Merchant Routing of Dual Network Debit Card Transactions


Background on debit cards

Most debit cards issued in Australia are dual-network cards:  these cards support both an international network (Visa or Mastercard) and the domestic eftpos network and therefore have an international network logo on one side and the eftpos logo on the other.  This means that debit card transactions can be routed through either of those networks.  Any transaction typically draws on the same deposit account regardless.

How has the routing of a payment been determined in the past and how is it determined today?

Traditionally, when a card was inserted into a point of sale terminal, cardholders determined how their debit transactions were processed, by pressing either the CHQ or SAV buttons for eftpos or the CR button for the international network.

With the shift to contactless or ‘tap-and-go’ transactions, the cardholder experience has changed significantly. In a ‘tap and go’ transaction, cardholders no longer actively select their processing option.  Initially, contactless debit card payments were only available for Mastercard and Visa and were therefore processed via those networks automatically.

What is merchant routing?

Now eftpos has contactless functionality, a merchant may choose to send a contactless transaction via the debit network of their choice, for example, because that network offers the lower cost for that transaction. This is merchant routing.

A customer can, however, always select a particular debit network by inserting their card and selecting a network rather than tapping their card. 
It is worth noting that merchant routing only applies to dual network debit cards; it will not affect customers using credit cards or single network debit cards.

Why is there a move towards merchant routing now?

A number of recent government reports have called for banks and payment providers to provide merchant routing. This includes the House of Representatives Standing Committee on Economics Third Report on the Review of the Four Major Banks, the Productivity Commission Draft Report on Competition in the Australian Financial System, and the Black Economy Task Force Final Report.

Merchant routing requires an upgrade to payment terminal software, and in some cases a replacement of the terminal itself. Several banks and payment providers have indicated that they will have merchant routing available for their customers in the second half of 2018, with others indicating it should be available in early 2019.

What is AusPayNet doing on merchant routing?

Our blog published on 21 December 2017, explains merchant routing:  what it is, why it is relevant now and what it means for cardholders. 

Merchants may wish to signal their choice of routing to customers with the following wording:
“We may choose how we process your contactless debit card payments; to choose your own option, please insert your card”.

Additional information regarding merchant routing is also available on the Reserve Bank of Australia's website, below.