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Westpac's least-cost plan for contactless card payments

Westpac's least-cost plan for contactless card payments

05 Apr, 2018 - 2 min read

Westpac has confirmed it plans to offer least-cost routing for contactless debit card payments, which could allow retailers to lower operating costs and pass the savings on to Australian shoppers.

Last year, the Reserve Bank of Australia’s (RBA) Payment Systems Board recommended that regulations be put in place to ensure banks give merchants the ability to send tap-and-go payments from dual-network debit cards through the channel of their choice, if the banks had not already facilitated this recommendation by 1 April 2018.

RBA payments policy:

RBA looks at more affordable electronic payments

Westpac is currently in discussion with the RBA regarding its plans, which are due to be put into action in 2019.

What is least-cost routing?

Many payment systems currently used in shops around Australia automatically rout contactless card payments through payment networks owned by the likes of Visa and Mastercard.

This means that even if a shopper pays with money from their bank account via a debit card, it is still considered a credit card transaction, rather than an eftpos payment.

The higher interchange fees involved with certain credit cards can mean that contactless payments end up costing merchants more than necessary, and some merchants have passed these costs on to customers via higher prices and/or surcharges.

Least-cost routing involves processing contactless card payments through the lowest-cost payment system, whether that’s the eftpos or Visa/Mastercard network, thereby helping to reduce the cost to merchants and/or customers.

Learn more about interchange fees:

Credit card interchange fee changes – winners and losers

Westpac chief product officer, Jim Tate, said that Australia had one of the highest adoption rates of credit cards in the world, and that least-cost routing should help to level the playing field for small businesses.

Australian Retailers Association (ARA) executive director, Russell Zimmerman, voiced his support for Westpac’s decision to offer dual network routing, stating that according to McLean Roche Consulting, the current system is costing the Australian economy an estimated $558 million.

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Disclaimer

This article is over two years old, last updated on April 5, 2018. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent credit cards articles.

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This article was reviewed by Property & Personal Finance Writer Nick Bendel before it was published as part of RateCity's Fact Check process.

Mark Bristow

Personal Finance Editor

Mark Bristow is RateCity's Home & Personal Finances Editor, and an experienced analyst, researcher, and producer. While primarily focused on Australian mortgage and home loan expertise, he has experience across energy, home and travel insurances. Mark has been a journalist and writer in the financial space for over ten years, previously researching and writing commercial real estate at CoreLogic. In the years since, Mark has worked for the Winning Group, Expedia, and has seen articles published at Lifehacker and Business Insider.