Woolworths act to cut debit card costs

Posted by Josette Dunn on 19th April 2010

In the wake of the global financial crisis, many customers have turned away from buying things on credit, choosing instead to use debit cards that act like credit cards, such as Visa debit or Mastercard debit.

Many new bank accounts are also offering these debit cards as standard, instead of the traditional EFTPOS card.

This increased use and promotion of scheme debit cards means retailers are now facing higher bank fees and growing cost pressures.  This is because when purchases are treated as credit purchases – whether from a credit card or debit card – and are thus processed by Visa or Mastercard, the retailer is charged a fee.

Woolworths has announced they are taking action to reduce this growing cost, by having customers using debit cards choose the Cheque or Savings button rather than credit.  This means the transaction will be processed via the EFTPOS network, rather than by Visa or Mastercard, avoiding the fee.

Woolworths Limited Finance Director, Tom Pockett said “The bank fees from processing debit transactions via MasterCard and Visa adds significant costs to the Woolworths business. By processing transactions through the Australian EFTPOS network, we can keep our costs low enabling us to deliver increased value to our customers,” Mr Pockett said.

“Regardless of which button customers press they still access the same bank account. The charges associated with the scheme debit networks are simply an unnecessary layer of costs for retailers that eventually trickle down to the consumer,” he said.

“By moving all debit transactions to the EFTPOS network, we can continue to be
one of the few national retailers not applying surcharges to any card transactions,”
Mr Pockett added.

In New Zealand, merchants process all debit transactions through the domestic EFTPOS network to keep transaction costs low.

Mr Pockett said the change is unlikely to cause inconvenience to customers as most scheme debit users already press cheque or savings to access their funds.

“Customers will need to ensure they know their PIN to access their funds via the cheque or savings buttons. The PIN customers use in-store is the same number which customers use to withdraw funds at an ATM,” Mr Pockett said.

Customers who do not know their PIN can contact their bank for assistance.

“The EFTPOS network is a secure and real-time payment network which is admired around the world. It’s important that Australian retailers support the Australian EFTPOS network to ensure we have a competitive, innovative and low cost network benefiting both retailers and consumers into the future,” Mr Pockett added.

The announcement initially caused some confusion, with some media reports stating that Woolworths Limited was banning or surcharging the use of Visa Debit and MasterCard Debit cards in its stores.

Woolworths Limited are keen to stress that they will continue to accept Visa Debit and MasterCard Debit cards at all stores within the retail group across Australia.

The only change for customers using Visa Debit and MasterCard Debit cards will
soon be the need to press either the ‘cheque’ or ‘savings’ buttons to access their
funds.

Credit cards will not be impacted by this change and customers will still be able to
select ‘credit’ when using a credit card.

Regardless of which button customers press they still access the same bank account.
The change, which is likely to only affect less than 1% of Woolworths’ customers,
will be introduced progressively across stores in the Woolworths group.