When retailers make a sale through a BNPL platform such as Afterpay, they pay a fee of about 4 per cent of the purchase price to the BNPL firm – significantly more than what retailers are charged for receiving credit card payments. As part of their contract with the BNPL firm, the merchant cannot add a surcharge on top of the retail price paid by their customer.

For years, groups including retailers, the Reserve Bank and some consumer groups have raised concerns about this ban on surcharging. They worry that forcing retailers to absorb BNPL firms’ chunky fees simply prompts the retailers to build these costs into their prices. Banks – which compete with Afterpay by issuing credit cards – have also grumbled about an uneven playing field.

BNPL loans appear “free” to a consumer, but of course, someone is paying, and it’s the retailer.

This long-running debate looks set to rear its head again soon because of proposed legislation before parliament that would give the Reserve Bank new powers to regulate new forms of digital payments, including digital wallets such as Apple Pay, and BNPL firms. The central bank has said that if the bill passes, it will launch a review of retail payments, including BNPL and surcharging.

When the Reserve Bank last looked at the question of BNPL surcharging in 2021, it sided with retailers, concluding that they should have the right to add a surcharge on to the price of products sold via a BNPL platform.

Will it reach the same conclusion when it consults on the issue again – expected in the second half of this year? That will be a key question for BNPL firms, the retailers that use these platforms, and their customers.

Afterpay co-founder Nick Molnar this week played down the potential impact of any potential changes to the rules on surcharging, saying it would not have a “material impact” on the business. He argued retailers would be attuned to the wants of their younger customers, who dislike credit cards and value things such as free returns (which, like BNPL, also costs retailers money).

“Retailers are going to meet the consumers where the consumers are, and when 50 per cent of retail spend in Australia in 2030 comes from this debit card consumer and the Millennial and Gen Z demographic, they’re going to optimise to the absolute best experience for that debit card customer,” Molnar said.

Even so, the risk for Afterpay and its rivals is that the Reserve Bank could give retailers the ability to charge more for goods they sell via a BNPL platform – as retailers often do for credit card transactions. If some retailers chose to surcharge BNPL sales, it would remove the appearance of BNPL loans being free to the consumer.

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Against this, there is also a chance that BNPL firms may get a reprieve from the Reserve Bank because of more important changes in the world of payments than the rise of BNPL. For example, the practice of surcharging by retailers will also be considered in the Reserve’s retail payments review because, increasingly, cashless consumers are becoming frustrated by retailers adding on charges for paying by card.

The Reserve Bank will also need to consider arguments from Afterpay and its rivals that they are putting competitive pressure on the traditional credit card market, which is dominated by big banks known for charging consumers hefty interest rates.

It is worth noting that the BNPL industry is still relatively small. Afterpay says BNPL is still only about 3 per cent of all consumer credit payments, and its role overall is tiny compared with digital wallets such as Apple Pay and Google Pay.

As consumers increasingly ditch cash for digital payments, it is throwing up all sorts of tricky questions about how these new payment methods should be regulated and how to keep costs contained. BNPL is just one area where these questions are still being debated, almost a decade after Afterpay came onto the scene.