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August 26th 2022

Breaking: RBA Announcement on Digital Wallet Routing Paves The Way For $800m in Annual Savings

In a market-leading move, the Reserve Bank of Australia has announced that it expects the payments industry to develop least-cost debit routing on mobile wallet transactions.

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The announcement comes at a pivotal time as Australian digital wallet usage more than doubled last year, accounting for over $2.1 billion AUD of transactions in March 2021 alone.¹

This comes as groundbreaking news to retailers, who have previously raised concerns surrounding the inability to undertake LCR on transactions processed through digital wallets.² Currently, merchants cannot access Australia’s domestic debit network, Eftpos, on payments made via digital wallets unless the customer alters their default network in-app.

More to Come from Least Cost Routing

If extended to all debit transactions, CMSPI estimates that LCR, which is currently limited to contactless domestic debit card transactions not processed via a mobile wallet, could save Australian merchants an estimated $800 million annually

What’s Next for Merchants?

The RBA has indicated it intends to consult the industry regarding the approach and timeline to best meet the expectation around digital wallets, stating that the implementation of these solutions would be “more feasible and less costly than previously indicated”.⁴

But benefits to merchants aren’t guaranteed. Between strategic rates, technical limitations, and negotiation dynamics, accessing the full benefit of LCR is incredibly complex, and we regularly see inefficiencies in merchants’ LCR systems. With our data-driven analysis, CMSPI works with Australian merchants to assess and optimize their LCR strategy and to supercharge their payments performance.