Last-minute Christmas shopping became even more stressful yesterday as the Eftpos system crashed for two hours, blocking half a million transactions.

Tens of thousands of shoppers around the country were left in chaos and millions of dollars worth of sales refused when the Paymark Eftpos system collapsed.

Terminals went down just before 1pm, declining transactions, and were not back up until 3pm.

In the Manurewa New World, the trolleys were queued up 10-deep as shoppers waited. Staff handed out free chocolates to placate customers.

In some stores, Christmas stress boiled over as frustrated customers dumped their gifts and walked out. Others put their purchases on hold while they queued at ATM machines to withdraw cash.

But many shoppers appeared to be resigned to the latest obstacle to completing their Christmas shopping.

"It was almost as if people were expecting things to be bad and this was just one more thing," said one.

Although some retailers accepted cheques or carried out manual Eftpos transactions, many others lost sales.

Paymark EFTPOS spokesman Darryl Roots expected the system to run smoothly today, but he could not guarantee it. "It's business as normal. We anticipate that we won't have any issues tomorrow [Saturday]. But like I said, I wouldn't have expected us to have a problem today."

Mr Roots said the breakdown was caused by a hardware failure, forcing a restart of the system. The hardware was to be replaced last night.

He said the system still had 50 per cent capacity before the processor crashed so the problem was not caused by overdemand. Instead, it appeared to be a case of technology and backup systems failing.

Business groups are questioning how the crash could have happened.

Newmarket Business Association head Cameron Brewer said retailers paid a lot in fees to Eftpos providers and they needed to be able to depend on the service.

"It's simply not good enough that what has become everyone's lifeline can crash without warning, explanation or even an apology."

The Retailers Association called for a review of the system.

"Once we are back into the new year we will be wanting a review on the whys and wherefores ... Eftpos is absolutely critical for retailers," said association chief executive John Albertson.

Paymark's network accounts for about 80 per cent of all electronic transactions in New Zealand. At the time of the crash, around 250,000 transactions were going through each hour.

In the week before last Christmas, Paymark handled transactions worth almost $120 million a day on average.

Mr Brewer said the collapse had cost retailers on a crucial trading day.

"2005 hasn't been the easiest year for retailers. A lot are playing catch-up this week, and the last thing they needed was the wiping-out of people's ability to pay."

Paymark EFTPOS issued a statement after the service was restored saying it sincerely apologised to merchants, card issuers and customers for the inconvenience caused. A review of the crash would be carried out.

Some stores were better prepared to handle the crash than others.

Aucklander Simon Chrisp, who pulled together some cash to pay for a CD, said he was given extra stamps on a bonus card even though his purchase fell short of the price needed to qualify.

Other people spoke of being given items on an IOU basis.

However some stores, especially larger ones such as The Warehouse in downtown Auckland, struggled to deal with the crash. Customer Joseph Nolasco Gomes said the store did not seem prepared to handle the situation.

"Most people could not pay for their [items] and left without them. They finally managed to get the manual machines to do the credit cards, but very few staff knew how to operate them."

Other stores did not have manual machines and some were reluctant to accept manual transactions because they did not know if the customer had enough funds in their account.

Adding to the confusion, about 30 of Westpac's 200 branches around the country were closed yesterday because bank staff were on strike.


Transaction declined

* Sales and operations assistant Pierre Braganza was at a work lunch in Auckland when the system crashed. "The restaurant guy tried about four times and the machine kept on saying try again. One of my mates then paid for me and I had to then stand in a 10-person-long line in front of the National Bank ATM machine so that I could withdraw money and pay him back."

* Account manager Krista Rostenberg was one of hundreds of people at the downtown Auckland Warehouse, where staff struggled to deal with the crisis. "The checkout girl was really rude. She didn't even give me the option of a manual payment. I said that I had heard [via the instore intercom] that you were taking manual payments and she said, 'Well that takes a lot of time'. I scraped together enough cash though - luckily."

* New World Manurewa checkout manager Helen Casey said the queues were up to 10 trolleys deep. Some customers got grumpy but were generally understanding when told what the problem was. "We just handed out chocolates and kept announcing over the intercom that it was a nationwide problem.'

* Invercargill pharmacy technician Kirsten Frew said regular customers were invited to take their prescriptions and return to pay next week. Some customers abandoned their Christmas gifts and just walked out. "One woman was really rude to me."

* Ellie Martel was in Whitcoulls with her 13-month-old daughter when the system crashed. "There were about 20 people in a line waiting to buy presents and they had announcements over the shop systems saying that the Eftpos system was down and you could only pay with cash or manual Visa. People were just putting down books and things and walking out. We were looking for a present for my sister-in-law and had just found the perfect present and couldn't buy, so will have to go back [today], which is a pain. It was very, very frustrating."

* Downtown shopper Katala McGregor had to queue for money at the ATM in order to continue her shopping. She said most people were understanding of the situation. "There were about 10 people in the queue. No one seemed that impatient. I just got out more than I needed so I didn't have to go back again."