Cash Combats Compulsory Cashless Charges

Regulations surrounding cashless transaction charges remain a grey zone in many countries, especially those with emerging economies. Keeping cash accessible and usable will foster more competitive payment ecosystems, ensuring everyone has access to private, fee-free transactions and reliable cover when cashless systems fail.

Rohan Shaju of payments and fintech consultancy Edgar, Dunn & Company notes that ‘surcharging has emerged as a practice that impacts both merchants and consumers’ with ‘this fee-shifting strategy… sparking debates about fairness.’

Surcharges are fees added by businesses to a customer’s purchase when using a particular payment method, most often a credit card. This addition, which is usually a percentage of the transaction amount, either completely or partially offsets the charge levied by payment providers to use their service.

Beyond transaction fees from cashless providers, Shaju points out merchants also face other costs when accepting non-cash payments. These can include the purchase of specialised hardware and software, ensuring compliance with data security standards, and losses associated with card fraud and chargebacks.

Response to these costs varies greatly by size of business, cultural and regulatory environment. Shaju gives the example of Australia, where card surcharges are legal and payment networks are not permitted to prohibit merchants from imposing them should they choose. ‘Over time,’ Shaju says, ‘issues emerged with merchants charging excessive surcharges… and applying fixed-fee surcharges that disproportionately affected lower-cost purchases.’ While the Reserve Bank of Australia (RBA) responded with revised regulations that limited surcharges, ‘there were still many merchants (especially small cafes, restaurants and takeaway food) who exhibited deviations.’ An RBA survey found the percentage of card payments on which a surcharge was added had risen from 4.7 in 2019 to 7.3 percent in 2022.

Shaju observes a connection between greater adoption of cashless payments, lower cash use, and a rise in fees being added to non-cash transactions. ‘In summary,’ he says, ‘as cash use declines, Australia is likely to see growth in surcharge prominence.’

Banknotes and coins offer an instant, clear exchange of value. By design, they are simple to use and understand, making them accessible to everyone from the very young to the very old and supporting individuals with disabilities. There are also no hidden fees associated with spending or receiving cash.

As card and other cashless payment options mature, and providers gain an understanding of what levels of personal data harvesting and added charges will be tolerated in a given market, cash remains essential to ensuring inclusive economies, competitive payment spaces and—ultimately—that choice remains with the individual and not governments or corporations.