EFTPOS meaning and how it works

From the supermarket to the servo, we use this domestic-only payment service almost every day. But many Australian business owners still don’t understand what EFTPOS means… or was that eftpos?

Much of the confusion stems from the fact that EFTPOS means different things depending on whether you spell it with upper- or lowercase characters.

In this post, we’re defining EFTPOS/eftpos, discussing the differences, and outlining processes. We’ll also provide relevant info for Australian SMBs, including limitations, fees, and affordable alternatives for offshore payments.

Clarifying the difference between EFTPOS and eftpos in Australia

EFTPOS is a generic term for in-person card payments used worldwide, while eftpos is an Australian domestic-only card with low transaction fees.

What does EFTPOS mean?

EFTPOS stands for Electronic Funds Transfer at Point of Sale. When written in capital letters, EFTPOS is a generic term for a system that facilitates electronic in-person payments, whether by debit card, credit card, or mobile wallet.

The EFTPOS system connects to the customer's account, verifies card details, checks for sufficient funds, and processes the payment. This system is used for in-person card payments worldwide, though sometimes under a different name.

What does an eftpos card mean?

The lowercase “eftpos” is a proprietary brand name for a domestic card scheme used only in Australia. A card scheme is a payment network that defines the standards, security, and fees for branded cards, such as Visa or Mastercard – eftpos is an Australia-only provider.

Take a look at your Australian debit card. Does it have eftpos written on it? Most likely. In Australia, 85%¹ of locally issued cards are dual network, using eftpos for domestic payments, and Visa or Mastercard for credit and overseas purchases.

How does eftpos work in Australia?

The process to use the low-cost eftpos payment scheme in Australia is as follows:

1. The customer inserts their card into the terminal.
2. The customer selects their Savings (SAV) or Cheque (CHQ) account. Credit (CR) will route the payment through an international card scheme, such as Visa or Mastercard.
3. The POS terminal communicates with the customer’s bank to verify the PIN and available funds.
4. The customer's bank places the funds on hold and informs the terminal that the transaction has been approved.
5. The funds are transferred from the customer’s account to the merchant account over a settlement period, usually 1-2 days.

Tap-and-Go payments follow a similar process, except customers don’t insert a card, select an account, or enter a PIN. The downside is that payments may get routed through international card schemes, which could have higher fees.

How can a business switch to cheaper eftpos transactions?

While a fraction of a per cent doesn’t look like much, pricier card surcharges can add up over time and impact your bottom line.

Some Australian businesses could reduce expenses through Least-Cost Routing (LCR), which has the POS system automatically selecting the cheapest available payment network. Instead of paying with Visa or Mastercard during Tap-and-Go payments, customers use the cheaper eftpos network.

LCR is usually an opt-in feature. Businesses can try calling their business bank or payment provider to see if it is available. In some situations, activating LCR may require upgrading a POS terminal.

How does EFTPOS/eftpos differ from other payment methods?

EFTPOS, the all-caps acronym, is a generic worldwide term for in-person card payments of any type. Alternative payment methods include cash, online payment gateways, direct debit, BPAY, Buy Now, Pay Later (BNPL), bank transfers, and payment platforms like PayPal.

The eftpos card scheme differs from its competitors through lower pricing and exclusive domestic use in Australia. When making in-person payments overseas, the cards automatically switch to a global card scheme, such as Visa or Mastercard.

What are EFTPOS payments and how it works?

All in-person card payments in Australia use the EFTPOS system. But not all EFTPOS payments use the eftpos-branded card scheme.

Before Tap-and-Go became mainstream, customers would swipe or insert their card in an EFTPOS terminal, select a “SAV” or “CHQ” account, and enter their PIN to pay with the low-fee eftpos card scheme.

Nowadays, most Aussies make contactless payments with a card or mobile wallet, which lets the terminal automatically select a payment network. Sadly, more often than not, the terminal shuns the low-cost eftpos card scheme in favour of pricer, more lucrative Visa or Mastercard networks.

Consumers can usually pay with the cheaper eftpos scheme by inserting their card instead of tapping. While this saves on processing fees, many people, including some high-volume businesses, find it too time-consuming and inconvenient.

EFTPOS fees in Australia

In Australia, EFTPOS fees vary depending on the card scheme, business size, and payment processor (Square, Stripe, etc.). Some businesses pay a flat-rate fee, such as 0.30c per transaction, while others pay a percentage-based fee, or a mix of the two.

According to the Reserve Bank of Australia, card scheme fees have an average total transactional value of:

• eftpos: 0.3%
• Visa/Mastercard debit: 0.5%
• Visa/Mastercard credit: 0.9%
• American Express: 1.3%
• Diners Club: 1.7%²

Understanding EFTPOS surcharges

In Australia, 16% of businesses pass card fees onto customers through a POS surcharge at checkout.³ That’s why when you purchase a $5 coffee, for example, you may end up paying 1-2% more, either through a flat fee or a percentage-based surcharge.

If your business has card surcharges, the Australian Competition & Consumer Commission (ACCC) requires that you don’t charge more than what it costs you. You must also be able to prove those costs if asked.

If there is no way for a customer to avoid surcharges, the ACCC also requires that you include all surcharges within the display price.⁴

The upcoming Reserve Bank EFTPOS card surcharge ban

The Reserve Bank of Australia will ban card surcharging on October 01, 2026. From that date, businesses can only charge customers the listed price, regardless of how they pay. Surcharges for Visa, Mastercard, eftpos or any other payment network will no longer be allowed.

In good news for businesses, the Reserve Bank plans to lower the caps on interchange fees, which it expects to reduce payment costs.⁵ The upcoming change should also improve fee transparency, making it easier for businesses to shop around.

Advantages of EFTPOS for Australian businesses

Despite the fees, the in-person EFTPOS card payment system has many benefits for businesses.

• Faster transactions: Businesses can reduce queues through rapid Tap-and-Go transactions.
• Meeting expectations: Australian consumers have come to expect EFTPOS on every transaction and often don’t carry cash.
• Less admin: Electronic payments create a digital record of every transaction, making it easier to reconcile payments, calculate taxes, and analyse revenue.
• Software integration: EFTPOS terminals can integrate with accounting software to make behind-the-scenes admin even easier.
• Improved security: While fraudulent transactions may occur, EFTPOS payments are safer than cash due to a lower risk of theft.

The low-cost eftpos card scheme also offers numerous benefits.

• Lower costs: The average eftpos transaction is cheaper than competing card schemes like Visa or Mastercard.
• Fast settlements: Most eftpos transactions settle instantly or within the same day, which improves cash flow.
• Debit transactions: Like a debit card, eftpos withdraws money directly from the customer’s account, making it easier for them to manage budgets and harder to overspend.
• Real-time balances: Transactions typically appear instantly in online banking, enabling businesses to better monitor expenses.
• Cash out: Some businesses allow cash out using the eftpos system, a value-add that customers may appreciate.

Disadvantages of EFTPOS payments for businesses

While in-person EFTPOS payments – and the eftpos card scheme – offer a plethora of benefits, there are downsides to consider.

• Fees: All card payments incur fees, which can irritate customers and eat into the business's bottom line.
• Fraud: Unauthorised transaction disputes can cause businesses to lose products and revenue.
• Outages: Although fairly rare, EFTPOS, electrical, and internet outages can make accepting payments impossible until systems are restored.
• Slow settlements: Some transactions take longer to settle, clogging your cash flow.
• Hardware: The business must purchase or rent a POS terminal to accept in-person EFTPOS payments.
• Training: Staff may need basic training to use the new POS terminal.
• Australia-only: The eftpos card scheme only works in Australia. Overseas transactions are processed through a global competitor like Visa or Mastercard.

Despite the drawbacks, most Australian SMBs accept EFTPOS payments, as few in-person customers are willing to pay in cash.

Wise Business: For cross-border payments

While optimizing your domestic EFTPOS setups can help manage local card transaction costs, local solutions fall short when your business operations cross borders. For Australian businesses managing international suppliers, remote teams, or global customers.

Expanding a business globally opens up exciting opportunities, but also new challenges like receiving payments across borders. Hidden foreign transaction fees and hefty currency conversions involved with international payments can eat into your profits and time.

Wise Business serves as a cost-effective solution where you can receive money from around the world at the speed and price of local payments.

Transform the way you receive payments with Wise Business:

• One-time fee of 65 AUD for local account details in 8+ currencies, including AUD, NZD, USD, and more—no recurring fees
• One account to hold, send, and convert money with no hidden fees or exchange rate markups
• Create and send professional invoices directly to your customers through Wise Business
• Create payment links to request money in specific currencies
• Seamlessly receive payments from customers, online sales, or PSPs like Stripe and Amazon.
• Wise is safe and secure - Trusted by 13 million people and counting

Sign up for the Wise Business account! 🚀

This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

Sources:

1. Reserve Bank of Australia: Least cost routing
2. Reserve Bank of Australia: The cost of card payments for merchants
3. Reserve Bank of Australia: Surcharging
4. ACCC: Card surcharges
5. Reserve Bank of Australia: Media release