pay fees as merchants build absorbed costs into goods and services. Consumers will also be affected by loyalty and rewards programs being made more limited. Banks have signalled rewards cuts, higher annual fees, and shorter interest-free periods. CBA already moved from 55 to 44 days. Sources: RBA Conclusions Paper March 2026; ABA submission September 2025 |
| Cash & basic debit users | Mixed | Surcharges disappear but the RBA acknowledges the waterbed effect — merchants embed card costs into base prices. Cash payers effectively subsidise credit acceptance through higher shelf prices. Source: RBA Conclusions Paper March 2026 |
| SME merchants | Clear winner | Biggest direct beneficiary. Previously paid closest to the caps. Freed from ACCC compliance obligations that carried infringement notice penalties of $2,160 to $108,000 per contravention for corporations. Sources: RBA Conclusions Paper March 2026; ACCC fines register |
| Large merchants | Limited gain | Already below caps via strategic rates (RBA 2020 Bulletin). Limited additional benefit. Largest gain arrives April 2027 via the new 1.0% foreign card cap. Foreign cards were 3% of volume but 20% of interchange fees. Sources: RBA Bulletin March 2020; RBA Conclusions Paper March 2026 |
| Credit card issuers | Significantly impacted | Real pain. Consumer credit interchange was a genuine revenue line. The 62.5% cut strips approximately $660M annually, forcing fundamental repricing of rewards, bundled benefits, and card profitability. Source: RBA Conclusions Paper March 2026 |
| Debit & prepaid issuers | Minimal impact | Debit interchange was not a primary revenue line. The RBA's Consultation Paper states reducing debit caps would not result in substantial revenue reduction as actual rates were already below the caps. Source: RBA Consultation Paper July 2025 |
| Acquirers & PSPs | Disrupted | Material industry-wide implementation costs. Fee-free models built on mandatory consumer surcharges are illegal from 1 October 2026. Mandatory quarterly MSF disclosure exposes margins for the first time. Source: RBA Conclusions Paper March 2026 |
| BNPL providers | Temporarily advantaged | Excluded from October's reforms. Continue charging merchants 3–6% (RBA confirmed) while card costs fall. Mid-2026 RBA consultation will determine how long this lasts. Sources: RBA Bulletin March 2021; RBA Conclusions Paper March 2026 |
| Card schemes | Volume up, scrutiny up | Higher card volumes from surcharge ban. Scheme fees of $2B per year, up 11% annually per RBA, now under mandatory quarterly disclosure. RBA has flagged the risk of schemes raising fees to offset interchange cuts. Source: RBA submission to Parliamentary Inquiry, January 2026 |
The credit card loyalty sector: a structural unravelling
Australian credit card rewards programs are funded almost entirely by interchange revenue. Cut credit interchange 62.5% and the economics compress significantly across the entire loyalty chain.
What changes for cardholders
- Lower earn rates on existing cards — fewer points per dollar spent
- Sign-on bonuses will shrink as acquisition costs rise relative to reduced returns
- Annual fees on premium and rewards cards will increase
- Bundled insurance (travel, purchase protection, extended warranty) faces review across every major issuer
- Airport lounge inclusions may be cut or converted to paid add-ons
- Interest-free periods will shorten further. CBA already moved from 55 to 44 days.
The Amex exception — an important distinction
American Express is excluded from October's interchange reforms. This creates a meaningful split in the co-branded card market:
- Amex co-branded cards NOT directly affected: Qantas American Express, David Jones Amex. Amex sets its own merchant fees independently. These programs can maintain their economics and rewards value.
- Visa and Mastercard co-branded cards DIRECTLY impacted: Woolworths Everyday Mastercard, Qantas Premier Visa. These programs were negotiated on 0.80% interchange economics. Those assumptions are now invalid. Renegotiations, product restructures, or closures should be expected through 2027.
The Apple Pay squeeze: a validated hypothesis
Multiple submissions to the RBA's review — including the Australian Banking Association citing the Frontier Economics report — place Apple Pay's per-transaction fee to issuers at approximately 15 basis points on credit transactions. This is paid by the issuing bank. Apple restricts NFC access on iOS devices to Apple Pay exclusively.
- At 0.80% interchange: Apple's fee consumed roughly 19% of that revenue. Bank retained approximately 65bps after Apple's cut.
- At 0.30% interchange: Apple's fee consumes approximately 50% of that revenue. Bank retains approximately 15bps before scheme fees and operational costs.
The Offshore Leakage Problem
The ABA's formal submission raised this directly: at the new interchange levels, a material share of every Apple Pay credit transaction flows to a US-headquartered technology company rather than the Australian banking system. The arithmetic is not disputed — it was cited by the ABA citing Frontier Economics and acknowledged in the RBA's summary of submissions.
Will merchants actually switch to cheaper payment methods?
Think of EV adoption and the price of petrol. When fuel is expensive, people urgently seek alternatives. When prices drop, urgency fades. The same dynamic applies to payment method switching.
The RBA just made card acceptance materially cheaper for SMEs. That same reduction dampens the financial pressure that would otherwise force merchants to overhaul their payment infrastructure. Most merchants want reliability and simplicity — the reform gives them lower costs on familiar rails.
Where This Reform Lands On Innovation
Removing the consumer price signal limits demand-side behavioural innovation — consumers can no longer choose cheaper rails to save money at checkout. But it simultaneously creates conditions for supply-side infrastructure innovation. The companies that build routing intelligence, multi-rail orchestration, and real-time cost optimisation tools for merchants will capture outsized value. There is real opportunity in the complexity — and — the companies that move fastest will define the next chapter of Australian payments infrastructure.
The genuine push for PayTo will come from enterprise merchants on high-value transactions, fintech infrastructure providers without legacy interchange to protect, and government mandates. Payday superannuation via PayTo is required by July 2026. What builds above that floor depends on who solves the merchant routing problem first.
The risk the reform leaves unresolved
Watch Scheme Fees in 2027
Visa and Mastercard collected $2.0 billion in scheme fees from Australian merchants in 2024/25 — confirmed by the RBA — up 11% from the prior year. October's reforms cap interchange. They do not cap scheme fees. After the EU capped interchange in 2015, scheme fees rose materially. The RBA has mandated quarterly disclosure and Scheme Fee Roadmaps by April 2027. Transparency is a meaningful first step. It is not a cap.
Where Kobble sits in all of this
Kobble operates as a Mastercard Principal Issuer with RBA BSB ownership — embedded finance infrastructure connecting Mastercard card issuance, PayTo, PayID, eftpos, and BPAY on a single modular platform.
In a regulatory environment reshuffling the economics of every payment rail simultaneously, the ability to access all of them from a single compliant infrastructure layer is what fintechs, financial institutions, and enterprise businesses are building toward. We are not neutral observers of these reforms. This is the environment we built for. Visit kobble.net to learn more.
Sources: RBA Conclusions Paper (March 2026) · Treasury Statement — Ending Card Surcharges to Help with the Cost of Living · RBA Bulletin — The Cost of Card Payments for Merchants (March 2020) · RBA Consultation Paper (July 2025) · RBA Bulletin — Developments in the Buy Now, Pay Later Market (March 2021) · RBA submission to Parliamentary Inquiry into Schemes, Digital Wallets and Innovation (January 2026) · ABA submission citing Frontier Economics report (September 2025) · RBA Retail Payments Statistics · ACCC fines and penalties register · Zepto PayTo Index 2025