Card surcharge bans in Australia: The way Indonesia once led

WHILE most of the Australian public is still clueless and perplexed about approximately $4 billion they spent last year on the card payment surcharge, the abolition of this fee is deemed necessary and eventually would not disrupt the consumption rate in the community. As proof, this policy has even been advancing in some of our neighbouring countries for more than 16 years now.

For example, since 2009, it is considered illegal for sellers or merchants to put a card surcharge for payment in Indonesia. This is regulated by the Central Bank of Indonesia as an extra-governmental institution.

Now we go back to our home soil. Although convenient as it seems, the corresponding process behind cashless or contactless payment is rather complicated than what we can imagine. There are the buyers–or us, the merchants, acquirer banks (or just banks) and the non-bank payment service providers, the Merchant Discount Rate (MDR) or the Merchant Fees.

Here is the flow. Banks and non-bank payment service providers issue the Electronic Data Capture (EDC) terminal, which is the machine where you insert, swipe, or tap your cards and NFC-enabled phones.

In a logical manner, merchants have to pay for using the machine and technology behind electronic payment services, also because banks and non-bank payment service providers agreed to accept those card payments. That is the Merchant Fees.

With different types of cards (debit, credit, prepaid, including international cards) from different banks and payment service providers, different amounts of the Merchant Fees are applied ranging from 0.25 to 3.28 per cent. The complete list of these fees can be found on the RBA’s website and gets updated regularly.

Also, in a logical manner, most merchants in Australia decided to pass on that cost of Merchant Fees to their customers so that it doesn’t undermine their transaction profit.

The Australian Competition and Consumer Commission (ACCC) so far only mandates that card surcharge fees have to be smaller than the merchant fees. However, big corporations and quick service restaurants (QSRs) have been able to absorb those fees partially due to the scale of their business and their bargaining power with the payment services providers.

We understand that the final price is the biggest concern if the RBA and the Australian government finally abolish surcharge fees altogether. We will not find 1 up to 3 per cent of the card surcharge fee printed on our receipts, but we still have to pay that extra amount.

That thing happened earlier in Indonesia, but the Indonesian government and the Central Bank of Indonesia managed to control the price and limit the merchant fees. So while most Indonesian people still use cash in their daily lives, the banning of surcharge fees didn’t quite shake the retail economy.

For me, so far, I always keep cash available in my wallet. Just in case. 😅

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