National Australia Bank is expected to launch merchant choice routing for contactless debit transactions to its small business customers by the end of the month.NAB was the first major bank to undertake pilots for merchant choice routing last year when it was asked to help facilitate the service by national pharmacy chain, Chemist Warehouse.Banking Day understands that following the success of that trial, the new capability for routing contactless payments has been rolled out to Chemist Warehouse sites and BP petrol stations across the country.Merchant choice routing gives retailers and other merchants the ability to direct contactless payments on dual network debit cards to platforms other than those operated by Visa and Mastercard.The new service is expected to expose the global schemes to competition from Eftpos Australia in the payments processing market.Major banks have been under pressure for several years from politicians and the Reserve Bank's Payments System Board to roll out the service, which could deliver big cost savings to small businesses that accept contactless payments.A NAB spokesperson said the bank last year enabled several thousand payments machines to provide merchant choice routing after the completion of trials conducted with terminal manufacturer, Quest."In April 2018 we began piloting merchant choice routing for a number of our business customers with Quest devices and by the end of 2018 we enabled merchant choice routing for over 2,000 sites across Australia," the NAB spokesperson confirmed in an email."We look forward to making this capability available to more of our customers in the coming weeks."NAB will be the third major bank to begin marketing the service to merchants after ANZ and Westpac activated merchant choice routing in the last month.Commonwealth Bank, which operates the largest payment terminal fleet in the country, is set to be the last of the majors to deliver the service to its merchant customers.However, there is heavy conjecture in the payments industry that CBA is likely to differentiate its offering from its three main rivals by providing an automated routing facility to merchants.While ANZ and Westpac require merchants to request the service and have all contactless transactions routed to their preferred provider, CBA is believed to be reprogramming terminals to instantly recognise whether Mastercard, Eftpos or Visa is the cheapest processor for each individual transaction.If these rumours are correct, CBA would end up delivering a service closely in line with the business model recommended by the Reserve Bank.Merchants would be more likely to optimise cost savings through such a service because all transactions would be routed automatically to the cheapest processing platform.Startup business bank Tyro became the first local merchant acquirer to fully launch least cost routing last year.Tyro's automated service is understood to have been routing most contactless transactions under $20 to Mastercard.The bulk of the contactless payments above that value have been sent to Eftpos Australia for processing.