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Debit cards vs EFTPOS cards: Understanding the differences in NZ

When it comes to everyday payments, EFTPOS cards and scheme debit cards (often referred to simply as “debit cards”) are most commonly used in New Zealand. While these terms are often used interchangeably, they are distinctly different products and, it’s essential to understand the differences between them so you can offer the right payment options for your customers’ needs.

In this article, we’ll delve into the nitty-gritty of EFTPOS and scheme debit cards, highlighting their distinctions and helping you make an informed decision.

What are Debit Cards and EFTPOS Cards?

(Scheme) Debit Cards: Convenient and Flexible Payment Options

Scheme debit cards are linked to a customer’s everyday bank account, allowing money to be spent directly from available funds. A debit card allows purchases to be made online on e-commerce platforms and in-store by inserting, swiping or using contactless payment methods like payWave. They can also be used for digital payments made by using smartphones or smartwatches on payment terminals as well as for withdrawing cash from ATMs. They are a convenient and flexible way to manage everyday transactions.

Compared to EFTPOS cards, they offer a higher level of flexibility to use. They are accepted worldwide wherever the debit card payment scheme (such as Visa, Mastercard, etc.) is accepted, giving access to pay at millions of payment terminals globally.

EFTPOS Cards: Electronic Payments Made Easy

EFTPOS cards are another popular payment option in New Zealand. EFTPOS (Electronic Funds Transfer at Point Of Sale) is an electronic payment technology that allows customers to pay for goods and services and transfers funds directly from customers’ bank accounts to the merchants’ (without the involvement of payment schemes such as Visa, Mastercard etc.). They are primarily designed for in-person transactions at the point of sale and can’t typically be used online. 

In New Zealand, this is a “homegrown”payment network of multilateral agreements governed by Payments NZ. Other countries like Australia and Singapore also have these localised networks, sometimes under different brand names. 

Key Differences between Debit Cards and EFTPOS cards in New Zealand:

The main differences between EFTPOS cards and scheme debit cards lie in the range of functionalities they offer and the specific locations and methods in which they can be used. Some of the differences are:

  • Wider Acceptance and Usage: Scheme debit cards can be used everywhere in New Zealand (both in-store and online) as well as internationally, because they are generally associated with international payment networks like Visa or Mastercard, and can also transact over the EFTPOS network when using insert or swipe transactions. This provides wider acceptance both domestically and overseas. On the other hand, EFTPOS cards are primarily designed for domestic use and are not typically accepted internationally or for online purchases.

  • More Payment Options: When using a debit card, customers can pay using insert, swipe or contactless (hover/tap) payment methods. Debit cards can also be linked to a mobile device such as a smartphone or watch that can be used to pay on the terminal. As more consumers adopt contactless methods to pay, carrying a wallet with cards and cash is becoming less common and so is touching the terminal to enter the PIN, causing more businesses to offer this payment option. Conversely, EFTPOS cards only allow payments to be made by swiping the magstripe and entering the PIN. These differences can impact the way transactions are processed, including the time taken at checkout and the associated fees you pay to accept the payment.

  • Appearance: EFTPOS cards appear different from debit cards as well. They have no chip embedded in the card and do not have a card scheme logo (such as Visa, Mastercard etc.).

  • Merchant Fees: There are fees associated with the method of payment that businesses accept due to how these payments are processed in the background. To accept EFTPOS, there is a fixed monthly fee merchants must pay to access the payment network for an unlimited amount of insert/swipe transactions via an EFTPOS card or a debit card. However, if the debit card is used for contactless payment, the transaction requires additional processing, which incurs a Merchant Service Fee (MSF) per transaction. These fees are attributed to the verification process and interchange costs between card issuers, acquiring banks and card schemes. The value of this fee is often calculated as a percentage of the value of the transaction and depends on the MSF package businesses negotiate with the merchant banking partner.

Benefits of Debit Cards for Cardholders:

Debit cards offer several advantages that make them a popular choice for many New Zealanders:

  • Increased Convenience: Debit cards provide a convenient way to access and manage funds. They can be used for various payment options, including online purchases, contactless payments and cash withdrawals.
  • Global Acceptance: Debit cards associated with international payment networks like Visa or Mastercard can be used worldwide, making them suitable for both domestic and international transactions.
  • Enhanced Security: Debit cards offer security measures and dispute frameworks backed by the card issuer and schemes, providing additional layers of protection against fraud. Banks may also offer card controls on debit cards, to disable paywave, international transactions and online transactions making these safer than EFTPOS cards.
    EFTPOS cards are often incorrectly considered more secure than debit cards due to the requirement of a PIN for transactions and inability to use for payWave, limiting their use if lost or stolen.

Benefits of EFTPOS Cards for Cardholders:

  • Domestic Use: EFTPOS, being a “homegrown network”, is widely accepted across New Zealand, making it a convenient payment method for local transactions at shops, supermarkets and other retail outlets.
  • Accessing Funds: EFTPOS cards are directly linked to the users’ bank account, allowing tracking of spending and viewing transaction history through online banking. It eliminates the need to carry and track cash.
  • Limited Use: EFTPOS cards typically cannot be used online and cannot be tapped to make contactless transactions, which makes them safer in some aspects, such as an entry-level payment option for children or seniors. But, because the card information is transferred via mag-stripe, it is less secure than encrypted chip or payWave transactions as it allows the card to be skimmed.

In Conclusion: EFTPOS Cards or Debit Cards or Both?

As a merchant, it is crucial to have the capability to accept both EFTPOS payments and debit card payments, primarily if you frequently deal with tourists or international buyers.

Accommodating these payment methods allows you to cater to a wider customer base and provide a seamless payment experience. Including catering to the needs of a younger audience who may no longer carry cash or even a wallet!

Also, while EFTPOS cards are widely used domestically, they cannot typically be used for online transactions. Therefore, if you are involved in e-commerce, it is essential to ensure that you can accept alternative card payment forms to meet online shoppers’ needs.

When it comes to transaction fees, the choice of payment method can impact costs for a business. While accepting EFTPOS payments does not incur any additional fees (apart from the fixed monthly charge), accepting debit cards (contactless or online transactions) may incur additional merchant service fees to accept.

Understanding the dynamics of payment fees and offering a diverse range of payment methods, allows you to strike a balance between convenience, cost-efficiency and customer satisfaction.

Final Considerations

Surcharging is one option merchants can use to mitigate the impact of merchant service fees. By implementing surcharging, you can offset some of the processing costs associated with certain transactions, helping to manage expenses while still providing a range of payment options to your customers. Smartpay terminals allow you to accept both these types of payment options and we also provide a free surcharging feature that allows you to offset the cost of acceptance.

To learn more about how Smartpay terminals can help you accept payments in your business, get in touch with our payment specialists today.

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