EFTPOS, or Electronic Funds Transfer at Point of Service, is the backbone of the debit card system.

To the consumer the EFTPOS system seems simple.  You use a card to pay for your purchases, either by tapping it or entering you PIN. However, the system behind this transaction is more complex than it appears

The EFTPOS system is a series of interconnected electronic terminals of which there are more than half 600,000 throughout Australia.  According to the Reserve Bank of Australia, there were about 1.1 million EFTPOS terminals in Australia as of June 2020, an increase of 8.6% from the previous year. Given that COVID-19 became a worldwide pandemic in March 2020, the demand for contactless payments grew as people avoided cash as it was thought to transmit the deadly virus.

When you make a transaction, these electronic terminals send back information as to who the debit card belongs to and which institution the card is with.  The institution then sends back details required to verify the information as well as whether the consumer has access to the relevant amount of money.  When the transaction is confirmed then the funds are deducted from the account and transferred to the shop or service provider.

Unlike a credit card network there is not a single payer, but a large number of payers each one of which is guaranteed by a varied number of banks.  This means that there needs to be a large degree of trust and verification built into the system.

The EFTPOS network is actually a network of seven proprietary payment systems owned by different banking networks.  They are all interconnected and to the end consumer they appear identical, apart from different branding on the terminals.  To the merchant the relationship does differ from bank to bank and they tend to be the operated by the same bank that operates their current account.  The networks are known as peers, and they agree to honour each other’s transactions, which leads to the seamless nature of the system.

EFTPOS finances itself through merchant charges and terminal rental.  This is when the shop or service provider pays the bank for processing the transaction.  These charges tend to be less than credit card charges, but it still means that many value retailers are reluctant to accept these cards and will either charge a surcharge, enforce a minimum payment or not accept cards at all.  Terminal rental can also exclude a number of smaller businesses such as market stalls, taxi firms and small shops.

EFTPOS was initially set up and run by the in 1984 by Westpac. By 1988, all the major banks in Australia had joined the EFTPOS network, and more than 10,000 terminals were in operation.Iit is now owned by a co-operative made up of many of Australia’s largest banks, including ANZ Bank, Westpac and the Commonwealth Bank of Australia.