Inform
5 min read
The Inertia Premium: What Staying Put Is Actually Costing You
Sylvia Luchian
Founder & Head of Procurement Practice
Inertia has a price. Most businesses just never see it on an invoice.
It does not show up as a line item. It shows up as the gap between what you are paying for a service and what you could be paying if you had reviewed the arrangement in the past two years. Payment processing is one of the clearest examples of that gap in the Australian market right now, because the RBA has spent two years measuring it.
The March 2026 Conclusions Paper on merchant card payment costs and surcharging found that at least 90 per cent of Australian merchants did not switch payment providers in the 2024/25 financial year, despite many of them paying significantly more than comparable merchants of a similar size.1 That statistic is not offered as a curiosity. The RBA cited it explicitly as evidence that competitive pressure in the acquiring market is low. Merchants are not shopping around. And the market knows it.
The inertia premium is the cost of that non-decision. It is real, it is quantified, and it is not limited to payment processing. It shows up in any cost category where contracts run unchallenged and suppliers operate without competitive pressure from the buyer.
The numbers in the Conclusions Paper are specific enough to be uncomfortable.2
On average, a small merchant on a single-rate pricing plan pays 1.4 per cent of their transaction value to accept card payments.3 A small merchant on an unblended plan, which separates interchange fees, scheme fees, and acquirer margin into individual components, pays 0.9 per cent on average.4 That is a difference of 0.5 percentage points on every transaction processed.
On a business processing $1 million in card payments annually, that gap is worth $5,000 per year. On a business processing $5 million, it is $25,000. These are not theoretical savings from a competitive tender process. They are the difference between what merchants on single-rate plans are paying now and what comparable merchants on unblended plans are paying for the same service.
Only 19 per cent of small merchants are on unblended plans.5 The remaining 81 per cent are on single-rate or blended plans. The plans that are simpler to understand, easier to sell, and typically more expensive to operate.
Large merchants, those with greater resources to manage their payment costs, pay an average of 0.6 per cent of transaction value.6 The gap between what small merchants pay and what large merchants pay is not explained by cost differences. It is explained by the presence or absence of active procurement.
Key Takeaway: The inertia premium in payment processing is 0.5 percentage points of transaction value for small merchants on single-rate plans compared to those on unblended plans. On $1 million in card payments, that is $5,000 per year sitting in a gap that no one has closed.
The RBA did not simply observe that merchants were not switching. It examined why.7
The complexity of payment concepts and the difficulty merchants face in comparing acquirers' offerings generate considerable inertia in merchants' choice of payment plans and acquirers.8 The report notes that this can cause merchants to remain with their existing provider even if they could achieve significant net benefits from switching.
That is a careful way of saying: it is confusing, and confusion is good for suppliers and bad for buyers. The merchant service fee is one number. The components inside it, interchange fees, scheme fees, acquirer margin, any bundled non-payment services, are rarely disclosed in a way that makes comparison straightforward. Getting a competing quote requires approaching multiple providers, each of whom will give you a different rate structure in a different format. The search cost is high and the benefit is uncertain.
Pricing plans are complex and competitive offerings are typically negotiated confidentially at levels below advertised rates.9 A merchant who calls a competing provider and asks for their rate will receive a quote for a business profile they have described, not necessarily the best rate available in the market. Without a basis for comparison, most merchants do not know whether the quote they received is competitive or whether there is further room to negotiate.
So they stay. And the supplier knows they will stay. And the price reflects that.
Play silly games, win silly prizes. The game here is signing a contract, putting it in a drawer, and assuming competitive pricing will find you without any effort on your part. It will not.
Key Takeaway: Inertia is not laziness. It's a rational response to a genuinely complicated market which is exactly why suppliers design markets to be complicated. The solution is not to become an expert in payment processing. It is to treat it as a managed procurement category with a review date.
Payment processing is the example the RBA has quantified. The principle applies to every cost category where you last reviewed the contract more than two years ago.
Think about your business insurance. Your telecommunications services. Your cloud software subscriptions. Your cleaning or facilities contract. Your freight forwarder arrangement. Each of those categories has a market rate. Each has a rate you are currently paying. The gap between those two numbers is the inertia premium for that category.
Most businesses cannot tell you what that gap is in any category, because they have not asked. The contract is in place. The service is running. The invoice is being paid. That feels like a managed cost. It is not. A managed cost is one where the buyer knows the market rate, reviews the arrangement periodically, and applies competitive pressure at renewal. A cost that runs on autopilot is a cost that grows on autopilot.
The RBA's review found that the total projected industry saving from the October 2026 interchange fee reductions is approximately $910 million per year.10 That number represents the difference between what the market was charging and what the regulator determined was efficient. It accumulated while 90 per cent of merchants sat in unchanged contracts, year after year.
Key Takeaway: The inertia premium is not a payment processing problem. It is a procurement discipline problem that shows up wherever buyers stop applying competitive pressure to supplier relationships.
Reviewing a payment processing arrangement or any indirect cost category is not a full procurement process. It does not require a tender panel, a scoring matrix, or a legal review. For most SMBs, it is a three-step process that takes a day or two.
1. Understand what you currently pay: Request a written breakdown from your current provider of every component in your merchant service fee: interchange fees, scheme fees, acquirer margin, and any additional services. Ask for the last 12 months of actual transaction data by card type. If your provider cannot or will not provide this breakdown, that is a data point.
2. Get at least two market comparisons: Approach two alternative providers with your transaction profile. Your monthly volume, average transaction value, card mix, and channel split between card-present and card-not-present. Ask for a specific quote based on that profile. From 30 October 2026, large acquirers must publish their fee schedules quarterly on the RBA's website, giving you a new public benchmark. You do not need to wait for that. You can ask for quotes now.
3. Use the comparison to negotiate, not just to switch: The purpose of market testing is not necessarily to change providers. It is to establish whether your current arrangement is competitive and, if it is not, to create the basis for a renegotiation. A provider who knows you have a competing quote will behave differently to one who knows you will not look.
From 30 October 2026, the new transparency requirements will make this process easier. Large acquirers will be required to publish interchange pass-through data for four consecutive quarters, and the RBA will republish that information on its website.11 That data will tell you whether your provider passed on the October 2026 interchange reductions or absorbed them. It is a public accountability mechanism. Treat it as one.
Key Takeaway: A payment processing review does not require a procurement team or a legal advisor. It requires a written breakdown from your current provider, two market comparisons, and a willingness to have the renegotiation conversation.
The RBA did not intervene in the merchant acquiring market because of enthusiasm for regulation. It intervened because the conditions that were supposed to create competitive discipline, an informed buyer exercising choice, had not materialised. Merchants were not shopping around. Providers were not competing on price in a meaningful way. The savings that should have flowed from a competitive market were not flowing.
That dynamic is not unique to payment processing. It is the default state of any indirect cost category that a business treats as a utility rather than a managed commercial relationship. The category runs. The invoices are paid. The contract renews on the same terms. And the gap between what the business pays and what it could pay quietly widens.
The procurement argument is simple. Every dollar sitting in an unreviewed contract is a dollar that is not contributing to margin, investment, or growth. For most Australian SMBs, the combined inertia premium across all unmanaged indirect cost categories, not just payment processing, is material. The RBA has simply made one instance of it visible and quantified.
Key Takeaway: At least 90 per cent of Australian merchants did not switch payment providers last year. The RBA found that small merchants on single-rate plans pay an average of 1.4 per cent of transaction value, compared to 0.9 per cent for those on unblended plans. The difference is not complexity. It is the presence or absence of active procurement. That gap exists in every unreviewed cost category in your business. Payment processing is just the one the regulator has now measured.
There is a well-worn observation in procurement practice: the cost of doing nothing is always higher than it looks, because it compounds quietly in the background while everyone is busy managing the things that are visibly broken.
The inertia premium is the accumulated cost of doing nothing. It shows up eventually in a regulatory review, in an audit, in the moment a business owner finally asks the question and receives an answer they were not expecting. The RBA has done the audit on payment processing. The result is in the Conclusions Paper.
The question is not whether the inertia premium exists in your business. The question is which categories you are going to review first.
If you would like help identifying where the inertia premium is sitting in your specific cost structure and what a practical review program looks like for an Australian SMB, D1 Advisory's cost reduction and procurement advisory services cover this directly. A discovery call takes around 45 minutes. There is no referral arrangement with any payment provider. There is no kickback. There is a conversation about your costs and what a structured review would produce. Book one through the D1 Advisory website.
Reserve Bank of Australia 2026a, 'Executive Summary', Review of Merchant Card Payment Costs and Surcharging — Conclusions Paper, Reserve Bank of Australia, Sydney, March 2026, viewed 22 April 2026, <https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/executive-summary.html>
Reserve Bank of Australia 2026b, 'Surcharging', Review of Merchant Card Payment Costs and Surcharging — Conclusions Paper, Reserve Bank of Australia, Sydney, March 2026, viewed 22 April 2026, <https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/surcharging.html>
Reserve Bank of Australia 2026c, 'Competition in Card Acquiring Services', Review of Merchant Card Payment Costs and Surcharging — Conclusions Paper, Reserve Bank of Australia, Sydney, March 2026, viewed 22 April 2026, <https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/competition-in-card-acquiring-services.html>
Reserve Bank of Australia 2026d, 'Transparency of Merchant Fees', Review of Merchant Card Payment Costs and Surcharging — Conclusions Paper, Reserve Bank of Australia, Sydney, March 2026, viewed 22 April 2026, <https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/transparency-of-wholesale-fees.html>
There is a version of the RBA's March 2026 Conclusions Paper that should not exist. Not because the findings are wrong, they are well-evidenced and the reforms are sensible, but because the conditions they describe should have been corrected by the market years ago.
There is a version of this story where the 'free terminal' is a good deal. If you are running a retail business that genuinely uses the inventory management tools, the data analytics platform, and the customer loyalty features bundled into your merchant service fee, and the all-in rate is competitive against the alternatives, then the bundle is working for you. Keep it. But know what is in it.
The Chief Procurement Officer role exists because buying well is hard. It requires commercial judgement, negotiation skill, market knowledge, and the discipline to build systems that last longer than a single contract cycle.
