Chemist Warehouse will become the first large Australian retailer to adopt least-cost routing on contactless debit card transactions following a successful trial with its acquiring bank, the National Australia Bank.In an interview with Banking Day, Chemist Warehouse co-founder and chairman Jack Gance confirmed the pharmacy chain from next month would begin routing contactless Mastercard debit transactions at its 450 outlets across Australia through the low cost Eftpos network.The move is expected to reduce dramatically the processing costs incurred by Chemist Warehouse franchisees when customers initiate contactless payments with dual network debit cards that carry the Mastercard logo."We have been running a trial since the end of last year with NAB and the supplier of our payments terminals, Quest," said Gance."As a result we have chosen to route all Mastercard contactless transactions through Eftpos."Chemist Warehouse will continue to direct contactless Visa debit payments through Visa's processing platform after striking a strategic arrangement with the card company. Gance declined to comment on the cost savings that his company would realise under the deal struck with Visa, but said Eftpos' presence in the market was critical for ensuring that the global card companies were exposed to competition."We're one of the biggest retailers in terms of point of sale electronic payments in Australia and one of our big concerns is that the international card companies are controlling the market and putting players like Eftpos out of business," said Gance."We've decided to go with Eftpos because we wanted to ensure that there was a local alternative to the big card companies."Chemist Warehouse's decision to trial least-costing routing since last year has inspired a raft of other national retailers to explore strategies for lowering their costs of accepting contactless payments.Banking Day understands that small business payments specialist Tyro Payments is in negotiations with at least one national retailer to take over as their acquiring bank on credit and debit card transactions.Tyro earlier this month became the first domestically licensed bank to introduce least-cost routing.Major banks and the card companies stand to lose hundreds of millions of dollars a year when least-cost routing is embedded in the Australian payments system.Under the current arrangements, the major banks automatically direct all contactless transactions to high-cost processing platforms operated by Visa and Mastercard.  The acquiring bank is charged a scheme fee and needs to pass this on to its customer. The scheme fees for using Eftpos are far less than those charged by Visa and Mastercard.However, the Reserve Bank is agitating for banks to ditch the default routing practice by giving merchants the right to select the cheapest processing platform.Research published last year by the RBA's Payments System Board found that the average merchant service fees levied by Visa and Mastercard on debit card transactions were more than double those charged by Eftpos.The RBA data shows that merchants were charged an average of 58 basis points on the value of debit card transactions compared to only 26 basis points for Eftpos.