Visa Debit Takes on EFTPOS

Debit cards have always been popular in Australia and the local EFTPOS system has proved successful for nearly three decades. Until recently the system has been unchallenged and has been the only option for debit cards. As a result all ATM cards issued by Australian banks have been EFTPOS until recently. While they work well in Australian retail stores the system does have its shortcomings.

Unfortunately, acceptability is limited only to Australia. This is the reason EFTPOS is having a difficult time competing with the flood of bank debit cards, particularly the market-leading Visa debit cards.

Debit cards can do virtually everything that EFTPOS can do for you but on a much wider scale. Where EFTPOS is accepted only in Australia, Visa debit is acceptable in the more than 24 million merchants and other outlets that also accept credit cards across the globe. If you wish to withdraw cash, you can use Visa debit at about one million ATM machines located in over 150 countries.

There simply are more over the counter outlets that accept Visa debit than EFTPOS. And, in these times of online purchases and the Internet, the single most distinctive advantage of debit cards is that they can be used for online and over the phone payments while EFTPOS is totally useless for these card-not-present transactions (as they are called in the industry).

Visa debit and other debit cards do not give you credit; they are simply linked to your bank account thus giving you access to your funds all hours of the day, all days of the year. In this regard the system is similar to EFTPOS in that you purchase items using your own money in your bank account.

But more and more banks are promoting the use of debit cards. These features are a result of consumer demand for using debit cards for online purchases. Use of debit cards has become so widespread that in terms of numbers alone there are more than 3 debit cards for each Australian qualified (that is, at least age 18) to obtain and use them.

On the other hand, while the Australian Consumers Association has acknowledged the huge inroads made by debit cards they also believe EFTPOS should not be phased out. While it’s less accepted overseas or online there are some advantages to EFTPOS.

There are differences in the charging of the interbank transaction fee (called the ‘interchange’ fee).

When you use your EFTPOS, your bank (or authorised deposit-taking institution or simply ADI) pay this interchange fee to the bank of the merchant. It’s the merchant’s bank that earns money on your transaction.

But when you use your Visa debit card or other debit cards, things turn out differently. Your bank is able to charge the merchant

s bank a transaction fee and therefore make money from your transactions.

Reports suggest that the EFTPOS system charges merchants a lower transaction fee than the Visa debit system. It may not seem like a big difference but if your making many transactions each month it can really add up.

On the other hand, Visa debit cards offer another advantage not found in EFTPOS. You enjoy purchase protection, card replacement in case of loss, and other security features normally associated with credit cards.

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