The Visa debit card details stored on my smartphone let me simply wave my smartphone in front of a contactless terminal store to make a payment via Google Pay.
I’m almost at the point where I can dispense with carrying a wallet entirely and pay for everything on my phone. But occasionally you’ll go to pay at a restaurant or dairy and see a sticker on the terminal reading ‘no paywave’. That can be awkward when you’ve left the house with just your smartphone.
It’s because many retailers have opted out of paying the monthly access fees associated with the credit card companies’ tap-and-go terminals which don’t use the cheaper Eftpos network. Others pass the fee onto customers, in the form of a 2-3% charge per transaction.
The contactless payment technology used by Visa (payWave) and Mastercard (PayPass) allows both contactless credit and debit cards, as well as the NFC (near-field communications) chip in your phone to facilitate a payment in conjunction with your bank. That means no fumbling around as you try to swipe your card and enter your PIN. It’s hugely convenient.
The origins of Eftpos
But we already had a cheap, fast and reliable system for making electronic payments in the Eftpos system, which was developed in the 1980s as the first national-scale system of its kind.
“It was cheap. Merchants paid only $18 a month per terminal and they could have as many transactions as they wanted,” says Julia Nicol, head of public affairs at Worldline (formerly Payments NZ), which runs the Eftpos network and processes the majority of financial transactions made by merchants around the country every day.
“I have to admit it, I use my card contactlessly,” says Nicol.
“It’s a great experience. But the little old Eftpos card did not keep up and if banks don’t make any money off Eftpos, they’re not going to invest in putting chips in it and making it a more expensive product.”
The credit card companies incentivise the banks to issue their credit and debit cards, which has seen rapid uptake of contactless technology by the banks and their customers. But the associated intercharge fees associated with using the network caught the attention of the Commerce Commission.
Last year the government introduced the Retail Payment System Act 2022 to cap intercharge fees, which the Commission describes as “the largest component of the merchant service fees charged to merchants to enable them to accept Visa and Mastercard card payments from their customers”.
It estimates that the fee cap will save consumers $105 million in surcharges each year. But many retailers continue to charge a 2-3% surcharge per transaction. An update from the Commission showed wide variation in responses so far to the capping of intercharge fees.
Auckland Council had reduced its surcharge for credit and contactless debit to 0.67% from 1.75% from late July. Telecoms provider One issued a 2% surcharge for one-off credit and debit card payments and said “it is comfortable with its current surcharging practices”.
Adding in loyalty schemes
Next year, Worldline will take Eftpos contactless in a bid to match the convenience of the credit card companies’ systems, and will also integrate loyalty schemes into payments. Successful trials of the technology have been undertaken in association with Restaurant Brands, the company behind KFC, Pizza Hut, and Taco Bell.
But will it be cheaper than using contactless credit and debit cards?
“I think there will be a fee, albeit it’ll be less expensive than the international card schemes,” Nicol says.
“We want there to still be a low cost, effective payment mechanism in New Zealand.”
Worldline, she adds, is hoping that the Commerce Commission’s review of surcharging will eventually require retailers to provide one non-surcharged electronic version of payments. Eftpos would be the natural solution, though the credit card companies would have something to say about that.
Worldline’s system will work with existing Eftpos terminals and the banking app on your phone.
“It will be a bank-issued token, a virtual card if you like,” says Nicol.
“So in the same way that Eftpos is issued by your bank, this will be issued by your bank as well and you’ll be able to manage it in your online banking app on your phone. Can we move the dial on those people that are still using their card? I think it depends on the incentives for the consumer.”
The biggest incentive may well be seamless integration of loyalty schemes so you accrue points or benefits automatically when you make an Eftpos transaction with the retailer offering the scheme.
“It will incorporate loyalty so you don’t have to fumble around for your supermarket loyalty card or your fuel card or whatever it is,” says Nicol.
“And in time, we’re looking to incorporate digital identity services because there’s lots of scams going on.”
Eftpos in wearables
Access to Eftpos on wearables such as smartwatches is also in the planning. Worldline hopes to have contactless Eftpos available to merchants by late next year. It’s a move, says Nicol, motivated by Worldline’s desire to not have electronic merchant payments solely the domain of the multinational credit card companies. But there’s a lot of work ahead to get the major banks onboard to support contactless Eftpos.
“We know it works,” Nicol says. “It’s just now about getting everybody in the industry to work together to create something that’s a credible alternative to Visa or MasterCard.”
