Least cost routing, explained
Least cost routing lets a merchant send an eligible debit tap down the cheaper network. It is mandated for card-present payments, largely absent online, and still switched off for a lot of businesses who have never been told it exists.
The short version
Most Australian debit cards are dual-network: they carry an eftpos logo alongside Visa or Mastercard. When a customer taps, the transaction can travel down either network, and the two do not cost the merchant the same. Least cost routing sends it down whichever is cheaper for you.
It applies to eligible debit only. Not credit, not single-network cards, and — for now — not reliably online.
Why it is not universal
Because it reduces the profitability of the banks and the schemes at the same time. The RBA had to mandate card-present routing to get it moving, and the pace of adoption since tells you how enthusiastic the industry is about it.
Online is worse. Least cost routing online needs both the acquiring bank and the payment gateway to support it. Mandating hundreds of gateways is a far bigger task than mandating the acquirers, and a gateway owned by a scheme has no commercial reason to build routing to a competitor.
What to do about it
- Ask your provider, in writing, whether least cost routing is enabled on your terminals.
- Ask what proportion of your debit volume is actually being routed — enabled and working are different things.
- If you take payments online, ask whether your gateway supports routing at all before you assume the answer.
Frequently asked questions
- What is least cost routing?
- Least cost routing sends an eligible dual-network debit tap down the cheaper network — usually eftpos instead of Visa or Mastercard — so the merchant pays less on that transaction.
- Is least cost routing mandatory in Australia?
- The RBA mandates it for card-present (in-person) debit payments. It is largely absent online. Being mandated does not mean your provider has actually switched it on for you.
- Which cards does it apply to?
- Dual-network debit cards — the ones carrying an eftpos logo alongside Visa or Mastercard. It does not apply to credit cards or to single-network cards.
- Does least cost routing work for online payments?
- Not reliably. Online routing needs both your acquiring bank and your payment gateway to support it, and many gateways do not — so check before assuming it is on.
- How do I know if least cost routing is switched on?
- Ask your provider in writing whether it is enabled, and what proportion of your debit volume is actually being routed. Enabled and working are different things.
Who writes this
This site is written by a payments specialist rather than a content team. It is independent education — it does not sell terminals.