What Regulators Should Not Have to Do

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.

The Payments System Board spent two years building, through legislation, the competitive discipline that active procurement practice would have created through buying behaviour. The question for every Australian business owner is not whether the RBA was right to intervene. The question is why the intervention was necessary in the first place and what that pattern looks like in the rest of your cost structure.

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What the RBA Was Asked to Fix

The current review of merchant card payment costs began in October 2024.¹ It was preceded by a review in 2019 to 2021. Before that, a review in 2015 to2016. Before that, the original surcharging framework introduced in 2003.² The RBA has been reviewing and re-reviewing the same market for more than two decades. Each review found similar problems. Each introduced further regulatory requirements to address them.

That pattern is not an indictment of the RBA. It is a description of what happens to any market where buyers consistently fail to exercise the competitive pressure that keeps suppliers disciplined. The regulation is the substitute for the buyer behaviour that was not there.

The 2024 review received 94 written submissions to the Issues Paper alone.³ The full review process, from Issues Paper through Consultation Paper to Conclusions Paper, generated more than 170 written submissions and more than 100 stakeholder meetings.⁴ The Conclusions Paper runs to 202 pages. It covers surcharging, interchange fees, scheme fees, transparency, competition in acquiring services, and least-cost routing.

All of that effort, two years, 170 submissions, 202 pages, produced three core decisions: end surcharging, reduce interchange fee caps, and mandate fee transparency. These are outcomes that a market with genuinely active buyers would have produced through ordinary competitive behaviour. Merchants shopping around for better rates. Merchants demanding itemised breakdowns. Merchants switching providers when the comparison revealed a better deal.

Key Takeaway: Regulation is the substitute for the buyer behaviour that was not there. The RBA spent two years building what active procurement would have created naturally.

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The Specific Failures the RBA Found

The Conclusions Paper does not describe a market that was merely inconvenient for buyers. It describes specific, documented failures of competitive discipline that accumulated over years.

The surcharging framework, introduced in 2003to encourage consumers to choose lower-cost payment methods, had stopped working by the time of this review.⁵ Only around 16 per cent of Australian merchants were surcharging designated network card payments. The framework was still in place, still creating compliance obligations, still generating consumer complaints but it was nolonger achieving its original purpose.

Interchange fees had been regulated since the early 2000s, yet the PSB concluded that current interchange levels were still materially above efficient levels.⁶ Card networks had found ways to raise scheme fees, the component of costs that sits alongside interchange and was not subject to the same regulatory caps without clear justification.⁷ The RBA observed considerable variation in scheme fees between different networks without commensurate differences in cost or service quality, and noted that card networks raise prices and adopt concerning commercial practices in the absence of the disciplining effects of robust competition.

At least 90 per cent of merchants had not switched payment providers in the previous financial year.⁸ Merchants on single-rate plans were paying significantly more than comparable merchants on unblended plans and most could not tell, because the pricing structure was designed to obscure the components.⁹

These were not new developments discovered by the 2024 review. They were patterns identified in previous reviews, partially addressed by previous regulatory interventions, and then re-established as market conditions shifted and buyer behaviour failed to adapt. Each regulatory solution created the conditions for the next round of competitive erosion.

Key Takeaway: The RBA did not find a market that had recently gone wrong. It found a market that had been slowly drifting from competitive discipline for more than a decade, precisely because buyers were not creating that discipline through their purchasing behaviour.

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What Active Procurement Would Have Done Instead

The three outcomes the RBA has now mandated through regulation were all available to active buyers without any regulator intervention.

Surcharging ended because it was not working for consumers and was being used to pass the cost of unrelated services to customers. A merchant who had reviewed their payment processing arrangement, who had itemised their merchant service fee, identified the non-payment services bundled into it, and understood what they were paying for, would have reached that conclusion without a regulatory mandate.

Interchange fee reductions are projected to save the industry $910 million per year. That saving was always available to merchants who understood their transaction mix, sought quotes based on their actual profile, and negotiated from an informed position. Large merchants, those with active procurement practices, were already accessing rates well below the regulatory caps that small merchants were paying. The gap between what large and small merchants paid was not a cost difference. It was a procurement discipline difference.

Transparency was mandated because merchant slacked the information to compare providers and apply competitive pressure.¹⁰ That information gap was always closeable by a merchant who asked theirprovider for an itemised breakdown, requested competing quotes, and treatedpayment processing as a category worth understanding. The RBA has now requiredproviders to publish what buyers should have been asking for all along.

The RBA built through legislation the conditions for competitive discipline that procurement practice would have created through managed supplier relationships. The published fee data is not a curiosity. It is a tender benchmark. Treat it as one.

Key Takeaway: Every outcome the RBA has mandated was available to buyers who were paying attention. The regulation exists becausemost were not.

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The Procurement Argument for Every Other Cost Category

Payment processing is the cost category the RBA has now regulated into transparency. It is not the only cost category in your business where the same conditions apply.

Think about the categories in your business where you last reviewed the contract more than two years ago. Where the invoice arrives, gets paid, and prompts no further inquiry. Where you have no clear sense of whether the rate you are paying reflects current market conditions. Where the pricing structure makes comparison with alternatives genuinely difficult.

These categories are not exotic. They are the normal state of most indirect cost categories in most Australian SMBs. Telecommunications. Insurance. Software subscriptions. Freight. Facilities. Professional services. Each of these markets has an equivalent structure: complexity that makes comparison hard, pricing designed to reward inertia, and suppliers who are rational about not volunteering that you could do better.

Regulators do not review those markets on a five-year cycle. The ACCC does not commission a 202-page report on whether your telecommunications contract reflects current market pricing. The disciplining force in those categories is the buyer. If the buyer is not applying pressure, the price reflects that absence.

The RBA noted explicitly that the industry had been on notice that changes to merchant card payment costs were being seriously considered since the Issues Paper was published in October 2024.¹¹ From that point, informed buyers had eighteen months to review their arrangements, seek market comparisons, and negotiate before the regulatory changes took effect. Most did not.

Key Takeaway: If the regulator is not reviewing your cost category, the discipline has to come from you. In most indirect cost categories, it is not coming from anywhere else.

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What to Do with This Observation

The practical application of this argument is straightforward, if not always easy.

1.  Identify your unmanaged categories:  List every significant indirect cost in your business. For each one, note when you last actively reviewed the arrangement against the market. If the answer is more than 24 months ago, or if you genuinely do not know, treat that as an unmanaged category.

2.  Prioritise by materiality:  Not every cost category justifies an active procurement process. Focus on the categories that are large enough to matter, typically those representing more than one percent of revenue or more than five per cent of total operating costs. Payment processing often qualifies. Telecommunications often qualifies. Insurance almost always qualifies.

3.  Apply the same logic the RBA applied:  For each priority category, ask the questions the RBA asked about payment processing. Are you paying a rate that reflects your specific profile, or a generic rate designed for buyers who are not paying attention? Is the pricing structure transparent enough to permit a genuine comparison? Have you tested the market in the last 24 months? If the answer to any of these is no, you have an inertia premium in that category.

4.  Act before the regulator does:  The RBA intervened in payment processing because buyers did not create the conditions for competitive discipline. In categories where no regulator is likely to intervene, the choice to act or not act is entirely yours. The cost of inaction compounds. The cost of a structured review is predictable and finite.

The October 2026 changes create an immediate and specific opportunity in payment processing: the new transparency requirements mean that from 30 October 2026, large acquirers must publish their fee schedules quarterly and the RBA will publish interchange pass-through data.[12]That data will, for the first time, give Australian merchants a reliable public benchmark for what other merchants are paying. Use it as the starting point for a review, not the completion of one.

Key Takeaway: The RBA spent two years and 170 submissions achieving what active procurement should have created naturally. The lesson is not that regulation is good or bad. It is that the absence of buyer discipline in a market always has a cost and in most cost categories outside of payment processing, no regulator is coming to measure it. That responsibility falls entirely to you.

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A Closing Thought

There is a category of business problem that is genuinely hard to solve and a category that is merely uncomfortable to address. The inertia that produced the conditions the RBA found in the merchant acquiring market is almost entirely in the second category.

The surcharging framework was not abolished because it was too complex for merchants to understand. It was abolished because merchants were not using it as intended and the market had evolved around it. The interchange fees were not reduced because the regulator had special access to information unavailable to buyers. They were reduced because the regulator applied pressure that buyers had not been applying.

The 202-page Conclusions Paper is a very detailed description of what happens when buyers stop paying attention to a market. It is also, if you read it that way, a very specific prompt to pay attention to yours.

If you would like help identifying which of your cost categories carry the conditions the RBA found in payment processing, complexity that makes comparison hard, pricing that rewards inertia, suppliers who know you are not looking, and what a structured review of those categories would produce, D1 Advisory's procurement advisory services cover exactly this. A discovery call takes around 45 minutes. It starts with your costs, not our methodology. Book through the D1 Advisory website.

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Bibliography

Reserve Bank of Australia 2026a, 'Introduction', 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/introduction.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, 'Interchange 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/interchange-fees.html>

Reserve Bank of Australia 2026d, 'Scheme 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/scheme-fees.html>

Reserve Bank of Australia 2026e, 'Competition in Card Acquiring Services', Review of Merchant Card Payment Costs and Surcharging —Conclusions Paper, Reserve Bank of Australia, Sydney, March 2026, viewed 22April 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 2026f, 'Transparency of Merchant Fees', Review of Merchant Card Payment Costs and Surcharging —Conclusions Paper, Reserve Bank of Australia, Sydney, March 2026, viewed 22April 2026, <https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/transparency-of-wholesale-fees.html>

Reserve Bank of Australia 2026g, '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 2026h, 'Impact and Implementation', Review of Merchant Card Payment Costs and Surcharging —Conclusions Paper, Reserve Bank of Australia, Sydney, March 2026, viewed 22April 2026, <https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/impact-and-implementation.html>