In business, every dollar counts – whether it's coming in or going out.

But if you're not using Least Cost Routing (LCR) to process your online debit transactions, you could be overspending on unnecessary fees without realising it.

Want to keep more of your hard-earned money in the bank where it belongs? Then read on to discover how LCR can help you save on transaction costs – with minimal effort.

But first: What exactly is LCR?

LCR – also known as Merchant Choice Routing – lets you route debit card transactions through the least expensive payment network.

And if your business handles a large volume of debit transactions, this can mean significant savings over time.

LCR is available on transactions made with dual-network debit cards. These are cards that allow your customers to choose between two networks: eftpos (Australia’s domestic network) or an international card network like Visa or Mastercard.

You can easily identify a dual-network debit card by looking for both the eftpos and international scheme logos.

How does LCR work?

When a customer uses a dual-network card to pay, LCR ensures that the transaction is processed via the network that costs you the least. For example, with LCR, your debit transactions go through eftpos when it’s the cheaper option, reducing your payment processing costs.

Without LCR, the transaction is typically routed through the more expensive network – such as Visa Debit or Debit Mastercard.

LCR used to be limited to in-person, tap-and-go payments. But thankfully, eftpos now enables online payments, meaning you can benefit from LCR in ecommerce settings as well.

The Reserve Bank of Australia has also indicated that LCR may soon extend to mobile wallets like Apple Pay and Google Pay, further expanding the scope of this cost-saving tool.

How does LCR help reduce my transaction fees?

LCR lowers your payment costs in 2 ways:

  1. It allows you to route dual-network debit transactions through the lowest-cost network.
  2. It fosters competition between debit card networks, incentivising them to lower their fees.

If your business processes a high volume of debit card transactions, LCR is one of the easiest ways to stop those associated fees from nibbling away at your profits.

Will LCR suit my business?

LCR could be a good fit for your business if you process a large volume of domestic debit transactions. However, there are situations where LCR may not be suitable:

  • If you process many payments using corporate credit cards, like American Express, LCR won’t apply since these cards aren’t part of the eftpos network.
  • If you handle a significant number of international payments, LCR won’t benefit you as eftpos is limited to Australia.
  • Apple Pay and Google Pay are not part of the eftpos network, so LCR doesn’t apply to transactions through these mobile wallets. (But that could soon change!)

Will LCR really save me money?

The savings from LCR depend on several factors, like:

  • The volume and size of your transactions
  • The industry you operate in
  • Your current payment processing fees and pricing plan

Remember, while LCR helps reduce debit card fees, it doesn’t apply to credit card transactions. So if most of your transactions come from credit cards, LCR might not offer as many savings.

And what about fee surcharges?

Well, the good news is you can still apply surcharges on card payments – if you comply with the rules. Specifically, you must ensure surcharges don’t exceed what it costs you to process the payment.

How can I activate LCR in my business?

Activating LCR is easy: simply reach out to your payment provider and ask if it supports LCR. If it does, it can help you realise the benefits from it.

What if your payment provider doesn’t offer LCR?

Ask them, why not! Or cut your losses (literally) and shop around for a new provider that can provide LCR as part of your package.

Incorporate LCR into your payment strategy, and you’ll be slashing costs while boosting your bottom line – leaving you more freedom to put that money back into your business.

Haven’t made the switch to LCR yet? Contact Pin Payments to start saving on debit transactions today.