Source: Australian Treasurer
NADIA MITSOPOULOS:
Well, we have spoken a lot about that fee you are charged when you use your debit card. Put simply, you hate it and it feels particularly unfair when you are forced to use that card by a business which is no longer taking cash. Well, the federal government is finally listening and it looks like it will get rid of these charges. How far will it go? When will this happen, if it does? Let’s get more from Stephen Jones, who is the Assistant Treasurer. Good morning and thank you for joining me.
STEPHEN JONES:
Nadia, good to be back with you.
MITSOPOULOS:
First of all, these fees, how much are they costing Australians every year?
JONES:
Look, industry sources say as much as $4 billion a year is being charged in one fee or another. All of that ends up with the consumer in one way or another. So, that’s a lot of money. We’re particularly concerned about debit card fees. That’s the one where you get charged a surcharge to access your own money to pay for a cup of coffee. Consumers are rightly had enough of it. As you said in your introduction, they feel like it’s harder and harder to get cash, harder and harder to use it, and then you’re getting whacked with a surcharge fee when you’re paying with a tap‑and‑go everywhere from a coffee shop to a restaurant to a hotel, and we’ve had a look at it, the practice has got to stop. Consumers are being ripped off. It’s time to end the rip‑off.
MITSOPOULOS:
Ok, I’ll talk more about ending the rip‑off in a moment. But who pockets it? Is it the bank, the business or the merchant?
JONES:
Really good question. The one we’re pretty certain it’s not is the small business. And if you look at the fees that are being charged small businesses, sometimes they’re being charged twice the fee that a large retailer like a Coles or a Woolworths would be charged to use those electronic payment methods. So, it’s definitely not the small business. They’re passing on a cost which is imposed on them by the bank, by the payment service providers and by the card provider. So, that’s your Visa cards, your Mastercards, your EFTPOS’. Then there’s the system that nobody knows about, which is the payments network, which transmits all the payments traffic around the country from bank to bank and from system to system. And the banks are in there as well. They’re at the front end of all of it. So, there’s at least 3 different players here, very opaque about the way the costs are charged. They all end up at a consumer. They look like a small charge, but they all add up and they punch a big hole in the wallet of the consumer in the takings of a small business.
MITSOPOULOS:
Do you agree that, well, first of all, these charges have been creeping up, but it’s more than the cost of doing that transaction. What consumers are being charged?
JONES:
Well, for the small business, they’re passing on, in most instances, some, but not all of the cost. Some small businesses say that they’ll just lose market share if they’re passing on the entire cost of using those charging mechanisms that they don’t. Many of them do if they’re able to. So, it’s not the cost of the small business. But if you’re asking me, are the banks or the card providers or the payment system providers making a healthy profit out of all of this, the answer is absolutely.
MITSOPOULOS:
Okay, so what’s your plan? What do you plan to do?
JONES:
We want to do this in a smart way. We want to ensure that whatever we do, particularly around banning of debit charge surcharges, debit card surcharges, we don’t just whack the small business. So, you stop the small business charging it, but they’re still copying that fee from the bank and the payment system providers. So, we’ve got to ensure that we get all ends of this sorted out so that we don’t save the consumer a dollar, but that just gets passed on in another way by the small business. So, we’ve got the Reserve Bank having a look at it using its powers over the next couple of months. They’ll hand us a report by the end of the year. We’ll look at the proposals in the first few months of next year. But we’re sending a very clear message to the market, to the operators, the banks, the card providers, the payment system providers, a very clear message to all of them – this has got to stop. And we are willing to impose a ban on it by the beginning of 2026 at the latest if these guys do not get their act together.
MITSOPOULOS:
And so you would then be banning the banks and the merchants from charging this fee because the concern is the small business could still be charged the fee and then can’t pass it on.
JONES:
Yeah, and you’ve got to the heart of it. That’s what we’re adamant we don’t want to do. We don’t want to create an elusive benefit for consumers, but the small business cops it in the neck. So, we’re not going to do that. We’ve got to ensure that we protect the position of the small business and the consumer. And somebody somewhere further up the chain, they’re going to have to review their pricing mechanisms. A lot of really opaque and tricky things have gone on over the last year or so in this area. Things like blended pricing, where they’re charging the same for a credit card transaction as they are for a debit card transaction when they’re completely different. So, a bunch of these things we’re going to get to the bottom of. But the thing that your listeners can be absolutely certain of, we’re going to protect the interests of small business. We’re going to protect the interests of consumers.
MITSOPOULOS:
Stephen Jones, the Assistant Treasurer, is my guest this morning. So, this will only apply if you go down this path, will only apply to debit cards, not credit cards.
JONES:
That’s where the biggest problem is, and they are very different transactions. As your listeners and all know, when you’re using a debit card, you’re accessing your own money to pay for something. It’s the modern form of cash.
MITSOPOULOS:
It’s the tap‑and‑go.
JONES:
It’s the tap‑and‑go, and it’s the modern form of cash, particularly for young people. Increasingly, young people won’t have a credit card, but they will have a debit card, or they might have some other form of buy now, pay later, but most of their transactions will go on a debit card for good reasons. They don’t want to rack up an interest bill. They also don’t want to rack up all the charges that they’re getting through these opaque surcharges. So, that’s why we’re focusing on this. It’s the biggest part of the big problem.
MITSOPOULOS:
Minister, why can’t you do this now? Why do you have to wait till 2026?
JONES:
Because we don’t want to do something that looks popular but actually ends up hitting small business in the neck. We want to ensure that we do this in a way that protects the interests of small business and gets the benefit for consumers. That’s why we’ve got to work through these things, and we’ll probably have to use a couple of different levers. Nothing is stopping the banks and the payment system providers getting ahead of the game by the way.
MITSOPOULOS:
And when we look at retail transactions, only about 12 per cent of those are now made using cash. Is using a card a cheaper way of doing business? I mean, again, we’re being charged for it, but is that cheaper than moving cash around?
JONES:
Certainly cheaper for the banks. It’s certainly cheaper for the big retailers and probably a lot of the smaller ones as well. If you think of it like – there’s always been a cost involved in using cash. It’s just not very transparent. When somebody’s got to go to the bank, get the money out to put the float in the till, somebody’s then got to add all of that up at the end of the day and take the bags of money back to the bank for safekeeping. There’s a cost involved in all of that and it’s just embedded in the price of the goods. The difference between the cost involved in money and the cost involved in electronic transactions is that they are very, very transparent from a consumer point of view because you can see them on your bill. We need to ensure that all of it’s transparent all the way upstream so that all the payment providers, the banks, the card providers are being very clear about what they’re charging and for what, and then we get a better deal for consumers.
MITSOPOULOS:
But a ban, are you certain that a ban is on the cards?
JONES:
Absolutely.
MITSOPOULOS:
You’ve just got to work out how to do it.
JONES:
Best way of doing it. That’s exactly right.
MITSOPOULOS:
When we look at bank profits, the feeling is they could probably absorb this charge. Do you agree?
JONES:
I agree that between the banks, the payment system providers, the card providers, all of these are participants in the scheme. It’s not always obvious to consumers. They just think it’s the bank. But there’s actually 3 or 4 different players in there and there is people in all up the stream who are clipping the ticket. The consumers are paying and it’s got to stop.
MITSOPOULOS:
I’ll leave it there. Appreciate your time. Thank you.
JONES:
Good to be with you.
MIL OSI News –
