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Government mandates ‘least cost’ routing for debit payments

James Mitchell
02 September 2021 1 minute readShare
debit payments

The Morrison government has made a commitment to lowering costs for small business through the implementation of default least-cost routing in the debit card market.

The government wants the RBA to mandate “least cost” routing for tap-and-go debit transactions so business merchants can avoid typically higher fees charged by international schemes and default to the usually cheaper domestic EFTPOS system.

The move was welcomed by eftpos Australia, who noted that the decision demonstrates a strong commitment to competition and lower debit transaction costs for struggling small businesses which are doing it tough during the COVID pandemic.

“Mandating least-cost routing as a default for merchants on mobiles and online as well as for the physical use of cards will be a major boost for local small businesses, jobs and communities as well as a key driver of the digital economy,” eftpos Australia CEO Stephen Benton said.

“It is essential that we guarantee our nation’s businesses access to competition and low-cost payments in a new, post-COVID world dominated by debit cards, mobile apps and e-commerce.”

Mr Benton said the gradual adoption of least-cost routing at physical stores has already resulted in merchant fees on debit card transactions being reduced by hundreds of millions of dollars a year.

“However, as we move boldly into the new digital economy, this type of debit card competition is not currently available on platforms like mobile and e-commerce,” he said. 

“The urgency of effective regulation in this area in a post-COVID economy is amplified by just how fast Australians have shifted to online and digital transactions in recent months.”

Government mandates ‘least cost’ routing for debit payments
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James Mitchell

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