Adds Mastercard comment in paragraph 10

SYDNEY, July 15 (Reuters) - Australia's central bank on Tuesday proposed to scrap surcharges on most debit and credit card payments for consumers while lowering interchange fees paid by businesses, steps it estimated would save the two groups around A$2.4 billion ($1.57 billion) a year.

In a consultation paper on the proposals, the Reserve Bank of Australia said surcharges and fees were no longer in the public interest and invited feedback from interested parties by August 26.

The RBA judged that surcharges on debit and credit cards, including Mastercard MA.N and Visa V.N, no longer achieved the intended purpose of steering consumers to make more efficient payment choices.

The RBA said avoiding surcharges had become harder as cash usage declined and there were challenges with enforcing the current rules.

The central bank's most recent triennial consumer payments survey found that the share of consumer payments made in cash had fallen from around 70% by number in 2007 to 13% in 2022.

"Removing surcharging would make card payments simpler, more transparent and help to increase competition in the card payments system," the RBA said.

Capping and lowering interchange fees, which merchants' banks pay to cardholders' banks, would benefit around 90% of Australian businesses, the RBA said.

Cutting interchange caps would benefit small businesses the most, while putting caps on foreign interchange fees would help to lower fees for all businesses accepting international cards.

Alan Machet, group country manager for Visa Oceania, welcomed action on consumer surcharges but argued interchange fees were needed to fund investment in innovation and fraud protection.

A Mastercard spokesperson welcomed the RBA's proposal to ban surcharges on domestic card transactions, adding the company would take time to carefully consider all of the recommendations.

The RBA also proposed to require card networks to publish the interchange fees they charge, making it easier for businesses to shop around for a better deal.

The central bank said it intends to publish its conclusions and an implementation timeline for any regulatory steps by the end of the year.

American Express AXP.N has a separate agreement with the RBA and is not subject to interchange rules.

($1.5288 Australian dollars)

(Reporting by Wayne Cole; Editing by Jamie Freed)

((Wayne.Cole@thomsonreuters.com; 612 9171 7144; Reuters Messaging: wayne.cole.thomsonreuters.com@reuters.net))