Cash Comeback or Price Hikes? How Australian SMEs Are Responding to the Card Surcharge Ban
The Tactical Menu for Cost Recovery
With the card surcharge ban now in force, Australian small businesses face a deceptively simple question with no easy answer: how do you recover payment processing costs when you can no longer charge customers directly for them?
The available options—absorb the cost, raise shelf prices, encourage cash, or renegotiate with payment providers—each carry distinct commercial risks. The choices businesses make will shape not only their margins but their customer relationships and competitive positioning.
The Cash-Preferred Strategy and Its Ceiling
Bakery owner Dylan McQueen has displayed “CASH PREFERRED” signage for years, and his laminated signs did generate an uptick in customers hunting for coins and notes. Yet cash still accounted for only 16 per cent of his transactions. His experience illustrates the fundamental limitation of cash encouragement: card payment is embedded in consumer behaviour, and convenience consistently outweighs cost sensitivity at the point of sale.
The same pattern emerged for nursery owner Calum Haygarth, who applied a 2.9 per cent surcharge on card transactions under $20 before the ban. Despite noticing banks “scrambling” to lower merchant fees ahead of 1 October, he believes price increases will still be necessary. “It’s just another added cost that we really don’t need,” he said, acknowledging the ultimate unfairness for cash-paying customers who will now effectively subsidise card users.
Price Adjustment as the Default Response
For most SMEs, embedding payment costs into displayed prices is the most viable path forward. The RBA explicitly permits this approach, noting that businesses can build card acceptance costs into their overall pricing just as they do with rent, wages, and utilities.
Ross Surace’s decision to raise coffee prices by 50 cents and panini prices by A$1 at Lennox Street Deli exemplifies this strategy. With bank-imposed card fees costing his business over A$1,000 weekly—and an estimated additional A$1,200 to A$1,500 per week once surcharging is removed—price adjustment is less a choice than a necessity.
The Renegotiation Opportunity
The RBA’s transparency reforms create a new lever for SMEs: published fee data. From 30 October 2026, major acquirers must publish quarterly merchant service fee reports. From April 2027, merchant statements will include standardised cost-of-acceptance information.
This data will allow small businesses to compare their current arrangements against market benchmarks and negotiate more effectively. The RBA designed these measures explicitly to help merchants “shop around for better deals” and support competition in card acquiring services.
The Consumer Perception Challenge
Businesses face a delicate communication challenge. Raising prices to absorb card costs risks alienating customers already sensitive to cost-of-living pressures. Yet the alternative—absorbing costs without adjustment—threatens viability for businesses operating on single-digit margins.
The Australian Small Business and Family Enterprise Ombudsman has highlighted that consumers may conflate the surcharge ban with weekend and public holiday surcharges in hospitality, which remain legal. This confusion creates an additional layer of complexity for businesses that rely on penalty-rate surcharges to manage higher staffing costs on weekends and holidays.
The Long-Term Outlook
The RBA’s reforms will be fully implemented by April 2027, when foreign card interchange caps and expanded transparency requirements take effect. For small businesses, the transition period represents both a compliance burden and a strategic opportunity—a moment to reassess payment provider relationships, pricing architecture, and customer communication. The SMEs that treat this reform as a catalyst for operational improvement, rather than merely a cost to be absorbed, will be best positioned to maintain healthy margins in Australia’s increasingly cashless economy.
