Commonwealth Bank Proposes Small Business-Friendly Acquiring Plan
Commonwealth Bank (CBA), one of Australia’s leading financial institutions, has presented a proposal to the Reserve Bank of Australia (RBA) suggesting a new acquiring plan specifically designed for small businesses. The bank’s proposal, as reported Here, was part of the RBA’s recent Consultation Paper review of Merchant Card Payment Costs and Surcharging. The new plan would feature a fixed single-rate merchant service fee, which CBA promises would be significantly lower than their current market-leading offer.
Reducing the Disparity Between Small and Large Businesses
In a surprising twist, CBA has also called for a reduction in the disparity between small and large business interchange. The bank is of the opinion that the best way to achieve this would be to limit the discounts permissible in ‘strategic’ merchant contracts. This call to action has been seen as a significant step towards levelling the playing field for businesses of all sizes.
Currently, credit card companies like Visa and Mastercard offer heavily discounted interchange fees to about 20 of the country’s largest retailers. This leads to significantly lower merchant service fees for these retailers, further widening the gap with small businesses. CBA believes that this practice should be regulated to ensure fair competition.
RBA’s Proposed Changes and Industry Reactions
In July, the RBA proposed removing surcharging across all debit and credit card payments from July 2026. They also proposed lowering caps on interchange further, leading to a reduction in merchant service fees. Additionally, the RBA plans to mandate greater transparency in merchant service fees and card scheme fees to promote competition.
These proposals have been met with varied reactions from different sectors. Associations like the Australian Retailers Association and National Retail Association have expressed their desire to retain surcharging as a tool for smaller businesses to recover the true cost of acceptance, especially for higher-cost card types or acquirer arrangements.
The Battle of Commissioned Experts
The Independent Payments Forum engaged Nick Hossack, a former director of policy at the Australian Bankers Association, who argued that mature payment systems don’t need interchange fees. He also raised concerns about competitive neutrality in the context of interchange and its regulation.
On the other hand, the Australian Banking Association commissioned Frontier Economics to examine the RBA’s review. Frontier shared data showing an increase in strategic merchants from around 32% to 34% of total debit spend in 2020/21, to 36% to 38% in 2024/25. The equivalent increase for credit and commercial card spend is even higher.
Next Steps
Following the review of the submissions, the RBA will now set up a series of bilateral meetings with many of the organizations that made submissions. The Payments System Board aims to finalize outcomes from this review by the end of the year.
With all these developments, it’s clear that the Australian payments landscape is poised for significant changes that could potentially reshape the merchant services industry and the broader financial sector.
