Banking News

Least Cost Routing Back in Focus

Least Cost Routing Back in Focus

(18 May 2020 – Australia) As contactless payments become de rigueur for consumers observing COVID-19 social distancing restrictions, retailers are reporting incurring high fees as banks continue to route ‘tap and go’ payments along credit card network ‘rails’ instead of the cheaper Eftpos network.

Smaller retailers have increased lobbying their case with regulators and the government, pushing the Reserve Bank of Australia to lift pressure on acquirers to adopt least cost routing and automatically assign contactless payments to the most cost effective network which is generally member owned Eftpos.

East & Partners latest H1 2020 Merchant Payments program, based on direct interviews with 2,246 enterprises with turnover of A$1 – 725 million plus across Australia, shows that Debit Card transactions continue to accelerate in preference, comprising over two thirds of all transaction volume and trending steadily higher.

Eftpos calculates up to A$30 million in additional fees were incurred by merchants in March alone as banks automatically routed debit card contactless payments to Visa or MasterCard. The retail industry estimated additional service fees were costing between A$350 million to A$550 million a year in the lead up to the coronavirus crisis.

“Retailers should be very concerned about the surge in tap and go from a cost perspective but they have options to reduce that cost significantly," he said. "They should talk to the banks about switching on least-cost routing as soon as possible. To get the service (least cost routing), retailers will need to press banks to switch it on” stated Eftpos CEO Stephen Benton.

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