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Merchant ‘tap and go’ choice a boost in challenging times

07:00am August 05 2020

Digital payments have soared as customers shop online more and shun cash. (Getty)

Businesses around the country are having to make difficult decisions every day. 

On staffing, on supply chains, on financing arrangements – or, for many, just whether to even open the doors. 

As the COVID-19 pandemic continues to evolve, being laid bare by Victoria’s battle with a troubling second wave of infections, the frequency and degree of these difficult decisions is unlikely to decline anytime soon. 

Yes, extraordinary levels of support have been provided by governments, the Reserve Bank and the banking sector – all good news for our millions of hard-working businesses navigating these incredibly uncertain times.  

But when I speak to businesses, what they also want is more simplicity. They’re typically time-poor, often stressed and, most of all, looking for solutions that make life easier. 


That’s why today Westpac announced it would lead the industry and proactively contact customers to activate Merchant Choice Routing (MCR) – also called least cost routing – if we think they will benefit from the switch based on their current usage. If they agree, we will start switching them over.

Our estimates suggest around 37,000 business customers will be better off. 

You might have heard of least cost routing in recent years. 

Coinciding with the massive take-up by consumers of “tap-and-go” payments, least cost or merchant choice routing relates to the contactless transactions done via debit cards and which payment “rails” they’re sent down. The issue has gained prominence because most debit cards are “dual-network” these days, meaning contactless transactions go down international MasterCard or Visa rails as they historically automatically have, but now also through the domestic eftpos network after the organisation also rolled out the functionality over the years. 

Mostly gone are the days where customers insert or swipe their card and choose by pressing the cheque or savings buttons on terminals as Australians tap their card – and increasingly phones – in droves. 

As such, the surge in contactless payments means there’s more at stake for industry participants and businesses. 

While merchants, such as shops and cafes, can now choose to send these payments down either the eftpos or international scheme rails, in reality usage is low, because they don’t know it can be activated or they simply struggle to determine if they would benefit. 

Westpac enabled MCR for businesses operating on Westpac-owned terminals over a year ago in April 2019, but activation rates remain very low. For some business, the reality is that for a variety of complex reasons switching MCR on doesn’t always lower their costs of accepting a payment.

However, we believe a large number of our business customers would benefit, giving them one less thing to worry about during a strenuous period. Hence, we’ve decided to reach out directly to customers over the coming months who we think would benefit from MCR and will be switching them over unless they request not to. 

This is no small change. 

Like all businesses at the moment, Westpac is facing many difficult decisions and today’s MCR one will have a financial impact on us. However, we believe that proactively helping our merchant customers is the right thing to do. 

Digital payments have soared in recent months as customers shop online more and shun cash – trends being accelerated by the pandemic. But payment costs can be meaningful for businesses, and anything we can do to bring down their overall running costs is positive at a very challenging time for the economy.  

Just last week, the Australian Bureau of Statistics’ sixth survey measuring the impact of COVID-19 on businesses revealed some concerning signs. A startling one in 10 businesses expected having to close if government support measures finished while 13 per cent said they would reduce staff without these measures.

More broadly, almost half of businesses reported a decline in revenue over the past month and expectations of future revenue suggested many remained pessimistic about the outlook.

Positively, the government’s recent extension of the JobKeeper wage subsidy scheme and the JobSeeker unemployment supplement payment will provide ongoing support to businesses and the economy more broadly into next year. Some industries and businesses also continue to benefit and recover, with Westpac’s new data tracking the millions of daily credit and debit card transactions processed by the bank showing a lift in activity in July, despite underperformance in Victoria as the lockdown takes a toll on activity. In fact, since bottoming in April, annual growth in card transactions by value is – somewhat remarkably – running slightly above its pre-COVID-19 pace. 

Of course, that doesn’t undo the economic damage done from the worst shock since the 1930s depression, nor downplay the challenges ahead. 

But we are committed to helping businesses in any way we can with what lies ahead, already providing a range of COVID-19 support measures such as $15 million in merchant fee refunds to business customers. 

Ensuring businesses are getting the best option which suits their needs on tap and go debit transactions is another important part of acting – not just talking – on that commitment.

Guilherme (Guil) joined Westpac as Chief Executive, Business in December 2019. He has 22 years' experience in banking and consulting in Hong Kong, Brazil, UK, US, Spain and the Netherlands. Previously, Guil was Group Head of Wealth Management at HSBC Hong Kong, after 10 years at McKinsey & Co. He holds a Bachelor of Business Administration in General Management and Finance and a Master of Business Administration in Strategy, Corporate Finance and Investment Management.

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