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Merchants in Australia are set to benefit from significant potential savings following the launch of least-cost routing for Google Wallet transactions.

Last week, Australian Payments Plus (AP+)  that ANZ and Suncorp Bank have become the first two issuers to enable dual-network debit card functionality within Google Wallet.

The move means that merchants will for the first time be able to use eftpos, the low-cost domestic network, when accepting debit transactions via Google Wallet.

In Australia, 90 percent of debit cards are dual-network, meaning that they can process transactions using eftpos, in addition to Visa or Mastercard.

According to the , the cost of accepting debit transactions is on average 20 percent cheaper for merchants when using least-cost routing.

Developed by AP+, least-cost routing is a technology solution that was designed to enable merchants to accept debit transactions via the cheapest network available.

However, despite the RBA officially , least-cost routing was not compatible with mobile wallet transactions until 2024.

The announcement that Google Wallet can now enable least-cost routing functionality is a significant step for the technology.

Adrian Lovney, chief payments officer at AP+, noted that mobile wallets now account for 40 percent of all in-person transactions in Australia, and that share is expected to grow in the coming years.

“Enabling merchants to route those wallet payments to the eftpos network brings further competition in the mobile wallet space, which we know lowers the cost of payment acceptance,” he said.

In a separate , Google Australia said it plans to enable least-cost routing for more issuers over the course of 2025.

Least-cost routing arrives late to mobile wallets

Previously, when a dual-network debit card was linked to a mobile wallet, debit transactions made via the wallet would default to Visa or Mastercard.

This defaulting process would take place whether or not the merchant had enabled least-cost routing for other debit transactions, such as contactless or chip and PIN.

In September 2024, Apple Pay became the first mobile wallet to enable least-cost routing, but the rollout covered only new cards loaded to the wallet, and did not affect existing cards.

Brad Kelly, co-founder and board member of the Independent Payments Forum (IPF), said it is likely that least-cost routing is currently used by about one in five Apple Pay wallets.

He also said that it is likely to take another three years before least-cost routing is available on all debit cards linked to Apple Pay.

Nonetheless, the arrival of least-cost routing to the two largest mobile wallets in Australia is broadly in line with the RBA’s expectations on the rollout of the technology.

In 2022, the RBA set an expectation for least-cost routing to be available for mobile wallet transactions by the end of 2024 — a target that Apple hit (in part) and Google missed by two months.

Other interventions to lower payments costs

AP+ noted that it is also committed to lowering payment costs by reducing eftpos interchange fees.

In December 2024, for eligible small business merchants, eftpos interchange rates for all card-present transactions (including mobile wallet transactions) were reduced to A$0.02 per transaction.

For online transactions, interchange was reduced to A$0.03 per transaction.

In May this year, eftpos issuer scheme fees will be reduced by 22 percent and acquirer scheme fees by 5 percent.

“Lowering the cost of payments in Australia is a fundamental part of the AP+ purpose,” said Lovney.

“Right across all the AP+ payment schemes, we’re committed to lowering the wholesale cost of payments.

“It’s all part of having strong and competitive payment systems that serve the needs of businesses and consumers in Australia.”

Effect on surcharging debate

The rollout of least-cost routing is also a key factor in Australia’s surcharging debate, which could lead to the practice being banned, at least for debit transactions, starting in 2026.

As described in an RBA  published in October 2024, enabling least-cost routing for more merchants, and for more types of transactions, would put downward pressure on overall payment costs.

However, enabling least-cost routing does not necessarily guarantee that merchants will save on payment costs, as the savings often need to be passed on by the merchant’s acquirer.

Many entities in the Australian payment markets, including AP+ and the IPF, have warned that least-cost routing, when combined with fixed-rate pricing plans, benefits the acquirer rather than the merchant.

In its , AP+ said it “sees merit” in mandating that debit and credit transactions are “unbundled” in merchant pricing plans, in that doing so would ensure that merchants can see how much they should save when using eftpos.

AP+ also argued in favour of either capping or banning debit surcharging.

The RBA will respond to the submissions in mid-2025.