Talking Innovation: Competition in the cashless economy

Cash free: Speed and convenience are major benefits for the consumer.
Cash free: Speed and convenience are major benefits for the consumer.

What is the difference between using EFTPOS and tap and pay? In recent years I’ve switched to using “tap and pay” or contactless payments when making purchases, and I wonder how this differs from the old EFTPOS system. Does it really matter which one I use and is it a case of one taking over the other?

The EFTPOS system has been around since 1989. The system allowed cashless payments by using a debit card at a payment terminal, with the business accepting the payments paying a relatively small fee for this process. Even though there was a fee for these transactions, it was never passed on to the customer because it was relatively small.

Customers were also allowed to use credit cards with the same terminals, however these resulted in higher fees for the businesses accepting the payments as they were subject to additional charges from the card issuer (for example Visa, MasterCard). Over time it has become common practice for businesses to pass on a surcharge for transactions paid via credit card, and the ACCC has recently stepped in to legislate that surcharges cannot be excessive.

In more recent times, the introduction of contactless payments via tap and pay (using Visa’s PayWave, MasterCard’s PayPass and American Express’ ExpressPay) has completely transformed the industry. Not only do you not need to insert your card (you just need to wave or tap it above the terminal), but for transactions under a certain limit, you don’t even need to enter your PIN.

This means that payments via tap and pay are now faster than paying with cash. The only problem has been that you’ve needed a credit card (rather than just an EFTPOS debit card) to use the system.

For consumers this may not be a problem, however if the business charges a surcharge for credit card payments (including Visa Debit and Debit MasterCard) then you’ll have to pay more for the convenience of tap and pay. And for businesses, there is also the downside of reducing EFTPOS transactions as payments via tap and pay increase, thereby increasing their merchant fees.

Fortunately, the EFTPOS system is making up ground on contactless payments, and has recently brought tap and pay for EFTPOS to both Apple Pay and Android Pay. 

If you need assistance with contactless payments or EFTPOS please contact your financial institution. 

Payments via tap and pay are now faster than paying with cash.