Links to Least Cost Routing deals below.
Least Cost Routing or Lowest Cost Routing refers to the ability of merchants, (specifically their POS terminal) to send each card transaction to the network that charges the least fees. Contactless transactions are typically sent to Visa or Mastercard. Consumers can choose the network to use if they insert their card and press either CHQ SAV or CRED buttons.
The CHQ and SAV buttons send a transaction to the eftpos network while CRED goes through Visa or Mastercard.
Mastercard and Visa may charge around 1.5% of the value of a transaction but eftpos charges a flat rate around 25 cents.
So a small transaction might be cheaper going through Mastercard or Visa and bigger transactions might be cheaper going through eftpos.
Mark owns a coffee shop with an average transaction size of $5. His card transactions, if handled by eftpos, cost about 25 cents each. But if Mark has the ability to direct his transactions to the least cost network, his $5 sales could be handled by Mastercard for 1.5%, or around 6 cents, a saving of 19 cents per sale.
Heather runs a fitness and pilates studio. Her average card transaction is $50. The average card fee, if handled by Mastercard or Visa is about 75 cents. But if Heather gets Least Cost Routing, she can switch most payments to eftpos, saving about 50 cents each time.
Links to Least Cost Routing plans offered by banks in Australia
Tyro’s Least Cost Routing package is called “Tap & Save”. Tyro says merchants can save more than 8 per cent of their total merchant service costs by switching to Tap & Save.
ANZ Bank’s Least Cost Routing service is called “Merchant Choice Routing.” ANZ says retailers should disclose the routing policy with a sign at the POS:
“We may choose how we process your contactless debit card payments; to choose your own option, please insert your card”.
Westpac has an offering also called Merchant Choice Routing. Westpac says:
“With Merchant Choice Routing activated you can choose to enable your payment terminal to send more debit card transactions through the eftpos scheme network, which may cost you less.”
Westpac have a special offer now for merchants to sign up for merchant choice routing.
Commonwealth Bank’s Merchant Choice Routing plan is available for merchants on interchange based pricing plans.
THIS INFORMATION IS GENERAL IN NATURE AND DOES NOT TAKE INTO ACCOUNT YOUR PERSONAL SITUATION. YOU SHOULD CONSIDER WHETHER THE INFORMATION IS APPROPRIATE TO YOUR NEEDS, AND WHERE APPROPRIATE, SEEK PROFESSIONAL ADVICE FROM A FINANCIAL ADVISER.
IF YOU OR SOMEONE YOU KNOW IS IN FINANCIAL STRESS, CONTACT THE NATIONAL DEBT HELPLINE ON 1800 007 007.