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Merchant choice routing: A process to significant savings for businesses

Driven by ongoing trends and accelerated by the emergence of COVID-19, the use of contactless and online payment continues to grow. While these payments offer significant benefits for consumers and businesses, the unique requirements to enable and secure these payment types can result in a higher cost of acceptance, impacting a business' bottom line. New options in Australia are addressing this gap with the support of the Reserve Bank of Australia (RBA).

What is merchant choice routing, or least cost routing?

Australia has one of the highest adoption rates for contactless payments in the world, with 83% of point-of-sale card transactions initiated by tapping a card or mobile device according to the RBA. Many cards issued in Australia are debit cards, with 90% being dual-network debit cards. These cards support either the MasterCard and Eftpos debit networks, or Visa and Eftpos debit networks.

When a business accepts a payment via these dual-network debit cards, the transaction can be processed via either network. In the case of contactless (or ‘tap and go') payments, the transaction will be processed via the Visa or MasterCard debit network as default, rather than via the domestic Eftpos network.

To consumers, this has no impact, as funds are still drawn from the same bank account. However, the routing option has a cost implication to businesses. Merchant choice routing offers businesses the ability to override these defaults in the card and use the smarts in the terminal to process the transaction via the lowest cost network. In most instances, processing via Eftpos offers lower cost of acceptance for businesses.

Is merchant choice routing only available on ‘tap-and-go' payments or can it also be used for online transactions?

While most of the discussions have been focused on ‘tap-and-go' payments in-store, merchant choice routing is also feasible for online transactions. This can be done for any business that has customer card account information stored on file, so it works well for billers, subscriptions and merchants who store card credentials to support one click to checkout for subsequent payments.

How can a business switch on merchant choice routing?

If a business uses terminals provided by a payment services provider, they can ask their provider about the availability of merchant choice routing. If the business is also selling online, there are providers that can offer both in-store and online merchant choice routing to maximise the cost savings for both channels.

How much will this actually save me?

Businesses may be able to lower fee costs by more than 40% with merchant choice routing. With the tremendous growth of ‘tap and go' payments and the vast majority of debit cards being dual-network debit cards the actual savings can be significant in many instances.


The RBA has stated that it regards merchant choice routing as integral to promoting competition in the debit card market and helping to reduce payment costs in the economy. Businesses can make these decisions confidently knowing that some of the largest merchants in Australia already utilise this routing method, and that the RBA is providing its full backing.

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