Electronic funds transfer at point of sale (EFTPOS //) is an electronic payment system involving electronic funds transfers based on the use of payment cards, such as debit or credit cards, at payment terminals located at points of sale. EFTPOS technology originated in the United States in 1981 and was adopted by other countries. In Australia and New Zealand, it is also the brand name of a specific system used for such payments; these systems are mainly country specific and do not interconnect.
EFTPOS technology originated in the United States in 1981 and was rolled out in 1982. Initially, a number of nationwide systems were set up, such as Interlink, which were limited to participating correspondent banking relationships, not being linked to each other. Consumers and merchants were slow to accept it, and there was minimal marketing. As a result, growth and market penetration of EFTPOS was minimal up to the turn of the century. Since 2002 the use of EFTPOS has grown significantly, and it has become the standard payment method, displacing the use of cash. Subsequently, networks facilitating the process of money transfer and payment settlement between the consumer and the merchant grew from a small number of nationwide systems to the majority of payment processing transactions. For EFTPOS, USA based systems allow the use of debit cards or credit cards.
In a short time, other countries adopted the EFTPOS technology, but these systems too were limited to the national borders. Each country adopted various interbank co-operative models. In New Zealand, Bank of New Zealand started issuing EFTPOS debit cards in 1985 with the first merchant terminals being installed in petrol stations. In Australia, in 1984 Westpac was the first major Australian bank to implement an EFTPOS system, at BP petrol stations. The other major banks implemented EFTPOS systems during 1984, initially with petrol stations. The banks' existing debit and credit cards (but only allowed to access debit accounts) were used in the EFTPOS systems. In 1985, the banks started to link their EFTPOS systems to provide access for all customers across all EFTPOS devices. Cards issued by all banks could then be used at all EFTPOS terminals nationally, but debit cards issued in other countries could not. Prior to 1986, the Australian banks organized a widespread uniform credit card, called Bankcard, which had been in existence since 1974. There was a dispute between the banks whether Bankcard (or credit cards in general) should be permitted into the proposed EFTPOS system. At that time several banks were actively promoting MasterCard and Visa credit cards. Store cards and proprietary cards were shut out of the new system.
In recent years, MasterCard and Visa have introduced a debit card which is widely accepted internationally. International transactions are generally in the local currency, requiring a currency exchange by the card company to the currency of the primary account. Other charges may also apply.
In Australia, debit and credit cards are the most common non-cash payment methods at “points of sale” (POS) or via ATMs. Not all merchants provide eftpos facilities, but those who wish to accept eftpos payments must enter an agreement with one of the seven merchant service providers, which rent an eftpos terminal to the merchant. The eftpos system in Australia is managed by Eftpos Payments Australia Ltd, which also sets the EFTPOS interchange fee. For credit cards to be accepted by a merchant a separate agreement must be entered into with each credit card company, each of which has its own flexible merchant fee rate.
The clearing arrangements for eftpos are regulated by Australian Payments Clearing Association (APCA). The system for ATM and eftpos interchanges is called Issuers and Acquirers Community (formerly Consumer Electronic Clearing System (CECS)) also called CS3. CECS required authorisations from the Australian Competition and Consumer Commission (ACCC), which was obtained in 2001 and reaffirmed in 2009. ATM and EFTPOS clearances are the made under individual bilateral arrangements between the institutions involved.
Australian financial institutions provide their customers a plastic card, which can be used as a debit card or as an ATM card, and sometimes as a credit card. The card merely provides the means by which a customer's linked bank or other accounts can be accessed using an EFTPOS terminal or ATM. These cards can also be used on some vending machines and other automatic payment mechanisms, such as ticket vending machines. Australian debit cards cannot be used for online and telephone banking transactions, unless they are also a credit card.
Each Australian bank has given a different name to its debit cards, such as:
- Commonwealth Bank of Australia: Keycard
- Westpac Banking Corporation: Handycard
- National Australia Bank: FlexiCard
- ANZ Bank: Access card
- Bendigo Bank: Cashcard
- ING Direct Australia: Orange Everyday
Some banks offer alternative debit card facilities to their customers using the Visa or MasterCard clearance system. For example, St George Bank offers a Visa Debit Card, as does the National Australia Bank. The main difference with regular debit cards is that these cards can be used outside Australia where the respective credit card is accepted.
Those merchants that enter the EFTPOS payment system must accept debit cards issued by any Australian bank, and some also accept various credit cards and other cards. Some merchants set minimum transaction amounts for EFTPOS transactions, which can be different for debit and credit card transactions. Some merchant impose a surcharge on the use of EFTPOS. These can vary between merchants and on the type of card being used, and generally are not imposed on debit card transactions, and widely not on MasterCard and a Visa credit card transactions.
A feature of a debit card is that an EFTPOS transaction will only be accepted if there is an available credit balance in the bank cheque or savings account linked to the card.
Australian debit cards normally cannot be used outside Australia. They can only be used outside Australia if they carry the MasterCard/Maestro/Cirrus or Visa/Plus or other similar logos, in which case the non-Australian transaction will be processed through those transaction systems. Similarly, non-Australian debit and credit cards can only be used at Australian EFTPOS terminals or ATMs if they have these logos or the MasterCard or Visa logos. Diners Club and/or American Express cards will be accepted only if the merchant has an agreement with those card companies, or increasingly if the merchant has modern alternative payment options available for those cards, such as through Paypal. The Discover Card is accepted in Australia as a Diners Club card .
In addition, credit card companies issue prepaid cards which act like generic gift cards, which are anonymous and not linked to any bank accounts. These cards are accepted by merchants who accept credit cards and are processed through the EFTPOS terminal in the same way as credit cards.
A number of merchants permit customers using a debit card to withdraw cash as part of the EFTPOS transaction. In Australia, this facility (known as debit card cashback in many other countries) is known as "cash out". For the merchant, cash out is a way of reducing their net cash takings, saving on banking of cash. There is no additional cost to the merchant in providing cash out because banks charge a merchant a debit card transaction fee per EFTPOS transaction, and not on the transaction value. Cash out is a facility provided by the merchant, and not the bank, so the merchant can limit or vary how much cash can be withdrawn at a time, or suspend the facility at any time. When available, cash out is convenient for the customer, who can bypass having to visit a bank branch or ATM. Cash out is also cheaper for the customer, since only one bank transaction is involved. For people in some remote areas, cash out may be the only way they can withdraw cash from their personal accounts. However, most merchants who provide the facility set a relatively low limit on cash out, generally $50, and some also charge for the service. Some merchants in Australia only allow cash out with the purchase of goods; other merchants allow cash out whether or not customers buy any goods. Cash out is not available in association with credit card sales because on credit card transactions the merchant is charged a percentage commission based on the transaction value, and also because cash withdrawals are treated differently from purchase transactions by the credit card company. (However, though inconsistent with a merchant's agreement with each credit card company, the merchant may treat a cash withdrawal as part of an ordinary credit card sale.)
EFTPOS transactions involving a debit, credit or prepaid card are primarily authenticated via the entry of a personal identification number (PIN) at the point of sale. Historically, these transactions were authenticated by the merchant using the cardholder's signature, as signed on their receipt. However, merchants had become increasingly lax in enforcing this verification, resulting in an increase in fraud. Australian banks have since deployed chip and PIN technology using the global EMV card standard; as of 1 August 2014, Australian merchants no longer accept signatures on transactions by domestic customers at point of sale terminals.
As a further security measure, if a user enters an incorrect PIN three times, the card may be locked out of EFTPOS and require reactivation over the phone or at a bank branch. In the case of an ATM, the card will not be returned, and the cardholder will need to visit the branch to retrieve the card, or request a new card to be issued.
All debit cards now have a magnetic stripe on which is encoded the card's service codes, consisting of three-digit values. These codes are used to convey instructions to merchant terminals on how a card should be processed. The first digit indicates if a card can be used internationally or is valid for domestic use only. It is also used to signal if the card is chip-enabled. The second digit indicates if the transaction must be sent online for authorization always or if transactions that are below floor limit can take place without authorization. The third digit is used to indicate the preferred card verification method (e.g. PIN) and the environment where the card can be used (e.g. at point of sale only). Merchant terminals are required to recognize and act on service codes or send all transactions for online authorization.
Contactless smart card
In the late 2000s, MasterCard and Visa introduced contactless smart debit cards under the brand names MasterCard PayPass and Visa payWave. These payments are made using either electronic payment networks separate from the regular EFTPOS payment networks, or newer EFTPOS with tap sensors. And is an alternative to the previous swipe or chip systems. These networks are operated by MasterCard and Visa, and not by the banks as is the EFTPOS network, through EFTPOS Payments Australia Limited (ePAL).
These cards are based on EMV technology and contain a RFID chip and antenna loop embedded in the plastic of the card. To pay using this system, a customer passes the card within 4 cm of a reader at a merchant checkout. Using this method, for transactions under $100, the customer does not need to authenticate his or her identity by PIN entry or signature, as on a regular EFTPOS machine. For transactions over $100, PIN verification is required.
The facility is only available for cards branded with the MasterCard PayPass or Visa payWave logos, indicating that they have the system-permitted embedded chip. ANZ has launched ATM solution based on Visa payWave in 2015, where the consumer tap the card on a reader at the ATM and insert a PIN to finalize the cash withdrawals, and not all merchants offer the facility. Bank debit cards and other credit cards do not currently offer a contactless payment facility. ePAL is developing a contactless payment system for debit cards based on EMV technology as well as an extension of debit cards for use for on-line transactions, and a mobile payment system.
The name and logo for EFTPOS in Australia were originally owned by the National Australia Bank and were trade marks from 1986 until 1991. The ownership was for convenience and all the banks used the name and logo (commonly called "fat-E") on their cards and advertising.
In April 2009, a company, “EFTPOS Payments Australia Ltd” (ePal) was formed to manage and promote the EFTPOS system in Australia. ePal regulation commenced in January 2011. The initial members of EFTPOS Payments Australia Ltd were:
- Australia and New Zealand Banking Group
- Australian Settlements Limited
- Bank of Queensland
- Bendigo and Adelaide Bank
- Commonwealth Bank of Australia
- Coles Group (now Wesfarmers)
- National Australia Bank
- Westpac Banking Corporation
- Woolworths Limited
In 2006 Commonwealth Bank and MasterCard ran a six-month trial of the contactless smart card system PayPass in Sydney and Wollongong, supplementing the traditional EFTPOS swipe or chip system. The system was rolled out across Australia in 2009; other systems being rolled out are Westpac Bank's MasterCard PayPass and Visa payWave branded cards.
In Australia, store cards have been excluded from participation in the EFTPOS and ATM systems. Consequently, several larger store accounts have entered into co-branding arrangements with credit card networks for the store-based accounts to be widely accepted. This was the case with Coles (previously, Coles-Myer) which co-branded with MasterCard, and David Jones which co-branded with American Express. Woolworths organized its credit card called Everyday Rewards (now Woolworths Money)[clarification needed] which initially was partnered with credit provider HSBC Bank, but changed on 26 October 2014 to Macquarie Bank.
As of December 2010, there were over 707,000 EFTPOS terminals in Australia and over 28,000 ATMs. Of the terminals, over 60,000 offered cash withdrawals. In 2010, 183 million transactions, worth A$12 billion, were made using Australian EFTPOS terminals per month.
In 2011, these figures increased to 750,000 terminals, with 325,000 individual businesses, processing over 2 billion transactions with combined value of approximately $131 billion for the year.
The EFT network in Australia is made up of seven proprietary networks in which peers have interchange agreements, making an effective single network. A merchant who wishes to accept EFTPOS payments must enter an agreement with one of the seven merchant service providers, which rent the terminal to the merchant. All the merchant's EFTPOS transactions are processed through one of these gateways. Some of these peers are:
- Australia and New Zealand Banking Group
- Commonwealth Bank of Australia
- National Australia Bank
- Westpac Banking Corporation
- First Data Network Australia (formerly Cashcard)
Other organisations may have peering agreements with the one or more of the central peers.
EFTPOS is highly popular in New Zealand. The system is operated by two providers, Paymark Limited (formerly Electronic Transaction Services Limited) which processes 75% of all electronic transactions in New Zealand, and EFTPOS New Zealand. Although the term eftpos is popularly used to describe the system, EFTPOS is a trademark of EFTPOS New Zealand the smaller of the two providers. Both providers run an interconnected financial network that allows the processing of not only of debit cards at point of sale terminals but also credit cards and charge cards.
In 1989 the system was officially launched and two providers owned by the major banks now run the system. The largest of the two providers, Paymark Limited (formerly Electronic Transaction Services Limited) is owned equally by ASB Bank, Westpac, Bank of New Zealand and ANZ Bank New Zealand (formerly ANZ National Bank). The second is operated by EFTPOS New Zealand which is fully owned by VeriFone Systems, following its sale by ANZ New Zealand in December 2012.
During July 2006 the five billionth EFTPOS payment was processed, and at the start of 2012 the 10 billionth transaction was processed.
EFTPOS is highly popular in New Zealand, and being used for about 60% of all retail transactions. In 2009, there were 200 EFTPOS transactions per person.
Paymark process over 900 million transactions (worth over NZ$48 billion) yearly. More than 75,000 merchants and over 110,000 EFTPOS terminals are connected to Paymark.
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