For businesses operating in Australia, the local debit card scheme, EFTPOS, is a familiar term. However, recent advancements in its digital payment services prompt a deeper examination of this prevalent debit payment method.
We’ll delve into its evolving role in the Australian payments landscape, including its latest developments such as EFTPOS Card Not Present and least cost routing.
eftpos within the Australian payments landscape
From iconic symbols like kangaroos to beloved figures such as Kylie Minogue, certain elements are deeply ingrained in Australian culture. In the realm of payments, one such iconic presence is EFTPOS. While other regions may heavily rely on credit cards or digital wallets, EFTPOS holds a distinctive position in Australia’s payment landscape, symbolizing everyday transactions.
Since its inception in 1984, EFTPOS has witnessed significant shifts in local payment trends and consumer behaviors. How has the scheme evolved to adapt to these changes, and how can businesses leverage its latest features like Card Not Present (CNP)?
Australia stands out as a country where card usage prevails: as of 2022, debit card payments accounted for 51% of all transactions, marking a consistent increase over the years. In contrast, cash transactions dwindled to a mere 13%, plummeting from 70% in 2007. Moreover, mobile device tap payments have gained popularity, particularly among younger demographics, with over two-thirds of individuals aged 18 to 29 embracing this method.
Looking to alternative payment methods, PayPal is Australia’s most popular digital wallet, and was used by 9.8 million (43.8%) Australians in 2022. Australia is also the home to buy now, pay later (BNPL) methods such as Afterpay and Zip. Afterpay claims over 3.2 million people use their product in Australia (15.2%), while Zip processes about half of those volumes.
What is eftpos?
As Australia’s indigenous debit card scheme, EFTPOS facilitates electronic debit transactions both in brick-and-mortar stores and online, rendering it a favored and adaptable payment solution for businesses.
EFTPOS Australia stands as the driving force behind the original EFTPOS system, which debuted in Australia in 1984. All EFTPOS transactions are locally processed within Australia through their infrastructure. Over the years, EFTPOS has continually evolved to keep pace with shifting payment trends – from transitioning to a centralized network and introducing contactless chip technology in 2014 to embracing mobile payments in 2017. In 2020, EFTPOS unveiled digital payment identity solutions with the launch of connectID, a platform designed to enhance Australians’ security in the digital realm.
In 2021, EFTPOS became a pivotal part of the Australian Payments Plus (APP) initiative. This collaborative venture brought together three prominent domestic payment entities – BPAY Group, NPP, and EFTPOS – with the aim of delivering significant benefits to Australian consumers and businesses both now and in the future.
How does eftpos work in Australia?
As you’re likely aware, the EFTPOS system enables consumers to initiate payments directly from their bank accounts, eliminating the need for cash. This process is characterized by its speed, security, and convenience, benefitting both customers and businesses alike. EFTPOS is widely accepted, boasting nearly 1 million terminals, over 60 million cards in circulation, and facilitating over 2 billion transactions annually (as of the end of 2020). Australians frequently rely on EFTPOS-branded debit cards for a multitude of transactions, ranging from everyday purchases like a cup of coffee at a local café to settling utility bills. EFTPOS offers the simplicity of cash transactions with the added convenience of electronic payment methods. Standard interchange ++ fees are applicable to EFTPOS transactions.
In Australia, debit transactions are primarily conducted through one of the three primary card scheme networks: EFTPOS, Debit Mastercard, or Visa Debit. Most debit cards are dual-network cards, featuring co-branding as either Visa with EFTPOS or Mastercard with EFTPOS. Over 35 million debit cards are contactless-enabled dual-network cards, enabling payments to be processed via either EFTPOS or one of the international networks.
Least-cost routing and eftpos Card Not Present
Now, let’s delve into the latest advancement impacting businesses processing payments through EFTPOS. As contactless payments continue to gain traction, innovations in debit payment technology are affording businesses greater choice and flexibility in how these transactions are handled. One such innovation is least-cost routing (LCR), also referred to as merchant-choice routing (MCR). LCR empowers businesses to, among other advantages, route a payment through the debit network that offers the lowest transaction processing fees, as well as automatically retry certain declined transactions.
Until recently, least-cost routing in Australia was limited to in-person debit payments made with physical debit cards, while online debit card transactions were solely processed via international networks. However, as of mid-2023, LCR has been extended to online transactions following the introduction of EFTPOS’ new Card Not Present (CNP) functionality for online payments.
While the shopper experience, such as checkout flow and shopper statement, remains unaffected by this new routing option, the introduction of EFTPOS CNP represents a significant development for any business accepting transactions in Australia. From potential cost-saving opportunities to regulatory considerations, you can explore further insights into the latest updates and their implications for your business in our recent guide to least-cost routing changes in Australia.
Keeping up with the latest payment trends in Australia
Remaining informed about local payment trends, even those that seem familiar, can offer numerous advantages to businesses – advantages that are frequently underestimated. By strategically directing transactions through the most cost-effective network, enhancing speed and reliability, businesses can lower their overall payment processing costs, enhance customer satisfaction, and streamline operational efficiency.
Are you prepared to propel your business forward in the Australian market? Keep up with the latest trends, innovations, and opportunities by consulting the 2023 Australia Retail Report.
