||The examples and perspective in this article may not represent a worldwide view of the subject. (October 2013)|
EFTPOS (pronounced //) — electronic funds transfer at point of sale — 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. In Australia and New Zealand it is also the brand name of a specific system used for such payments. The Australian and New Zealand systems are country specific and do not interconnect. EFTPOS technology originated in the United States in 1981 and was quickly adopted by other countries.
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, US 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, the major Australian banks started issuing debit or EFTPOS cards (each under a different brand name) starting in 1986 and merchants started installing EFTPOS terminals at the same time. Debit cards issued by all banks could 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 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 clearings are the subject of 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. 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 can be authenticated in a number of ways. The oldest system requires the printing and signing of a receipt, with the merchant verifying the signature on the receipt against the signature on the card. It is not very common in Australia for a merchant to require a cardholder to provide photo identification. More recently, authentication was by a personal identification number (PIN) that was entered into a PIN pad at the terminal and transmitted to the bank for verification. However, as of May 2011[update] financial institutions are in the process of rolling out smart cards with integrated circuits ("chips") that will enable verification of the PIN at the EFTPOS terminal. PIN management is governed by international standard ISO 9564. At ATMs, only PIN verification is available, and all new credit cards are now issued with PINs regardless of whether or not they have a chip. In 2014, banks have indicated that the option for a customer to sign receipts is to be phased out, and that only PIN authentication is to be available. For some merchants, transactions below a specific threshold value (up to $100) can be approved without authentication (either signature or PIN).
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 late 2000s, MasterCard and Visa introduced contactless smart debit cards under the brand names MasterCard PayPass and Visa payWave. These payments are made using electronic payment networks separate from the regular eftpos payment networks, 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 major Australian banks started issuing debit or EFTPOS cards (each under a different brand name) starting in 1986 and merchants started installing EFTPOS terminals at the same time.
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 will change 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
- FDI (Cashcard)
Other organisations may have peering agreements with the one or more of the central peers.
The network uses the AS 2805 protocol.
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 NZ. Although the term eftpos is popularly used to describe the system, EFTPOS is a trademark of EFTPOS NZ 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 NZ 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.
- APCA: Cards and Accepting Devices
- EFTPOS. Merchant banking services. EFTPOS. Bank of Queensland Australia
- "eftpos - the way Australia pays". eftpos Payments Australia Ltd. Retrieved 2013-01-30.
- Proposed changes to the interchange fees standard
- ACCC reap proves CECS
- Australian Payment System
- Visa Debit Card - St.George Bank. Stgeorge.com.au. Retrieved on 2013-09-27.
- Nab — Eftpos
- NAB General Security tips
- Visa Australia kills signatures by 2013
- Visa Australia | Visa Debit. Visa-asia.com. Retrieved on 2013-09-27.
- Eftpos Annual Report 2011
- APCA PaymentsMonitor publication — Industry establishes new company to manage EFTPOS
- "Commonwealth Bank unveils "Tap N Go™" payment technology". Commonwealth Bank of Australia. 5 April 2006. Retrieved 2011-09-11.
- "Commonwealth Bank rolls out contactless terminals and cards". Commonwealth Bank of Australia. 15 October 2009. Retrieved 2011-09-11.
- "Introducing contactless technology". Westpac Banking Corporation. Retrieved 2011-09-10.
- APCA ATM and EFTPOS statistics
- APCA Card Transaction Volume
- APCA Card Transaction Value
- The World of EFTPOS | Overview
- RBA paper on Australian Payment systems
- Home. Cuscal. Retrieved on 2013-09-27.
- "ANZ sells eftpos business". The New Zealand Herald. December 18, 2012.
- Paymark "Nought to five billion in 17 years". Paymark. July 24, 2006.
- Gregor, Kelly (14 December 2009). "Eight billionth eftpos transaction processed". National Business Review. Retrieved 29 September 2011.
- "About-Paymark". Paymark. Retrieved 10 December 2014.