What is least cost routing?
Least cost routing (LCR) or Merchant cost routing (MCR) is designed to help reduce payment costs for merchants. At its simplest level, LCR means whenever someone taps their debit card to pay, that payment is routed to the option which costs the least for the business.
Transaction security is not compromised
Tried and tested overseas and on thousands of Australian transactions
Chargebacks are available
“eftpos is implementing significant wholesale fee relief from July in the point-of-sale environment, which aims to help small business and retailers during the recovery phase with ‘least cost routing’ (LCR).
The principle of LCR is simple. Merchants carry the cost burden. LCR lets them choose to route debit transactions to the network that costs less, eftpos or not, when accepting Australia’s most often used form of card payment (dual network debit cards).”
eftpos CEO and Managing Director
How much could your business save by Least Cost Routing?
An independent supermarket with an average basket size of $44 could save $26,391 p.a.† on the cost of debit transactions.
An independent petrol station with an average ticket size of $44 could save $13,196 p.a.† on the cost of debit transactions.
An independent newsagent with an average ticket size of $36 could save $3,167 p.a.† on the cost of debit transactions.
†Source: RBA Statistical Tables, March 2020.
The Australian Debit Card Market.
With debit cards totalling around 70% of all transactions in Australia, or about 6 billion a year#, this can mean significant savings of up to 40%* on contactless debit card service fees.
There are around 35 million** contactless enabled ‘dual network’ debit cards in Australia. These are cards that features both the eftpos logo and an international scheme.
With LCR enabled, when customers tap one of these cards your acquirer will route eligible transactions through the network that provides your business the best economic outcome. It’s a win for your customers and a win for your business.
You can find out from your Card Payment Service Provider about:
• What you’re currently being charged
• How much your business could save
#Source: RBA Bulletin, March 2020 *40% saving based on numbers provided in the RBA Bulletin March 2020. Subject to your Acquirer terms and their passing through eftpos’ package wholesale pricing.
Frequently Asked Questions (FAQs)
Least Cost Routing (LCR), also known as Merchant Choice Routing, enables retailers and merchants to choose the payment network that delivers the lowest costs for accepting most contactless transactions from dual network debit cards, in most cases eftpos*
Speak to your bank or card payment services provider and ask them to give you a proposal that incorporates Least Cost Routing into your current arrangements.
An acquirer is a bank or provider that enables card payments.
The Reserve Bank of Australia has for a number of years continued to push for Least Cost Routing to be rolled out because it supports Australian businesses by boosting competition in the payments space and helping drive down costs.
Read more from the RBA here: https://www.rba.gov.au/payments-and-infrastructure/debit-cards/least-cost-routing.html
Potential savings will vary from merchant to merchant. Your business could save up to 40%# on contactless debit card service fees if your Acquirer passes through the benefits of eftpos’ packaging wholesale pricing.
#40% saving based on numbers provided in the RBA Bulletin March 2020. Subject to your Acquirer terms and their passing through eftpos’ package wholesale pricing.
No. Currently Least Cost Routing only applies to dual network debit cards in Australia.
Yes, for eftpos transactions, chargeback rights cover the full range of losses required by the ePayments Code.
Least Cost Routing is already operational across thousands of merchants in Australia, with no discernible difference in technical or payment outcomes. It has also been introduced in a number of other countries without out known, overt technical issues.
Will consumers lose any insurances (extended warranty, purchase protection) offered on a purchase from using the card if the merchant is routing transactions?
No they will not. While insurances on debit cards are very rare, currently available information suggests all the insurances offered are done so at an account level rather than a network level. Consumers should therefore still be eligible for insurance benefits offered on dual network cards.