- Future of banking services and the payment system
- The Committee examined the evolving banking and payments landscape, focusing on its implications for fairness and security. Key issues discussed included the trend of branch closures and concerns about surcharges on card payments.
Changes to the branch network
Branch closures
4.2Banks offer a wide range of essential services to their customers. Historically, these services were delivered through branches, however the landscape of banking has evolved significantly. Digital banking, changing consumer demand, demographic shifts to larger cities and changes to financial regulation have led the banks to consolidate their branch networks and reduce their physical presence.
4.3The closure of local bank branches is a longstanding issue and has raised questions of fairness and equity, particularly for rural and regional customers and those who need or prefer to transact in person. These cohorts include people with low financial or digital literacy, members of culturally and linguistically diverse communities, the elderly and people in rural and remote locations. In its discussions with the banks, the Committee expressed concern that an increasing number of communities were being left with no access to in-person banking services.
4.4Some banks reported to the Committee that branch closures have slowed or ceased in response to community concerns, with CBA and Westpac announcing moratoriums on branch closures through to the end of 2026 and early 2027, respectively. As part of ANZ’s acquisition of Suncorp, it agreed not to close any regional branches for at least three years.
4.5The banks argued that the nature of branches was changing in response to evolving consumer behaviour, in particular declining demand for in-person services and reduced foot traffic in some locations. The Committee heard that in some locations, branches would only handle a small number of in-person transactions per day, and continuous operation would not be viable.
4.6The Committee requested additional data on branch closures over the past 10years. After the public hearings held in 2023, the Committee asked the banks to identify the number of regional and rural locations where each bank operated as the ‘last bank in town’, as well as the number of locations where the decision to close a branch resulted in no banking presence at all.
Table 4.1Bank presence as ‘last bank in town’ and closures resulting in no bank presence
| | | | |
Number of regional and remote areas where branch is the only bank presence | 11 | 30 | 26 | 15 |
Number of branch closures that resulted in no bank presence after the closure* | 16 | 12 | 12 | Did not provide number |
Sources: ANZ responses to questions arising from public hearing of 12 July 2023; CBA responses to questions arising from public hearing of 13 July 2023; NAB responses to questions arising from public hearing of 12 July 2023; Westpac responses to questions arising from public hearing of 13 July 2023. Available at House Economics Committee, Review of Australia’s Four Major Banks, Additional Documents, www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Ausfourmajorbanks/Additional_Documents, viewed 3 February 2025.
*ANZ defined ‘no branch presence’ to mean no alternative branches within 20 km; CBA defined ‘last bank in town’ to be where there are no alternative branches within 20 km; Westpac noted that all the 12 locations had a Bank@Post service in town; NAB similarly noted that in all locations where a closure resulted in no branch presence, customers had access to a Bank@Post service.
4.7In its most recent report on customer trends, the ABA reported that 99.1percent of bank interactions occur via digital channels, 0.6percent through branches and 0.3percent through phone and chatbots. The ABA also reported that in-person branch transactions were rapidly falling, experiencing a decline of 47 per cent between 2019 and 2023.
4.8The major banks reported similar trends. At the public hearing in 2023, NAB advised that 99 per cent of all flows through to the bank were now digital, describing the shift as ‘quite dramatic’. ANZ similarly reported that 96 per cent of its transactions were digital, and that only 8 per cent of customers exclusively used a branch and had no digital relationship with the bank.
4.9Such consumer trends towards digital services uptake were accelerated by the COVID-19 pandemic.
4.10Despite customers increasingly preferring digital payments and transactions, all of the banks affirmed that there is a future role for branches—though this role continues to evolve in response to shifts in customer behaviour and community needs.
4.11ANZ commented that there was ‘absolutely a role for branches’, and acknowledged that for some cohorts, the changes in the digital space had been ‘too fast’. It told the Committee:
We're not just slashing and burning in the branch network at all. We have to respond to customer needs. As our customers change, we need to change. But there's absolutely a future for branches. I think there's a bright future for branches. What we've got to do not only as an industry but also as ANZ is find where's the best place for them, what are the most important things to be done in them, when should they be open, how big should they be and what tools should be in those things. Actually, that is where there's lots and lots of innovation to get the balance. … Yes, they're expensive things to run. They are. But that's why we're innovating different models.
4.12CBA highlighted that 39 per cent of its branches were in the regions; it similarly reported that customers have been changing their behaviour, and that CBA’s physical footprint was changing to align with this.
4.13The final report of Treasury’s Regional Banking Taskforce in September 2022 highlighted a variety of alternative models for delivering bank services. These included: co-location of services, co-branding, community banks, reduced opening hours, banking and advisory hubs, mobile branches and smart ATMs. At public hearings for this inquiry, the banks described their approaches to adopting or trialling such alternative service models tailored to the diverse needs of their communities, whether metropolitan or remote.
4.14Among the strategies highlighted by the banks were the deployment of mobile bankers who provide personalised services by visiting customers at their home, the implementation of condensed operating hours or specific service days to better align with community schedules, and the establishment of virtual contact centres designed to offer comprehensive support through digital channels.
4.15The Committee heard that the services provided by bank branches are set to continually evolve, particularly to meet the needs of customers who require assistance with more complex financial matters. ANZ, for instance, emphasised that its branches were frequently utilised by small businesses seeking business-specific advice, and young individuals going through the home loan process for the first time. ANZ additionally informed the Committee about its ANZ Plus initiative, which is being trialled as a new branch format focused on financial wellbeing. This initiative includes dedicated spaces where customers can book appointments to learn about digital banking and engage in financial wellbeing discussions, such as strategies for avoiding scams or planning for retirement.
4.16Westpac highlighted its recent efforts to co-locate branches, with Westpac, StGeorge, Bank of Melbourne and/or BankSA branded branches operating from one location. Westpac explained the benefits:
We have 627 branches around Australia. We're the second-largest network. But previously we may have had two branches in the one street, one being a StGeorge and one being a Westpac, and, to ensure that we can maintain that presence in that street, we have put the two branches together in a co-location with a single cash queue so customers can be served regardless of the brand they're in. That means we can maintain that footprint, and actually, for a lot of our customers, it's given them a lot more access points because now they can access, if they're a St George customer, all of our Westpac branches. We have 106 of those, and that's a trend that we will continue because, as Peter said, we think the branch network is actually a really important brand presence for us as well. It's part of who we are in the community.
4.17By contrast, ANZ reported that co-location had not achieved the desired outcomes, based on its experience trialling shared premises with other banks in New Zealand. The initiative was part of the regional banking hubs trial, with the New Zealand Banking Association concluding that despite offering nearly all banking services, customer usage of these multi-bank hubs was ‘lower than many single-brand bank branches’.
4.18Even with a commitment by banks to maintaining branch operations in regional areas, supported by alternative formats for branches and new methods for conducting transactions, some banks argued that customer support was not sufficient to render all remaining branches economically viable.
4.19CBA told the Committee that as its competitors’ branches have closed, their ‘customers have not changed banks’ in response to switch support to those banks that stayed in town. It said the economic viability of operating regional branches would be extended if customers switched to banks that made an effort to maintain a presence. CEO Matt Comyn shared the following story:
I remember clearly having a robust debate or certainly a very high conviction debate by a local mayor about why we shouldn't close and why we were the last branch and the other banks had already exited. I asked where the mayor banked, and it wasn't with us. This is one of the challenges. People don't shift their behaviour. Part of it will be, 'Will we persist in our branch footprint?' It's a deliberate strategy. As I said, we want to see it as a point of difference and differentiation. We want to be a financial institution that stands for supporting regional areas. We are continuing to support that. That is certainly something we're going to be engaging closely with regional communities over the next few years.
4.20ANZ also reported weak customer uptake of alternative solutions, and said this would continue to be a challenge:
What we've found is—and again I don't mean to diminish the feedback—that a lot of people bemoan the fact that branches are closing but they don't actually use them. Even when we do provide alternative solutions the usage is extraordinarily low because people actually do like the convenience of being able to do things digitally. There are going to be challenges. We're up for solutions.
Bank@Post
4.21Australia Post’s Bank@Post service enables cash and cheque deposits, withdrawals and balance inquiries for over 80 banks and financial institutions at participating post offices, including more than 1,800 locations in rural and remote areas. Australia Post recently reported that there were more than 17 million Bank@Post transactions in the 2024 financial year.
4.22The Committee questioned the banks on the critical role of the Bank@Post program in ensuring continued access to banking services, and particularly on their involvement in sustaining the program’s viability across metropolitan, regional and remote locations.
4.23Participating banks told the Committee they regarded the Bank@Post program as a valuable complement to their branch networks and other service offerings. The banks viewed it as a crucial component of a long-term, sustainable strategy to maintain access to cash and physical banking services in communities.
4.24CBA, Westpac, NAB and around 80 other lenders collectively pay Australia Post approximately $90 million annually to facilitate basic banking services. Recently, the three major banks renewed their 10-year agreements with Australia Post, underscoring their commitment to the program.
4.25However, Australia Post had raised concerns that the increasing number of branch closures had strained its financial resources, hindering its ability to invest in new security infrastructure including CCTV and to manage other rising costs, such as premises and training costs.
4.26These concerns were recently highlighted by the Senate Rural and Regional Affairs and Transport References Committee report into bank closures in regional Australia. The report noted concerns by submitters regarding the limitations of local post offices in providing bank services, including training for post office staff to recognise abuse and fraud, privacy issues and security levels. The report also noted Australia Post’s reflection that the costs of running Bank@Post were challenging due to the need for significant investments in cyber-security and training, compliance standards adherence, and uplift of security and safes. Australia Post also highlighted that this was a particular challenge for small post offices in rural and regional areas.
4.27The Committee asked the banks about their level of support for small post offices now required to compensate for an absence of banks and ATMs, and which often required significant technological uplift.
4.28Westpac told the Committee that while Australia Post ultimately ‘have the responsibility to fit out those sites’ due to their multi-use nature, it was working with Australia Post on this issue through negotiations.
4.29NAB similarly noted that Australia Post already had some capability, having offered banking services for some time, but that this was ‘an area where we want to and should be working together, and we’d be happy to do that’. NAB also explained its desire to:
…better understand in our conversations with the post office…the impact on these small regional and rural licensees that you mentioned. I think when we did the original contract we were of the opinion that they wanted more Bank@Post transaction volumes because it would actually help them become more sustainable businesses, because letter mail and post mail are falling precipitously and there was actually a risk that the economics of these small regional and rural locations was in jeopardy, and that actually Bank@Post services was helpful in creating additional revenue streams. Now, if that's incorrect and Bank@Post is actually burdensome to these locations rather [than] being helpful, I'd want to understand that—because maybe we could redeploy our capability. We spend significant dollars with AusPost and maybe there's a better solution for Australia. I don't know, but that's also something that we'll want.
4.30CBA commented on Bank@Post funding arrangements and recent concerns expressed by Australia Post, informing the Committee that:
There's a community fee, and then there's a transactional fee called a community representation fee. It is approximately $22 million; we pay about another $20 million in transactional fees. This community representation fee is somewhat relevant because it was supposed to be precisely to pay for other services and upgrades within the Bank@Post network. It would appear, based on recent comments, that from Australia Post's perspective some of the things are not where they need to be.
4.31Despite Australia Post’s concerns about the growing burden on local post offices, the banks said they had not observed any notable increases in Bank@Post transaction volumes. CBA, Westpac and NAB told the Committee their transaction volumes going through Australia Post were either not experiencing growth, or had not yet reached the levels committed to in their contracts. Westpac, for example, stated:
If I look at the increase in transactions for Australia Post, say for the last five years, it has averaged about one per cent for us. That says the volume is probably going sideways. Costs for Australia Post are going a different way, so what they've highlighted is that that model's not working for them. We pay a fixed community representation fee and then a volume cost. So the revenue does go up with volume, but it's not working.
4.32To help Australia Post manage costs associated with Bank@Post, some banks suggested addressing inefficiencies in the current allocation of resources. Banks suggested improvements to how regional offices are resourced. Westpac, in particular, noted that there was ‘too much coverage’ between Australia Post and the banks in metropolitan areas. Westpac believed it would be advantageous to reallocate resources to support and strengthen the Australia Post network in regional areas, thereby enhancing service delivery and efficiency in these underserved communities.
4.33NAB raised a similar suggestion, with CEO Andrew Irvine telling the Committee that:
One of the things that I think is apparent is that we might be overspending or over-resourcing metro locations and we could potentially use that money to improve the offering in regional Australia. We have a high number of transactions where our consumers are using Australia Post where there's a NAB branch right next door. I don't begrudge that; they may be in a post office for a reason; they're buying stamps or need to post a letter or a package, and they're doing their banking at the same time. It's convenient, but it's also quite easy for them to use the NAB across the street or next door. Is that a good use of our collective resources and could we optimise that more? They're the types of conversations that I think we could have with the post office.
4.34ANZ is the only major bank not currently involved in the Bank@Post program. ANZ described its retail banking operations as ‘relatively modest’ compared to the other banks, and said that its business operations had more of an international and institutional presence. It said these factors affected the sustainability and rationality for ANZ of agreeing to the terms set out by Australia Post. ANZ also reported that despite its customers initially expressing dissatisfaction with being unable to use Bank@Post, ANZ had ‘not really seen too many people move’ to other banks that offered the service.
4.35However, ANZ told the Committee that while it did not participate in the program, it continued to be open minded about a banking role for Australia Post and engaged regularly on the issue.
4.36ANZ completed its acquisition of Suncorp Bank shortly before the public hearings of 2024. As a regional bank, Suncorp offered a lower-cost model and had an existing arrangement with Bank@Post, which has been grandfathered for existing customers following the acquisition. ANZ informed the Committee that Suncorp’s experience with Bank@Post presented a valuable opportunity:
We will learn from Suncorp: what is working for them; what they like about it; how their customers feel. We've got a real-life example here so we will do that. We made a commitment to the federal treasurer that we will continue to negotiate and to discuss and dialogue in good faith to seek a way forward where we could offer the Bank@Post service more broadly at ANZ, and we are doing that. As I said, the Suncorp acquisition was only a month ago. We will continue to talk to them in good faith and see whether there is a way through.
Cash distribution
4.37In June 2024, the ABA, major banks and major retailers reached an agreement with Australia’s last remaining significant cash transporter, Linfox Armguard, to provide a 12-month financial contribution for its cash-in-transit business, to keep it solvent. This agreement will see Linfox Armaguard receive approximately $50 million in financial assistance, subject to various conditions, and includes a commitment by the parties to work together to develop an independent pricing mechanism to support sustainable cash delivery in the longer term.
4.38This agreement followed roundtables led by the RBA to discuss the sustainability of the wholesale cash distribution system. The RBA—in a submission to the ACCC regarding the ABA’s application for authorisation to discuss and develop arrangements to facilitate ongoing access to cash—noted that the steady decline in cash usage has put significant financial pressure on private cash-in-transit market participants, and excess capacity within the distribution network.
4.39Noting that the usage of cash would most likely continue to decline, CBA reflected on this challenge:
We're very focused on making sure there's efficient and reliable transportation and distribution of cash. As I touched on earlier, we and a number of other institutions made a voluntary financial contribution to Armaguard. If you look at a business model like cash in transit—and this is globally—when you're under a structural reduction in volume, there needs to be investment to get much greater operating efficiencies. It's highly likely that more and more financial institutions are going to pull out of cash. That gives us some concern. It's not that we will seek to recover all of the costs, but what's a reasonable proportion?—because that could become more and more expensive over time.
Committee comment
4.40Bank branches play a crucial role in providing accessible financial services, particularly for individuals and businesses with complex needs that cannot be fully addressed through digital channels. The Committee recognises that with a small percentage of customers availing themselves of in-person branch services, the viability of many of these branches is a challenge for the major banks.
4.41The Committee, however, is of the view that the banks should prioritise maintaining these branches to ensure that all Australians, especially those in regional and remote areas, have equitable access to essential banking services. Branch closures can disproportionately affect vulnerable populations, leaving them without convenient access to financial support and advice. The banks must balance the efficiency of digital banking with the necessity of physical branches and of readily accessible, personalised support when needed, particularly for small businesses and for vulnerable customers.
4.42The Committee is concerned about the financial sustainability of the Bank@Post program, especially with the increasing number of branch closures and additional pressure being put on sometimes ill-equipped local post offices to act as a banking presence in remote or regional locations. The Committee encourages the banks to continue to collaborate with Australia Post to ensure that Bank@Post can continue to be a viable—but not the only—model for providing access to banking services for all Australians.
4.43The Committee encourages the banks and Australia Post to explore options to re-profile resourcing for Bank@Post services between metropolitan and regional areas, noting that metropolitan areas with both Bank@Post and major bank branches may be over-serviced, while regional post offices are struggling.
4.44The Committee acknowledges the significant contributions by the major banks to the emergency bail-out of Australia’s last major cash transporter, Linfox Armaguard. The constructive collaboration shown by all players in this episode has staved off a collapse in the cash economy—for now. The Committee notes the Government’s recent announcement that it will become mandatory for businesses to accept cash for essential goods and services, with appropriate exemptions for small businesses. The Committee urges all banks to continue collaborating in good faith with their counterparts on this issue to ensure that cash continues to be a viable medium of exchange in Australia.
Card payment costs and surcharging
4.45Australians widely use credit and debit cards to purchase goods and services, appreciating the ease and security they offer. However, in the current high cost-of-living environment, the fees and charges associated with card payments are a growing concern for both businesses and consumers.
4.46Debit cards, credit cards and cards linked to loyalty programs each offer different benefits and features. Banks impose surcharges to cover the costs of processing card transactions, which include fees charged by card networks, fraud prevention measures and costs to maintain secure payment systems.
4.47Unlike other jurisdictions, Australia allows businesses to surcharge for card payments. The RBA’s surcharging regulations allow merchants to impose surcharges that capture the reasonable cost of accepting card payments. Introduced in 2003, the RBA’s regulations aimed to promote the efficiency of the payments system by encouraging customers to use lower-cost payment methods and put competitive pressure on card networks to lower their wholesale fees.
4.48From the perspective of consumers, surcharging practices are inconsistent, and regulation of excessive card surcharging is ineffective. Recognising these issues, the RBA announced in October 2024 that it would commence a review into merchant card payment costs and surcharging. This review aims to examine the costs merchants incur when accepting card payments and to evaluate the current framework for surcharging, ensuring it is fair and transparent for both businesses and consumers.
4.49In public hearings for this inquiry, some of the banks argued that the surcharges associated with card payments reflect the costs and features of such transactions. These banks informed the Committee that the costs to businesses of processing cash transactions are embedded in the price of goods, and consumers typically do not expect to be surcharged for using cash.
4.50To ensure fair practices in card surcharging, the ACCC has the authority to take compliance or enforcement action against businesses that surcharge more than the actual cost of using a particular payment method. CBA told the Committee that while some businesses may hypothetically be surcharging above the real cost of card acceptance, there was currently no data to support this claim.
4.51Since the introduction of surcharging regulations, there has been a notable shift in how Australians pay for goods and services—specifically, a significant decline in cash usage and growth in online shopping, where cash is not an option. According to the RBA’s Consumer Payments Survey, this shift has led to an increase in merchant surcharging for card payments, with approximately 7 percent of card transactions being surcharged in late 2022. Westpac’s data broadly supports this trend, with approximately 90 per cent of the merchants it has visibility over not applying a surcharge, while the remaining 10 per cent do.
4.52NAB reflected on the changes in the payments landscape and questioned whether surcharging was serving its original purpose, commenting that:
…the cost of credit card acceptance in those days was much higher than it is today. Credit cards tended to be the predominant payment of card acceptance. Debit cards weren't anywhere near as frequent. Often it was a case of cash that's free or a credit card that's quite expensive from an interchange perspective. Times have moved on quite significantly since those days. It's over 20 years ago. Debit is much more prevalent. We have least cost routing and a domestic scheme that's taking market share. It's possible that surcharging was warranted over 20 years ago, but I think it behoves us to ask whether it still serves its purpose.
4.53CBA argued that costs were ‘difficult’ to compare between cash and card payments. The estimated cost of a cash transaction, according to CBA, is around 4 per cent, with Buy Now Pay Later payments at 8 per cent and electronic payments ‘less than half of that’.
4.54Westpac and NAB both elaborated on the costs associated with handling cash for businesses. These costs are indirectly passed on to consumers, not explicitly surcharged. While consumers may not see a direct surcharge for cash transactions, the expenses incurred by businesses in managing cash are still reflected in the overall pricing of goods and services. Westpac informed the Committee that:
…if you're a business, you've got someone handling the cash and you've got the security around it—you've got all those things. We just don't cost that. We don't cost that and compare it against the $12,000 for digital payments. There's the cost of a person handling cash versus the charges from the bank in a digital world—if you're a business, that's the trade-off.
4.55Similarly, NAB commented that while cash is not currently being used ‘anywhere to the extent that it has been’, there were still associated costs for businesses that were not obvious to the consumer:
…it still costs a merchant, a business owner or a shop to collect and manage cash. The cost of that cash is not obvious to the consumer, but it's definitely a cost that's incurred by the business owner, in the same way that electronic payments also incur a cost.
4.56Concerns about payment surcharges have been increasingly prominent in public discourse. The RBA, in its initial issues paper, noted ‘growing public concern about payment surcharges’, with consumers often unable to anticipate whether a surcharge will be applied or how much it will be.
4.57The banks similarly acknowledged that this lack of transparency and consistency contributed to customer dissatisfaction. NAB CEO Andrew Irvine shared the following story:
Yesterday, Mr Laxale, you highlighted with a prop the $5 in cash and the $5.08 that you would pay if you used debit. My experience is different from that. My experience is that it's all over the place. In fact, earlier this year in Sydney, I had the shocking experience of buying a coffee with a 10 per cent surcharge. I don't know if any of you have experienced that, but that's outrageous. The RBA has commenced consultation. Wherever this lands, my hope is that it's consistent and can't just be played with in this manner. I personally don't like surcharging, but, if surcharging is maintained, I hope to goodness that it's simpler, more transparent and consistent.
4.58Part of the variability of surcharges is related to the fees set by banks and the different products offered. The banks informed the Committee that different interchange fees can apply to each transaction, based on the type of card (for example debit, credit or other payment cards like American Express), the value of the transaction and the size of the merchant. Additionally, the banks provide various offers to merchants for their payment processing facilities, such as blended rates that cover multiple card types like EFTPOS, Debit Mastercard, Visa Debit and credit cards rather than individual rates.
4.59The complexity of these fee structures and product offerings has contributed to inconsistency in surcharging practices, making it challenging for consumers to predict and understand the surcharges applied to their transactions. The RBA highlighted in its issues paper that payment service providers were increasingly bundling a range of services with their card acceptance offerings. This bundling often leads to higher fees, which could be passed on to consumers as surcharges, even when not all the bundled services are directly related to card payments. Additionally, the RBA noted concerns that debit, credit and charge cards are often surcharged at the same rate due to the rise of blended payments. This practice can obscure the true cost differences between various payment methods, making the basis of surcharges even more opaque to consumers, and potentially leading to higher overall costs.
Least-cost routing
4.60When a customer makes a payment with a dual-network debit card, businesses may choose to route the transaction through the debit network that costs them the least to accept, a practice known as least-cost routing (LCR). This can significantly impact the surcharges applied to card payments that flow through to consumers. The RBA estimates that the cost for an EFTPOS transaction is less than 0.5 per cent, while Visa and Mastercard debit transactions range between 0.5 and 1 per cent, and Visa and Mastercard credit transactions range between 1 and 1.5 per cent.
4.61In the context of excessive surcharging practices, the Committee noted the low uptake of LCR by businesses for each of the banks compared to its availability to businesses (see Table 3.2). The Committee questioned whether banks were doing enough to promote LCR adoption among businesses to help facilitate lower transaction costs.
Table 4.2Least-cost routing of card-present debit card transactions
| | |
NAB | 100% | 52% |
CBA | 97% | 48% |
ANZ | 98% | 42% |
Westpac | 100% | 41% |
Source: Reserve Bank of Australia, Update on the availability of least-cost routine for merchants: Data as at June 2024 (published August 2024), www.rba.gov.au/payments-and-infrastructure/debit-cards/least-cost-routing/update-on-implementation.html, viewed 5January 2025.
4.62However, LCR may not always be the most cost-effective option for businesses, depending on their size. The RBA’s data is subject to the caveat that for some businesses, the default routing scheme might already be the cheapest option, or the savings from LCR might not justify the implementation costs. Additionally, non-price considerations, such as differences in service capabilities between domestic and international schemes, can also play a role in this decision. CBA told the Committee:
I'd like to give you an example: all of the customers that we believe reasonably are benefiting from least cost routing have been moved on to, in most instances, a simple merchant plan. Our pricing at the moment is 1.1 per cent. We cut that maybe three years ago. It's one of the lowest in the market. One of the companies that's referenced as 100 per cent LCR is 1.8 per cent. I could offer that simple pricing plan. A lot of our customers would be worse off, and I would be at the top of that box, saying '100 per cent'. The RBA understands that. It's one measure; it's certainly not the important one. From within that, depending on what the merchant is, they have preferences in terms of which scheme they use, I can assure you. We've had ongoing dialogue with the RBA for many years, trying to make sure that least cost routing is available, that there is not inertia being show[n] by customers and we're not relying on that inertia—we're trying to make it available to the customers where it makes sense. As I said, we've substantially cut our fees, but also, as a matter of fact, if we just increased pricing and pushed everyone onto a plan, even though a great number of them would be worse off, we'd also be at the top of that table saying, '100 per cent LCR enabled'.
4.63The Committee expressed concern that blended rates were cross-subsidising high credit costs. Some of the banks told the Committee that businesses may prefer blended rates that allowed businesses to manage their cash flows better, while others preferred direct charging. In this context, Westpac conceded that the market was ‘probably too complex for the consumer to make a decision’. Similarly, NAB told the Committee that:
I guess we're taking the variability risk away from the merchant because, if we didn't do that, the merchant would ultimately just pay the rates of their customer base. I don't know. Those may diverge. Different cafes or different merchants may have different mixes of domestic EFTPOS versus card versus Visa debit, say, or Mastercard debit. We try to simplify this for businesses because they tell us simple is better for them and they like simple. As you said, we're very conscious of making sure that our services provide real value to our customers, and we're constantly looking at that. As I said, if our LCR rates continue to go up, I would expect our simplified pricing to reduce.
Committee comment
4.64While surcharging was not the only issue discussed with the banks relating to the payment system, the Committee recognises the Australian public’s increasing dissatisfaction with inconsistent surcharging practices when making purchases. The Committee notes the Government’s announcement that is prepared to ban debit card surcharges from 1 January 2026, subject to further work by the Reserve Bank of Australia (RBA) and safeguards to ensure both small businesses and consumers can benefit from lower costs.
4.65In a high cost-of-living environment, it is imperative that surcharges be consistent and transparent. Consumers should be able to predict and understand any additional costs associated with their transactions.
4.66The banks can play a crucial role in addressing these concerns by standardising their fee structures and providing clear information to merchants and consumers. This includes differentiating between the costs of various card types and ensuring that surcharges reflect the actual cost of processing payments.
4.67Moreover, it is essential that Australians are not subjected to excessive fees. The Committee urges the banks to review their pricing strategies and work towards minimising unnecessary charges. This will not only benefit consumers but also enhance the overall efficiency and fairness of the payment system, contributing to a more stable and equitable financial environment.
4.68The Committee is encouraged by the RBA’s announcement of its inquiry into these practices and looks forward to seeing the outcomes.