Another Spectrum

Personal ramblings and rants of a somewhat twisted mind

The end of a (financial) era?


New Zealand’s isolation from the rest of the world has resulted in some unique evolutionary developments. This is true for more than just our fauna and flora. It also holds true in the business world. Whereas in most parts of the western world eBay is a household name, many NZers haven’t a clue what it is. However, we all know what TradeMe is.

Then there’s our eftpos system. For 30 years NZers have enjoyed free electronic transactions through eftpos, where payments are made by transferring funds directly from the purchaser’s bank account to the retailer’s bank account at the time of purchase. Who the purchaser or retailer banks with is irrelevant. All that is required is a plastic card and a PIN number for the purchaser and a cheap terminal for the retailer. We don’t think twice about using eftpos for purchasing items costing as little as one dollar (or less).

I, like a lot of NZers, never carry cash. I carry a single card which doubles as my credit/debit card and as an eftpos card for my personal and business bank accounts. An eftpos transaction is often cheaper than cash. If I purchase an item valued at $4.98, I pay $4.98 via eftpos, but $5.00 if paying by cash as the smallest coin denomination is 10 cents.

But all this is about to change.

Visa and Mastercard, which have a virtual duopoly on the credit/debit card market, are strongly pushing their “contactless” wave and pay technology. That in itself is not a problem. I can see the convenience of not having to remove a card from my wallet and entering a PIN. The problem is that Mastercard and visa own the pay and wave technology and won’t allow it to be used for eftpos transactions.

Currently, eftpos is universally available. Every dairy and café accepts eftpos but many do not offer credit card facilities due to the high cost of transactions. The smaller the value of their transactions, the less likely they are to offer credit card payments. It appears that all new bank cards are being issued with wave and pay technology enabled and no way of turning it off. Does this mean that I will have to resort to using cash when purchasing a cup of coffee or a chocolate bar? Will the introduction of pay and wave technology be the death-knell of eftpos in much the same way as the introduction of rats, weasels and possums were to much of our indigenous flora and fauna? Or will it spur our inventive genius to evolve an alternative and independent payment system?

Only time will tell.

Author: Barry

A post war baby boomer from Aotearoa New Zealand who has lived with migraines for as long as I can remember and was diagnosed as being autistic aged sixty. I blog because in real life I'm somewhat backwards about coming forward with my opinions.

6 thoughts on “The end of a (financial) era?

  1. So would the introduction of the “wave and pay” cards, which we don’t have here in the States, preclude retailers and customers from continuing to offer eftpos? Can’t you have a credit card as well as the eftpos thing?

    For what it’s worth, I don’t carry around much cash either. I have a MasterCard, a Visa card, and an American Express card (which is my company-issued card). And I charge just about everything!

  2. In theory, the two systems could run along side and independent of each other. It would require retailers having two terminals and customers carrying multiple cards. Currently around 75% of all electronic transactions are via eftpos, leaving credit cards, debit cards, direct debits and other forms of electronic transaction to fight over the rest. However if wave and pay technology grows significantly, there will come a tipping point where eftpos is no longer viable.

    Eftpos transactions are free for both buyer and seller due to the high transaction volumes. I imagine that a significant portion of the costs of the service are related to the extensive infrastructure required, and those aren’t directly related to the volume of transactions.

    I can only compare the situation to Australia, which doesn’t have an equivalent to our eftpos system. There practically every electronic transaction attracts surcharges and it’s practically impossible to make small value purchases except by cash.

    All hope is not lost though. I have just learnt, that a consortium has been set up to develop an alternative system. Consisting of the major banks, eftpos providers and major mobile phone companies, it plans to roll out an electronic wallet system that would include payments systems for credit cards, eftpos, transport systems and possibly café and loyalty cards. Transactions would be processed by waving a mobile phone over the terminal. Plans are to have it rolled out before the end of the year.

    One issue I have with a system controlled by Visa and Mastercard is that 2% of every transaction heads offshore. That’s a considerable cost to the country. Also the revival of a cash economy leaves more room for transactions to be hidden from legitimate taxation, something which the current system avoids.

  3. Here in Canada we have wave and pay credit and we ahve debit cards, which are insert or swipe. I do believe that there are compound terminals that allow either mode to be used. here each debit transaction costs the user a fee 0 depending on the bank agreement you pay for. the more your monthly fees, the more “free” debit card uses you get. Using another bank’s termonal or a public terminal to withdraw cash also costs (about $1.00 per transaction). Credit card usage is paid by the vendor who typically pay 2-3% per each transaction. Both systems mean that cash transactions are cheaper for user and/or vendor. I typically withdraw enough cash each month to cover all my incidentals and rent, etc. I will use debit for paying groceries but definitely not for small purchases. It used to be that all debit transactions were free, but our bamks only made 100’s of billiions in profit so they felt obliged to charge for each transaction – hard to begrudge them more money for shareholders and less for customers. After all we want our banks to be strong and paying them for each transaction with OUR money seems to be the best way.

    Realistically there is some cost to the bank for each debit card use, but only pennies compared to the dollars they extract in fees. The vast majotity of Canadian bank profits in the last 5 years have been through user fees – not loan interest or investment returns, or special services like currency exchange. transaction fees. So I run as few transactions as possible through my bank and have returned to mostly cash. Besides, I once applied for a loan(years ago) and the bank looked at my itemized debit card use and refused based on how and where i spent my money. That pissed me off so much that I have operated fundamentally with cash since – no personal records of purchases. The less persoanl info that is out there, the better off we all are.

    • At present, a single card can be a credit card, debit card or eftpos all at the same time. Mastercard and Visa are insisting that eftpos cannot be integrated with pay and wave. As they control the technology, they have the power to permit integration or not. Currently they aren’t

      Our eftpos system is a truly costless system for users. There’s no transaction charges or inter-bank charges. Eftpos terminals are every where from the largest department stores down to street vendors selling roasted chestnuts. They would be out of business very quickly if they relied only on cash and credit/debit cards.

      And of course, the other issue is the 2% transaction charge that Mastercard and Visa impose. That’s a huge amount per year, all of which heads overseas.

      When one of our minor political parties proposed a 0.02% transaction tax on all bank transactions, big business was aghast. You should have heard the outcries. But it’s Okay to impose a 2% fee on the little guy? Go figure.

      • Exactly. They way I use my debit card, I get by with bank charges of about $3.95 per month. Those who have unlimited card usage can pay $20 per month. And those who run an overdraft or personal line of credit pay a fortune in interest. (can be 20% per annum) And many people here do that.

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