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How Does EFTPOS Work in Australia?

Last editedSept 20212 min read

The capital-lettered EFTPOS is a term used worldwide, but lowercase eftpos is only used within Australia. Both stand for ‘Electronic Funds Transfer at Point of Sale’, but how do these two terms differ, and how does electronic funds transfer work?

What is eftpos in Australia?

EFTPOS refers to any point-of-sale payment system for credit and debit cards, but what is the lower-case eftpos? This acronym refers specifically to a privately-run debit card payment system that’s unique to Australia. It was launched in 1983 to offer consumers a more convenient and secure way to make electronic payments at the point of sale. Unlike credit cards, eftpos doesn’t work using the credit system – instead, the money is withdrawn directly from a bank account.

The eftpos payments network works with all ATM or debit cards, provided they’re issued by Australian banks. If you choose CHQ or SAV payment options, these are both examples of eftpos. The system has recently been updated to accommodate tap-and-go NFC contactless payments, to keep in line with modern technology.

How electronic funds transfer works

There are seven networks operated by major Australian banks including National Australia Bank, Westpac, Commonwealth Bank, and others. These networks are interlinked, which is how electronic funds transfer works using eftpos.

When connected banks issue debit cards to their customers, the debit cards can support both international networks like Visa as well as the domestic eftpos system.

When you go to the point of sale in a shop to make a purchase, you’ll have the choice between:

  • Cheque (CHQ)

  • Savings (SAV)

  • Credit (CR)

Credit transactions run through the Visa or Mastercard network, depending on the type of card you have. When a customer chooses to pay via CHQ or SAV, however, these payments are processed using the eftpos system with the funds taken out of the customer’s bank account. As soon as the payment is clear, the funds are transferred directly into the retailer’s bank account.

Consumers can also use eftpos to make cash withdrawals from their own bank accounts, making it possible to take out cash from merchants even if there’s no ATM nearby. In return, merchants often charge a fee for cash withdrawals using the eftpos system.

How to set up electronic funds transfer

If you’re interested in accepting eftpos transactions, you’ll need to sign up with an eftpos-approved provider first. Major providers include:

  • Australia and New Zealand Banking Group

  • Westpac Banking Corporation

  • Tyro

  • Commonwealth Bank of Australia

  • Firstserv/First Data Network

  • National Australia Bank

In addition to these major Australian banks, you can also turn to payment processors like Square and Mint Payments that accept eftpos cards.

When looking into how to set up electronic fund transfers at your business, you should also consider the fees involved. One of the key benefits of eftpos is that merchant rates are far lower than credit payments. For example, the eftpos merchant rate is an average 0.26% while average Visa and Mastercard rates are over 0.5%.

In addition to merchant rates, you will also need to think about the cost of terminal rental. Different businesses will need different POS systems and hardware, whether it’s a virtual terminal or large cash register and card reader.

What is eftpos Tap & Pay?

Up until recently, eftpos cards didn’t work with contactless payment technology. This put the system at a disadvantage to credit cards. Eftpos Tap & Pay has remedied the situation by enabling contactless transactions under the threshold of $200. The company’s also developing a mobile payment system that integrates with digital wallets like Google Pay and Apple Pay at the point of sale. However, this isn’t yet available from all banks or payment processors. Eftpos also doesn’t work for online purchases just yet.

Are electronic funds transfers safe?

Security is one of the key concerns for any business accepting payments, so you may be wondering are electronic funds transfers safe? In short, the answer is yes – eftpos payments are very secure. The system works with major banks, each of which has its own high-level security checks. Payment details are encrypted at each end with payment protection.

If you’re looking to expand your payment options, signing up for eftpos services will allow you to serve a wider selection of customers in Australia.

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