Card Surcharge Ban Hits Hospitality: 51% Plan Price Rises

Fifty-one per cent of Australian hospitality businesses plan to raise prices following the country's card surcharge ban — a regulation that took effect on 1 October and was sold to consumers as a collective $1.6 billion annual saving.

That figure comes from new research by OnDeck Australia, a small business lender, which surveyed more than 250 Australian small businesses about the practical fallout of the ban. The intended consumer benefit works out to roughly $80 per year for each card user. But the merchants who actually process those card payments still incur merchant fees on every transaction, and the survey suggests those costs don't disappear. They move.

For hospitality operators, the numbers are sharper than for small business at large. Sixty-nine per cent of hospitality respondents expect the ban to increase their business costs, and 65 per cent are concerned about its impact on their operations over the next 12 months. Across the full survey pool of more than 250 businesses, 66 per cent expect higher costs — and of those, 23 per cent expect the increase to be significant.

Where does the cost go now?

The answer, for most operators, is straight into the menu. Forty-four per cent of all surveyed businesses plan to increase prices to cover the added expense; among hospitality businesses specifically, that share climbs to 51 per cent. Only 23 per cent of businesses said they would absorb the payment costs themselves — meaning more than three in four intend to pass the cost somewhere other than their own margin.

OnDeck Australia CEO Cameron Poolman said the survey shows the new rules simply shift the cost rather than remove it.

"The idea that this would be a win for consumers ignores how businesses operate," Poolman said. "For many businesses, merchant fees are a real operating cost. If the business can no longer recover that cost at the point of payment, it has to recover it somewhere else. If the cost of payment is simply built into the price of the coffee, the customer is still paying for it."

That coffee example is the operator-level economics in one sentence. A merchant fee that once appeared as a separate, itemised surcharge at the terminal now gets folded into base pricing — effectively a menu-wide price engineering decision that every card-paying and cash-paying customer sees equally, whether they use a card or not.

What does this mean for inflation?

Poolman's bigger concern is scale: what happens when thousands of businesses make the same pricing decision at the same time.

"At a time when inflation is already elevated and interest rates are rising, further price increases risk adding to inflationary and cost-of-living pressures rather than relieving them," he said.

The arithmetic behind that worry is straightforward. If roughly half of hospitality businesses — a sector dominated by thin-margin, high-frequency, low-ticket transactions where card payment is now the norm — build merchant fees into prices, the $80 per-card-user saving gets partially clawed back through higher listed prices on everything from coffees to mains.

The next 12 months will show whether the 65 per cent of hospitality businesses worried about the ban's impact follow through on planned price rises, or whether competitive pressure forces more of them into the 23 per cent who absorb the cost.