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<\/figure>\n\n\n\nPart of us just thinks this is an awesome market response to supply and demand.<\/p>\n\n\n\n
Think about it: airlines and hotels increase costs based on demand<\/a>.<\/p>\n\n\n\n Uber has surge pricing<\/a>. <\/p>\n\n\n\n All the big US couriers are adding surcharges as fuel prices go up<\/a>.<\/p>\n\n\n\n Surcharges are uniquely free market.<\/p>\n\n\n\n And they sure as hell beat the alternative.<\/p>\n\n\n\n Think about it: if an authoritarian caps the costs of a good or service, and the price increases to the point where delivering that good or service is uneconomical, who the hell would provide it?<\/p>\n\n\n\n But this is a payments\/retail tech periodical.<\/p>\n\n\n\n So when we mention surcharge, we mean the variety stemming from cards.<\/p>\n\n\n\n By October, surcharges will no longer be permissible in Australia.<\/a><\/p>\n\n\n\n And it’s important you read the content in that link, as we think it’s a great case study on surcharges generally.<\/p>\n\n\n\n First, an estimated 16% of Australian businesses surcharge cards.<\/p>\n\n\n\n That’s about the same was<\/em> it is domestically, but we have a pretty high CAGR on surcharges. Today it’s estimated that over a third of US businesses add card fees<\/a>, whether surcharge or dual pricing. <\/p>\n\n\n\n Second, Australians can surcharge debit cards<\/a>, unlike in the US. Which we always thought was unfair since US debit cards are expensive: they come with rewards<\/a>, and thanks to the Durbin amendment are a massive profit center for acquirers now<\/a>. <\/p>\n\n\n\n Third, the mechanics of this Australian boondoggle bill are hilarious.<\/p>\n\n\n\n The Reserve Bank of Australia (RBA), estimates that consumers pay $1.6B in surcharges. Their proposal is that the banks will simply reduce interchange by $910M to help the merchants with the $1.6B in lost revenues.<\/p>\n\n\n\n Even if you believed this, merchants are already getting shafted to the tun of $700M.<\/p>\n\n\n\n In reality, banks will just find another mechanism to charge the merchant.<\/p>\n\n\n\n Interest rate increases.<\/p>\n\n\n\n Minimum fees for accounts.<\/p>\n\n\n\n Whatever.<\/p>\n\n\n\n And we’re not begrudging banks for making a profit: they have shareholders too.<\/p>\n\n\n\n But we ARE upset that the merchants are hostage to the credit card system and the banks just abuse them.<\/p>\n\n\n\n This is what an oligopoly looks like: nominal differences, same results.<\/strong><\/p>\n\n\n\n Copying directly from the article:<\/p>\n\n\n\n The Australian Hotels Association criticised the ruling, with the chief executive, Stephen Ferguson, saying it wouldn\u2019t make the typical coffee or beer any cheaper.<\/em><\/p>\n\n\n\n \u201cWhat was the purpose of the whole exercise if it wasn\u2019t to decrease costs for consumers?\u201d he said.<\/em><\/p>\n\n\n\n Duh.<\/p>\n\n\n\n Last comment on the article itself which will get us to our final point:<\/p>\n\n\n\n Australians have told the RBA they would prefer to know the final price, even if it was higher, instead of being caught with a hidden fee.<\/p>\n<\/blockquote>\n\n\n\n Nobody likes a surprise fee.<\/p>\n\n\n\n\n