Is PayID the New Alternative for Small Businesses After the Card Surcharge Ban?

With card surcharges banned from 1 October 2026, some Australian small businesses are switching off card payments and turning to PayID, bank transfers and cash.

The reason is simple... while the surcharge has disappeared, the cost of accepting card payments hasn't. Business owners now need to decide whether to absorb those fees, adjust their prices or find a cheaper way to get paid.

For owners considering selling in the next 12 to 24 months, the decision could be particularly important. Allowing payment costs to quietly eat into margins could affect cash flow and profitability which are key figures prospective buyers will examine when assessing a business.

 

The surcharge is gone. The processing cost isn't.

 

The change follows the Federal Government's push to end card surcharges and a subsequent review by the Reserve Bank of Australia (RBA). Following the review, the RBA changed its regulatory standards, allowing eftpos, Mastercard and Visa to introduce 'no-surcharge' rules from 1 October 2026.

American Express and UnionPay have also removed surcharging from 1 October, while PayPal's changes take effect from 5 October.

While the rules are implemented through card networks and merchant agreements, the outcome for Australian businesses is straightforward, the card surcharges can no longer be passed directly on to customers.

But that doesn't mean the cost of accepting cards has disappeared.

The Reserve Bank of Australia (RBA) has confirmed that businesses will continue to incur costs when accepting card payments. Businesses can choose to absorb these costs or incorporate them into their overall pricing rather than charging customers a separate card surcharge.

At the same time, the RBA has introduced measures aimed at reducing merchant payment costs and improving transparency.

The maximum interchange fee on domestic consumer credit cards, for example, has fallen to 0.30% from 1 October. The RBA estimates its broader interchange reforms could save merchants around $910 million a year.

However, interchange fees are only one component of what a business may ultimately pay its bank or payment provider.

For business owners, the question now becomes: what does it actually cost to get paid — and is there a better way?

 

Some businesses are simply switching cards off

 

That question has produced some fairly dramatic answers.

Yarra Valley Rides, a family-run private transport business in Victoria, announced that it would stop accepting card payments from 1 October and instead accept cash or direct bank deposits.

Director Scott Bennett told SmartCompany the business was paying around $9,000 a year in card-processing fees.

Some individual bookings attracted processing fees of around $50.

Rather than increasing prices for every customer, including those who would otherwise pay by bank transfer, the business decided to remove cards.

"I don't want to put the price up because we quote a price not knowing how they're going to pay," Bennett said.

Around 90% of the business's work is invoiced, with jobs generally worth between $300 and $2,000, making bank transfers a more practical alternative than they might be for a busy café processing hundreds of small transactions.

The decision nevertheless highlights the calculation many business owners are now making.

Is accepting cards worth the cost?

 

Salons, service businesses and others are following

 

Yarra Valley Rides isn't alone.

Hello Mane, a salon in Marsden Park, NSW, announced on Facebook that it would trial operating without card payments and instead accept cash and bank transfers.

"We apologise for any inconvenience, but find this to be the easiest way to work through this right now," the business said.

Victorian aesthetic clinic Amor Sui also announced it would stop offering EFTPOS from 1 October, accepting cash and bank transfers instead.

Dog-training business Pedal Paws made a similar decision, telling customers that new invoices would be payable by cash or bank transfer.

The business explained on Facebook:

"As a small business and [with] the cost of everything going up, especially fuel at the moment, I decided that I'd rather not put service prices up to cover the costs/fees as everyone is in the same boat with the cost of living these days."

The comments reflect a broader issue for small businesses.

A 1% or 1.5% processing cost might appear insignificant on an individual transaction. Across hundreds of thousands or millions of dollars in annual turnover, it can become a meaningful business expense.

 

 

Business owners are debating online

 

The discussion is also playing out among Australian business owners on social media.

In one discussion on the r/ausbusiness Reddit community, a business owner who already offered PayID and direct bank transfer as fee-free alternatives questioned why they should now absorb the card fee when customers choose the convenience of paying by credit card.

Another owner described the effect on an $11,000 invoice where around $9,000 represented outgoing costs.

"I need to absorb $187 now," the business owner wrote.

The same discussion highlighted the opposing view.

Some customers and business owners argued that card processing is simply another cost of doing business, like rent, electricity or cleaning, and should already be incorporated into pricing.

Others questioned whether pushing customers towards cash creates its own costs through counting money, reconciling tills, making bank deposits and security.

There is no single solution that suits every business.

A café selling $6 coffees has a very different payment environment to a professional services business issuing $10,000 invoices.

 

Could PayID become the alternative?

 

One payment method receiving increasing attention is PayID.

Instead of passing through a card network, PayID enables customers to make account-to-account payments using an identifier such as a mobile number, email address or ABN linked to a bank account.

For businesses that invoice customers or accept larger payments, it can provide an alternative to percentage-based card processing fees.

PayID isn't necessarily "free" in every commercial setup. Costs depend on the bank, payment provider and how the business integrates the payment method.

But the difference between percentage-based card fees and fixed-cost account-to-account payments can become particularly important as transaction values increase.

Payment providers are already responding to that opportunity.

For example, Pay Advantage is promoting a business PayID option priced at a flat 48 cents per transaction through its platform, compared with its published card pricing of 33 cents plus 1.68%.

On a $2,000 payment, it gives an example of a $33.93 card-processing cost compared with 48 cents using its PayID option.

That is one provider's pricing rather than an industry-wide rate, but it demonstrates why account-to-account payments are attracting attention from businesses processing larger transactions.

Even Macquarie's DEFT payment system has stopped accepting credit and debit card payments for rent from 1 October, with customers still able to use BPAY, PayID and bank transfers.

 

Businesses can encourage PayID without fees

 

There's another important distinction for businesses.

While a business can no longer add the prohibited card surcharge, it can still encourage customers to use another payment method.

The RBA confirms businesses can offer discounts for particular payment methods.

So rather than advertising a price and then adding 1.5% because someone taps a card, a business could advertise its full standard price and offer a discount for customers who choose an eligible lower-cost payment method such as PayID or cash, subject to applicable pricing rules.

That reverses the psychology of the transaction.

Instead of:

$1,000 + card surcharge

the customer sees:

$1,000 standard price

with the possibility of a discount for using the business's preferred payment method.

That approach won't suit every business, but it provides owners with another option beyond simply absorbing every processing fee.

 

But convenience still matters

 

There's a reason cards became so dominant.

They're easy.

Mount Gambier bakery owner Dylan McQueen told the ABC his business paid $5,785 in card fees last financial year despite displaying "CASH PREFERRED" signs.

Cash still accounted for only 16% of his transactions.

"People pay for convenience," McQueen said.

That convenience matters to businesses as well.

A card payment can be collected immediately. There's no waiting for a customer to make a bank transfer, checking whether an invoice has been paid or chasing an overdue account.

For businesses processing large numbers of transactions, handling cash also creates labour, security and banking costs.

David Bitton, chef and founder of Bitton Gourmet, told SmartCompany approximately 92% of turnover at his Rose Bay bistro comes through credit cards.

Annual card acceptance costs can reach around $40,000.

Despite that figure, moving the restaurant towards cash isn't necessarily practical because of the logistics involved in handling large amounts of physical money.

The cheapest transaction fee isn't necessarily the cheapest way for a business to get paid.

 

 

Other businesses will simply change their prices

 

For many owners, abandoning cards won't be realistic.

That leaves another option: incorporate the cost into normal pricing.

Swim-school owner Greg Hodge told the ABC his business has been encouraging customers to move from credit card payments to bank transactions.

If customers can't switch, the business may need to increase prices.

"We either have to absorb [the fees], or we have to put our fees up," Hodge said, estimating the difference could be around $1 per swimming lesson.

Australian Restaurant and Cafe Association chief executive Wes Lambert told the ABC that businesses were considering several responses, including increasing prices, stopping acceptance of certain card types and moving towards cash.

The RBA itself acknowledges that businesses which previously surcharged may choose to incorporate payment costs into their advertised prices.

The question for each business is how much.

 

Don't guess! Work out what cards actually cost your business

 

This is where business owners need to be careful.

Simply adding 1.5% to every price because that was the previous surcharge may not reflect the business's actual cost after the reforms.

Likewise, absorbing every fee without examining the numbers could unnecessarily reduce margins.

Businesses should review their merchant statements.

 

Selling your business? You need to act quickly

 

For owners thinking about selling a business, there is another reason not to ignore the change.

Buyers aren't simply looking at revenue.

They're looking at what the business earns from that revenue.

If a business previously recovered $10,000, $20,000 or $40,000 a year in card-processing costs through surcharges and now simply absorbs those costs, that can flow through to the bottom line.

Consider a business turning over $2 million annually.

If most customers pay by card and the business ultimately carries an additional $20,000 in unrecovered payment costs, doing nothing could mean $20,000 less operating profit, all else being equal.

Leave that situation unaddressed for the next 12 months and the impact could begin appearing throughout the financial statements presented to a prospective buyer.

That matters when preparing a business for sale.

The answer isn't automatically to increase prices.

It is to understand the cost and make a deliberate commercial decision about how it will be managed.

That could mean negotiating lower merchant rates, changing providers, introducing PayID or bank-transfer options, moving recurring customers to direct debit, reviewing prices, offering discounts for preferred payment methods or deciding that accepting the cost of cards remains worthwhile.

Whatever the solution, owners considering a sale should be able to demonstrate that they identified the change and responded appropriately rather than allowing it to quietly erode profitability.

 

Buyers should be looking at payment costs too

 

The issue also belongs on the due-diligence radar for business buyers.

A buyer considering a café, retailer, salon, medical practice, trade business or other operation with significant card turnover should understand how customers pay.

Ask what percentage of sales are processed by card. Look at actual merchant statements rather than assuming the percentage.

Understand whether the business previously passed those costs to customers and what changed after 1 October.

If the business recently increased its prices, determine why.

If customers have been moved to PayID or bank transfers, look at whether the change has affected payment times or debtor levels.

Historical accounts may also need some context.

Understanding that difference will be important when assessing maintainable earnings and the ongoing performance of the business.

 

Cards out? Not necessarily.

 

The end of card surcharges probably won't mean the end of cards.

For millions of transactions, tapping a card will remain the fastest and easiest way to pay.

But 1 October has forced Australian businesses to look more closely at something many owners previously treated as an unavoidable line on their merchant statement: what does it actually cost the business to get paid?

For some, the answer may still be cards.

For others, it could increasingly be PayID, bank transfer, direct debit, PayTo or even cash.

And for business owners preparing to sell, the important thing is not which option they choose.

It's making sure the decision protects cash flow and profitability rather than allowing a seemingly small transaction cost to quietly chip away at the value they have spent years building.

Tags: government selling a business buying a business

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