In Australia, tap-and-go (also known as contactless) dual-network debit card payments are typically processed through one of three networks: Mastercard, Visa or eftpos. Each network charges different rates per transaction, which are then included in your monthly merchant fees.
By opting into Least Cost Routing², it's possible for you to choose which network(s) (eftpos/Mastercard/Visa) these payments are sent through. You might do this because customising which networks are used may represent cost savings for your business.
If you opt-in to Least Cost Routing, you'll be asked to select one of three options for processing customers' tap-and-go dual-network payments. Which one you choose will depend on your individual business and determine your potential savings. In order to decide, take the time to look at your transaction volumes, card mix and turnover to make the most cost-effective choice.
Read our case studies outlining how three businesses might benefit from each of the Least Cost Routing options.
Luke runs a cafe where he sells a lot of coffee. His average sale size is $5.
As per his pricing schedule, debit transactions processed through the Mastercard or Visa networks incur an average of 1.2% in transaction fees. Debit transactions processed through the eftpos network incur 25c per transaction.
Based on Luke's average sale size of $5, routing customers' dual-network tap-and-go transactions through Mastercard and Visa networks would cost him an average of 6c per transaction. Routing these transactions through eftpos would cost him 25c per transaction. Luke realises it's cheaper for him to enable Least Cost Routing to route these transactions through the Mastercard and Visa networks.
Current fees: Visa and Mastercard only - average $5 x 1.2% = 6c per transaction
Alternative option fees: 25c per transaction
Sam runs an upscale restaurant where the average meal costs $150. Sam pays an average fee of 2% for each debit payment processed through the Mastercard or Visa networks. She discovers that it would only cost her a flat rate fee of 35c for each payment processed through the eftpos network.
Based on an average sale size of $150, Sam pays $3 in fees to route a debit transaction. She decides to enable Least Cost Routing on her terminal and sets the dual-network tap-and-go transactions to be routed through the eftpos network for the 35c flat rate, and by doing so saves an average of $2.65 per sale.
Current fees: Visa and Mastercard only - average $150 x 2% = $3 per transaction
Alternative option fees: 35c per transaction
Sandra runs a gift shop where her average sale size is $25. Sandra pays an average transaction fee of 1.2% for debit payments processed through the Mastercard and Visa networks. Sandra discovers that it would cost her a flat fee of 30c for every debit transaction processed through the eftpos network.
She works out that she’d be best off using Least Cost Routing and setting a transaction threshold limit of $25. This way, debit transactions up to and including the value of $25 will be processed using the Mastercard or Visa networks at a cost of 1.2% per transaction, and debit transactions greater than $25 will be processed using the eftpos network at a cost of 30c per transaction.
With this approach, Sandra will pay a maximum cost of 30c per transaction and for debit transactions less than $25 in value, the fee will always be less than 30c per transaction.
Current fees: $5 x 1.2% = 6c and $25 x 1.2% = 30c and $45 x 1.2% = 54c
Alternative option fees: $5 x 1.2% = 6c and $25 x 1.2% = 30c and $45 will incur the flat fee of 30c
Understand the fees you pay now with the fees you would pay with the different LCR options to make an informed decision about whether to opt in. We can help with this over the phone and find out what the most cost-effective choice is for your business. Either:
Least Cost Routing only applies to tap-and-go dual-network debit card transactions. This means that the card must have a Mastercard or Visa logo on one side and the eftpos logo on the other. Most debit cards in Australia are dual-network cards. Tap-and-go credit card transactions are not covered because they will default to their issuer’s network.
Least Cost Routing isn't applicable to credit card transactions, Mobile Wallet transactions or any transactions being made by inserting or swiping a debit card on the device.
You'll still need to make sure you're only surcharging the amount it costs you to process the payment, known as the Cost of Acceptance.
Chargebacks are still available for customers that opt in to Least Cost Routing.
No, your settlements will not be affected and will take place as usual.
¹ You must be on an Interchange Plus pricing plan with an Essential Lite or Essential Plus device. Older devices such as IWL255, IWL252, ICT250 and IPP350 are also eligible if they are on an Interchange Plus pricing plan.
² Least Cost Routing is also known as Merchant Choice Routing. A reference in the Merchant Agreement dated 1 April 2020 to Merchant Choice Routing is also a reference to Least Cost Routing.
View Terms and Conditions for Business Transaction and Savings Accounts and our Financial Services Guide and consider them before making any decision about these products. This advice has been prepared without considering your objectives, financial situation or needs. Before acting on the advice, please consider if it’s right for you. Bank fees and charges may apply. Download the Merchant Agreement Terms and Conditions for more information.
MasterCard and the MasterCard brand mark are registered trademarks of MasterCard International Incorporated. Visa is registered Trademark of Visa in the United States. Eftpos is a registered trademark of eftpos Payments Australia Ltd.
