EFTPOS


Electronic funds transfer at point of sale is a type of payment transaction in which electronic funds transfers are processed at a point of sale system or payment terminal usually via payment methods such as payment cards. EFTPOS technology was developed during the 1980s.

As a payment network

In Australia and New Zealand, EFTPOS is also the brand name for the interbank electronic payment system network used for facilitating eftpos types of payments. Other countries use different brand names for their EFTPOS systems, such as NETS in Singapore or Interlink in the United States. Since the early 2010s, country specific EFTPOS systems have been overtaken by global EMV based systems with contactless payments or QR code payment systems.
The payment cards used by EFTPOS systems are plastic cards complying with ISO/IEC 7810 ID-1 standard that have a bank card number conforming with the ISO/IEC 7812 numbering standard.

History

EFTPOS technology originated in the United States in 1981 and was rolled out in 1982. Initially, a number of nationwide systems were set up, such as Interlink, which were limited to participating correspondent banking relationships, not being linked to each other. Consumers and merchants were slow to accept it, and there was minimal marketing. As a result, growth and market penetration of EFTPOS was minimal in the US up to the turn of the century.
In a short time, other countries adopted the EFTPOS technology, these systems were limited to the national borders. Each country adopted various interbank co-operative models.
In Australia, in 1984 Westpac was the first major Australian bank to implement an EFTPOS system, at BP petrol stations. In New Zealand that same year Bank of New Zealand was the first bank to introduced an EFTPOS system, initially at Shell petrol stations. The other major banks in Australia implemented EFTPOS systems during 1984, initially with petrol stations. The banks' existing debit and credit cards were used in the EFTPOS systems.
In 1985, the State Bank of Victoria developed the capacity to host connect individual ATMs and helped create the ATM Network. Banks started to link their EFTPOS systems to provide access for all customers across all EFTPOS devices. Cards issued by all banks could then be used at all EFTPOS terminals nationally, but debit cards issued in other countries could not.
Prior to 1986, the Australian banks organised a widespread uniform credit card, called Bankcard, which had been in existence since 1974. There was a dispute between the banks whether Bankcard should be permitted into the proposed EFTPOS system. At that time several banks were actively promoting MasterCard and Visa credit cards. Store cards and proprietary cards were shut out of the new system.
Since 2002, the use of EFTPOS has grown significantly, and it has become the standard payment method, displacing the use of cash. Subsequently, networks facilitating the process of money transfer and payment settlement between the consumer and the merchant grew from a small number of nationwide systems to the majority of payment processing transactions. For EFTPOS, USA based systems allow the use of debit cards or credit cards.

Australia

In Australia, eftpos is the name of a proprietary domestic debit payment system launched in the 1980s, owned by eftpos Payments Australia Limited that accepts bankcards or debit cards at POS "point of sale"" terminals, ATMs and most recently, online via eCommerce.
In 2021, eftpos joined BPAY Group and NPP Australia under Australian Payments Plus following ACCC authorisation of the amalgamation.
Not all merchants provide EFTPOS facilities, but those who wish to accept EFTPOS payments must enter an agreement with one of the many merchant service providers, which rent an EFTPOS terminal to the merchant. ePal also sets the EFTPOS interchange fee. For credit cards to be accepted by a merchant a separate agreement must be entered into with each credit card company, each of which has its own flexible merchant fee rate. Eftpos machines for merchants are provided by larger banks and specialists such as Live eftpos.
The clearing arrangements for EFTPOS are managed by Australian Payments Clearing Association. The system for ATM and EFTPOS interchanges is called Issuers and Acquirers Community also called CS3. CECS required authorisations from the Australian Competition & Consumer Commission, which was obtained in 2001 and reaffirmed in 2009. ATM and EFTPOS clearances are the made under individual bilateral arrangements between the institutions involved.

Debit cards

Australian financial institutions provide their customers with a plastic card, which can be used as a debit card or as an ATM card, and sometimes as a credit card. The card merely provides the means by which a customer's linked bank or other accounts can be accessed using an EFTPOS terminal or ATM. These cards can also be used on some vending machines and other automatic payment mechanisms, such as ticket vending machines.
Each Australian bank has given a different name to its debit cards, such as:
  • Commonwealth Bank: Keycard
  • Westpac: Handycard
  • National Australia Bank: FlexiCard
  • ANZ Bank: Access card
  • Bendigo Bank: Easy Money card
  • St George/Bank of Melbourne/BankSA: FreedomCard
  • Qudos Bank, Queensland Police Credit Union, Dnister and Indue sponsored financial institutions: Cue Card
  • People's Choice Credit Union, Bank Australia, Credit Union SA, Beyond Bank, Teachers Mutual Bank, Nexus Mutual, and Cuscal sponsored financial institutions: rediCARD
  • Suncorp Bank: eftpos Card
  • Regional Australia Bank: Access card
Some banks offer alternative debit card facilities to their customers using the Visa or MasterCard clearance system. For example, St George Bank offers a Visa Debit Card, as does the National Australia Bank. The main difference with regular debit cards is that these cards can be used outside Australia where the respective credit card is accepted.
Those merchants that enter the EFTPOS payment system must accept debit cards issued by any Australian bank, and some also accept various credit cards and other cards. Some merchants set minimum transaction amounts for EFTPOS transactions, which can be different for debit and credit card transactions. Some merchants impose a surcharge on the use of EFTPOS. These can vary between merchants and on the type of card being used, and generally are not imposed on debit card transactions, and widely not on MasterCard and Visa credit card transactions.
A feature of a debit card is that an EFTPOS transaction will only be accepted if there is an available credit balance in the bank cheque or savings account linked to the card.
Australian debit cards normally cannot be used outside Australia. They can only be used outside Australia if they carry the MasterCard/Maestro/Cirrus or Visa/Plus or other similar logos, in which case the non-Australian transaction will be processed through those transaction systems. Similarly, non-Australian debit and credit cards can only be used at Australian EFTPOS terminals or ATMs if they have these logos or the MasterCard or Visa logos. Diners Club and/or American Express cards will be accepted only if the merchant has an agreement with those card companies, or increasingly if the merchant has modern alternative payment options available for those cards, such as through PayPal. The Discover Card is accepted in Australia as a Diners Club card.
In addition, credit card companies issue prepaid cards which act like generic gift cards, which are anonymous and not linked to any bank accounts. These cards are accepted by merchants who accept credit cards and are processed through the EFTPOS terminal in the same way as credit cards.

Cash out

A number of merchants permit customers using a debit card to withdraw cash as part of the EFTPOS transaction. In Australia, this facility is known as "cash out". For the merchant, cash out is a way of reducing their net cash takings, saving on banking of cash. There is no additional cost to the merchant in providing cash out because banks charge a merchant a debit card transaction fee per EFTPOS transaction, and not on the transaction value. Cash out is a facility provided by the merchant, and not the bank, so the merchant can limit or vary how much cash can be withdrawn at a time, or suspend the facility at any time. When available, cash out is convenient for the customer, who can bypass having to visit a bank branch or ATM. Cash out is also cheaper for the customer, since only one bank transaction is involved. For people in some remote areas, cash out may be the only way they can withdraw cash from their personal accounts. However, most merchants who provide the facility set a relatively low limit on cash out, generally $50, and some also charge for the service. Some merchants in Australia only allow cash out with the purchase of goods; other merchants allow cash out whether or not customers buy any goods. Cash out is not available in association with credit card sales because on credit card transactions the merchant is charged a percentage commission based on the transaction value, and also because cash withdrawals are treated differently from purchase transactions by the credit card company.

Cardholder verification

EFTPOS transactions involving a debit, credit or prepaid card are primarily authenticated via the entry of a personal identification number at the point of sale. Historically, these transactions were authenticated by the merchant using the cardholder's signature, as signed on their receipt. However, merchants had become increasingly lax in enforcing this verification, resulting in an increase in fraud. Australian banks have since deployed chip and PIN technology using the global EMV card standard; as of 1 August 2014, Australian merchants no longer accept signatures on transactions by domestic customers at point of sale terminals.
As a further security measure, if a user enters an incorrect PIN three times, the card may be locked out of EFTPOS and require reactivation over the phone or at a bank branch. In the case of an ATM, the card will not be returned, and the cardholder will need to visit the branch to retrieve the card, or request a new card to be issued.
All debit cards now have a magnetic stripe on which is encoded the card's service codes, consisting of three-digit values. These codes are used to convey instructions to merchant terminals on how a card should be processed. The first digit indicates if a card can be used internationally or is valid for domestic use only. It is also used to signal if the card is chip-enabled. The second digit indicates if the transaction must be sent online for authorisation always or if transactions that are below floor limit can take place without authorisation. The third digit is used to indicate the preferred card verification method and the environment where the card can be used. Merchant terminals are required to recognise and act on service codes or send all transactions for online authorisation.