Friday, 23 October 2020 09:12

Mastercard disputes claims of big savings from least cost routing for eftpos Featured

Richard Wormald: "Mastercard calculates that merchants save just less than one cent per transaction by routing with the domestic scheme [eftpos]." Richard Wormald: "Mastercard calculates that merchants save just less than one cent per transaction by routing with the domestic scheme [eftpos]." Supplied

A senior official from Mastercard Australasia says it is misleading to compare costs of schemes that process card present, card not present and international debit transactions with a domestic-only debit scheme, namely eftpos, that, at this stage, processes very few card not present transactions.

Richard Wormald, division president, said this created an an incorrect impression of the true cost of like-for- like transactions.

He was reacting to statements made by financial payment systems and software solutions provider DataMesh Group, claiming that there could be a potential reduction in fees for merchants of up to $500 million nationally per year if least-cost routing was fully implemented.

Added Wormald: "When it comes to fees and costs for merchants, the costs captured for international schemes do not differentiate between transactions done at the point of sale (card present), and those done online (card not present), or those processed internationally, or domestically. Card not present transactions are typically higher priced given the higher fraud mitigation costs."

LCR sends contactless debit card payments through the network that costs the least. The technology enables a debit payment to be flagged as a specific debit card transaction. If LCR were not present, the transaction would be sent to the default debit network specified on the customer's card, which may not be the one that costs the least.

Said Wormald: "As our letter to the chair of the House of Representatives Economics Committee said, and by the Reserve Bank of Australia's own admission, the RBA's representation of data relating to merchant service fees does not compare like-for-like and presents challenges for comparing merchant service fees across schemes.

"Mastercard calculates that merchants save just less than one cent per transaction by routing with the domestic scheme [eftpos]. When we assume there are two million small businesses across Australia, that's only just over $1 a month for businesses, without the added value and benefits such as increased safety and security."

DataMesh Group chief executive Mark Nagy had said the unique least cost routing capability developed by his company was a massive win for Australian merchants, especially in this era of contactless payments.

“eftpos’ debit card network accounted for more than two billion cheque and savings transactions in 2019 worth about $130 billion," he said. "DataMesh is working with eftpos and other payments industry members in the push for least cost routing, and to bring down fees for merchants in what is a very challenging environment for retailers and consumers."

Wormald said when cards were used online they followed the same process as card present transactions, undergoing authorisation, clearance and settlement.

"The key difference is the addition of an extra step in card-not-present transactions – authentication. Authentication is a vital step in online payments to validate a person using the card is the owner of the card," he explained.

"In this increasingly complex payments system, Mastercard is continually investing to ensure transactions are fast, easy, convenient and most importantly, secure and safe for merchants and consumers.

"When it comes to authenticating online payments, Mastercard has a range of solutions such as Decision Intelligence which uses advanced AI to reduce fraud, and Identity Check which leverages the latest, industry-wide authentication standards to complete transactions without disruption using biometric technology."

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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