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DataMesh tech cuts transaction costs with least cost routing

06 Oct 2020

Australian financial payment systems and software solutions provider, DataMesh Group has developed a capability to automatically apply least cost routing (LCR) technology within Australia’s debit card payment system for its customers.

LCR allows for the best economic outcome for merchants on contactless (tap-and-go) debit card payments by sending them through the debit network that costs the least to accept. 

It enables a debit payment to be uniquely "flagged" as a specific debit card transaction and sent to the lowest cost debit network, resulting in the lowest cost fee structure for the merchant.

Without LCR, the transaction is sent to the default debit network programmed on the customer’s card, which may not be the lowest cost debit network, resulting in higher transaction costs for merchants.

DataMesh’s software can read the card/phone/watch, decipher whether it’s a debit or credit payment and attach the relevant message to the transaction before it’s sent to eftpos via the acquirer (potentially any bank), which has awarded the transaction the applicable fee structure. 

Merchants are then charged the lowest payment fees on debit transactions. 

The Sydney-based fintech is among the first companies to have found a way to automatically select LCR on a tap-and-go debit payment.

DataMesh’s software can be uploaded on existing hardware terminals, negating the need for merchant acquirers to buy new terminals, nor requirements for action by merchants or cardholders.

Eftpos, the Australian Retailers Association (ARA) and retailers have been pushing for LCR, with the Reserve Bank of Australia (RBA) saying it will consider regulation if it’s not made widely available to merchants.

Currently, debit cards represent around 70% of all card transactions in Australia, so DataMesh LCR technology translates into significant transaction cost savings for merchants.

“The unique least cost routing capability developed by DataMesh is a massive win for Australian merchants, especially in this era of contactless payments,” says DataMesh Group CEO Mark Nagy.

‘Eftpos’ debit card network accounted for more than two billion cheque and savings transactions in 2019 worth around $130 billion. 

DataMesh is working with eftpos and other payments industry members in the push for least cost routing, and to bring down fees for merchants in what is a very challenging environment for retailers and consumers.

“Our conservative estimates suggest a potential reduction in fees for merchants of up to $500 million dollars nationally per year if LCR was fully implemented,” Nagy continues.

“Our LCR software is compatible with many legacy merchant terminals and most acquirers. We estimate more than half of card terminals in Australia are currently unable to fully support LCR, so our technology provides an effective solution and removes the need for acquirers to undertake costly hardware upgrades.”

DataMesh is focused on vastly improving and modernising merchants’ outdated backbone payment systems. 

It has developed solutions that not only fix current payment system issues for merchants but can increase their business efficiency through new and improved integrated technology.

Last month, the Company announced it had signed a major long-term agreement with national retail giant Peregrine Corporation under which DataMesh has become the company’s sole payments provider.