The price of transparency

The banning of retail card surcharges has been framed as a win for consumers, but there are concerns cafés and other retailers will need to up their prices to cover it.

In late March, the Reserve Bank of Australia (RBA) handed down a decision to remove all surcharges on debit, credit, and prepaid cards on all major card networks. In short, surcharges will be outlawed by October 2026.

The RBA stated the ban is expected to save consumers about $1.6 billion per year, and businesses $200 million per year, in surcharge fees, however these incremental fees – which commonly sit at around 0.5 to 1.5 per cent of the bill – will not simply be absorbed.

Instead, the onus has been placed on businesses on how they are going to cover the removal of these fees themselves.

For Matt Gellert, it’s another test for his café business. As Owner of Black and White Espresso, which operates three locations in Sydney, along with three more in the works this year, and a café business broker, he’s acutely aware of how another cost pressure could push café prices higher in an already strained market.

“In reality, customers are likely to see higher upfront prices,” he says.

“For example, a flat white might move from $5.20, not to $5.21, but more likely to $5.50, as businesses take the opportunity to round pricing. Given how cash usage has declined, especially coins like 20-cent pieces, pricing has already been moving toward cleaner figures.

“Customers may no longer see surcharges at the point of payment, but they will notice higher listed prices.”

Matt says, at the time of writing, there has been little additional information provided by the RBA to businesses about the removal of surcharging beyond what has been made available to the wider public.

That $1.6 billion figure the RBA has cited has been front and centre of most communications by the governing body, mapping the change as a win for consumers. However, Matt believes people aren’t being given the full picture of the impact.

“When the surcharge changes were first announced my initial reaction, like many people, was removing surcharges sounded great. It seemed like a win for consumers. But when you look more closely, the cost doesn’t disappear; it’s still borne by the business,” says Matt.

“The RBA did a great job marketing the idea that they were saving consumers a significant amount of money, and it’s positive to see a focus on transparency. However, the real cost of that transparency is different from what customers might expect. Even within my own household, I had to explain that these costs don’t go away for businesses, they’ll simply be incorporated into pricing.”

Matt says his own cafés – like most others around Australia – are consistently wrangling with when and how to raise prices, and the removal of card surcharging has added yet another element to this.

“When I first heard the news, I hoped the fees might disappear entirely, but that hasn’t been the case. With changes expected in October, we’re trying to decide the best timing for any price adjustments,” he says.

“Acting too early could mean multiple increases in a short period, especially with end of financial year supplier price rises coming as well. Having too many staggered increases risks frustrating the customer.

“For now, we’re waiting until more information becomes available and supplier pricing stabilises. We’ll likely look at implementing changes around September, incorporating the costs into our overall pricing. It will effectively amount to around a one per cent increase across the venue.”

There’s also the competitive aspect, he notes, watching what others do and deciding whether to act now or later.

“My instinct was to move early, but it makes more sense to take a measured, holistic approach rather than just knee jerk reactions every once in a while.”

While factoring the card surcharge ban into the balance sheet creates another potential headache – especially in a typically tight-margin industry – Matt believes it will, ultimately, be for the greater good.

He’s been a long-time supporter of increasing transparency in pricing, and says the RBA’s move will help achieve this.

“Ideally, I’ve always wanted an all-inclusive pricing model for the industry, one that is clearer, fairer, and more professional. As we move toward that, it’s important the conversation remains informed and balanced. The RBA isn’t the enemy, and cafés aren’t the villains,” says Matt.

“The RBA is one of the few bodies capable of regulating this space. The challenge is that cafés will be the ones having to explain these changes to customers, who may perceive price increases as gouging.

“Ultimately, transparency comes with a price tag. What used to be a $25 lunch with a small surcharge might now simply be priced at $26. As an industry, we’ll need customers to understand these costs have effectively been socialised, and we’re reacting to that shift.”

Hospitality is an industry that actions this differently than most other retail services, but Matt says it’s up to the RBA and other governing bodies to help communicate the true impact of the card surcharge ban.

“For years, we’ve communicated price increases carefully by posting notices, explaining rising costs, and even showing graphs to justify changes. That comes from a place of hospitality and respect for our customers, but there’s only so much apologising we can do,” says Matt.

“Other industries don’t operate this way. For example, when the price of an iPhone increases, companies like Apple don’t issue apology letters or detailed explanations. But cafés often feel obligated to justify every change, and that’s because we’re a hospitable group of people who cares about our customers.

“Part of the issue lies in how these surcharge changes have been communicated. They’ve been framed as a clear win for consumers, without enough emphasis on the fact that business costs remain unchanged. Customers would likely understand this if it were explained more clearly, but that nuance hasn’t yet come through.”