The introduction of contactless card payment (i.e. Tap ‘n’ Go) has increased the cost of processing debit transactions for most businesses in Australia. Some fuel retailers have reported a three-fold increase in the merchant fees charged by their Bank for processing debit transactions since ‘Tap N Go’ was introduced.

“An investigation of this issue revealed that the higher cost was due to the Banks redirecting ‘tap n go’ debit transactions from the lower cost eftpos pathway to the higher cost credit card gateways (i.e. Visa and Mastercard)”, said ACAPMA CEO Mark McKenzie.

While actual costs for individual fuel retailers vary according to the specifics of the merchant services contract negotiated with their bank, debit transactions processed by the Visa/Mastercard credit card gateways were typically costing 1% of the total value of the debit transaction, compared with a fixed fee of just 24 cents via eftpos.

“This means that, for an average debit transaction of $75, the current cost of processing the transaction via the credit card gateways – at 75 cents – is three times higher than if the transaction was processed by Eftpos at just 24 cents”, said Mark.

Curiously, this change occurred without any notice to Australian retailers with the Banks defaulting all payment terminals to the higher cost gateway. This is why many fuel retailers have experienced a sharp rise in the cost of their debit transactions over recent years.

The discovery of this issue gave rise to advocacy efforts seeking the introduction of “least-cost merchant routing” – that is, allowing the retailer to choose the least cost payment gateway to be used for processing debit transactions on their own terminals.

This week, Westpac announced that it has introduced least-cost merchant routing for its business customers. Westpac has advised its’ business customers that a change to least-cost routing can be made ‘in 10 minutes’ by simply contacting the Westpac Merchant Help Desk on 1800 029 749 (or speaking with your business relationship manager).

“The Westpac announcement follows similar announcements by NAB and ANZ in recent weeks, with the Commonwealth Bank understood to be working on the introduction of a least cost routing solution in June 2019”, said Mark.

These changes mean that it is now worth taking the time to compare the costs of your current merchant services fee arrangement with your bank. If they can’t provide least cost routing then it might be worth considering a change to a merchant services provider who does offer this service.

“In most cases, fuel retail businesses can halve the current cost of processing debit transactions if the average value of their debit transactions is $50 or more and so it is worth taking the time to make the change, said Mark.