Tyro has stolen a march on the major banks in the hotly contested small business payments market after launching the country's first least-cost routing service to merchant customers.In a move that will deliver big cost savings to merchants on contactless debit transactions, Tyro is hoping to grab market share from the four majors whose customers continue to be stuck with high-cost merchant fees imposed by Visa and Mastercard.Bronwyn Yam, Tyro's director of products, said most of the bank's 20,000 merchants could expect to save around 30 per cent on fees when contactless transactions were re-routed from existing default processing systems to the low-cost eftpos network.The bank is now marketing least-cost routing to business customers as "Tap & Save"."Our aim is to remove the barriers from business success and we are thrilled to give our customers the opportunity to be the first businesses in Australia to benefit from Tap & Save," Yam said."As the first mover in offering least-cost routing to merchants it certainly gives our customers an advantage."Regulatory pressure is mounting on the major banks to follow Tyro into least-cost routing, with the RBA's Payments System Board warning last month that it would issue a new standard requiring them to give merchants the right to direct contactless transactions to the cheapest processing system.Under existing industry practice the major banks automatically route contactless debit card payments through the Visa and Mastercard systems that levy average merchant fees of 0.58 per cent on debit transactions.According to the RBA, merchants incur average fees of only 0.26 per cent when debit card payments are processed through eftpos Australia.From this week, Tyro merchants will be able to process all contactless debit card transactions - including those issued by the international card schemes - via the cheap eftpos system.ANZ is the only major bank to confirm that it will make least-cost routing available to some of its merchants this year.The bank began work last October to upgrade its merchant terminal network to accommodate the change.However, the other big banks - CBA, Westpac and NAB - appear to be reluctant starters.While Westpac and NAB have each expressed in-principle support for least-cost routing, the nation's most tech-savvy bank, Commonwealth Bank, has been the laggard.The three majors have complained that giving merchants the power over where to direct contactless transactions involves a significant investment of time and capital in legacy software and terminal upgrades.CBA's resistance to the reform took a fresh twist in December when the bank called on the banks to develop "a collective industry response" to the RBA's reform push.Tyro's move has demonstrated, however, that its banking platform is comparatively more agile than those of the majors.Yam told Banking Day that Tyro only began trialling least-cost routing last November with four of its merchants."The pilot was expanded to twenty merchants earlier this year and we've been able to take it to market because the feedback was very positive," she said."Low-cost routing was certainly something very manageable for Tyro."The major banks and international card schemes are collectively expected