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Westpac to offer cheaper contactless payments for merchants

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Westpac will deliver least-cost routing to its retail customers in 2019.

Westpac has today confirmed it will offer cheaper contactless payment processing for its merchant customers by 2019. Referred to as least-cost routing, the functionality will enable Westpac's retail and small business customers to process contactless debit card transactions through the cheaper EFTPOS system.

Currently, businesses don't have a choice as to what network contactless tap and go debit payments are sent through. When a customer taps their debit card to pay without entering a pin, the transaction is automatically processed via the Visa or Mastercard network, despite not being a credit transaction. Given the popularity of tap and go contactless payments, this inability to send these transactions via EFTPOS is estimated to be costing the economy more than $558 million in additional costs.

For this reason, in December 2017 The House of Representatives Standing Committee on Economics ordered the banks to allow merchants to instead have the option of sending these contactless payments through the EFTPOS network, with a recommended deadline of 1 April 2018. Chief product officer for the business bank at Westpac, Jim Tate, said Westpac will deliver on its commitment to offer least-cost routing sometime in 2019.

“Australia has one of the highest adoption rates of contactless payments in the world and now that another card scheme is capable of processing these transactions, we are investing in our payments infrastructure to pass this option onto our merchant customers," said Tate.

This commitment by Westpac is a win for retailers across the country who rely on the bank's EFTPOS and credit terminals to accept and process customer transactions. Executive Director of the Australian Retailers Association Russel Zimmerman said, "This is a positive move for retailers as merchants shouldn’t be disadvantaged for accepting card payments from customers."

Australian business-only bank, Tyro, beat the Big Four in the race to commit to least-cost routing, announcing its new Tap & Save product in March 2018 ahead of the government deadline. Tyro said the initiative will save its merchants an average of 6% on Merchant Service Fees and the majority of its merchants will save between 20-30% on re-routed transactions going through EFTPOS instead. This is because Tyro's Tap & Save product will process and charge contactless tap and go transactions made with a debit card the same as a standard EFTPOS transaction. When it announced the initiative, Tyro said the product will benefit merchants at the expense of its own profits.

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