From theory to reality: The varied and often unintended consequences of card payment surcharging

Abstract

This paper examines the practice of surcharging card payments, which is designed to increase transparency and reduce the cost of card acceptance for merchants. However, the theory behind surcharging does not always align with its outcomes in practice. Despite its intended benefits, such as encouraging cost-effective payment methods and reducing merchant service fees, the global implementation of surcharging has produced mixed results. While surcharging is legal in certain markets, like Australia and the USA, it often leads to overcharging by small merchants, a lack of consumer benefits, and regulatory challenges. This paper explores the current state of surcharging across key markets, identifies the main beneficiaries of the practice, and highlights the need for stronger regulation of payment acceptance costs. Ultimately, it argues that surcharging has failed to meet its goals and that a more competitive and regulated payment ecosystem is necessary to achieve genuine transparency and cost reductions.