The Reserve Bank has told payment providers that they need to do more to promote the availability of least cost routing for merchants and it has flagged that it will take further action to support LCR.

According to industry data presented in the latest Reserve Bank Bulletin, take-up of least cost routing by merchants has been limited, despite an increase in its availability.

In 2021, the Reserve Bank set an expectation that merchant acquirers and payment facilitators would offer LCR functionality to merchants in the device-present environment.

The RBA also set an expectation that acquirers, payment facilitators and gateways would offer LCR functionality to merchants in the device-not-present (online) environment by the end of 2022.

LCR allows transactions to be routed through the eftpos network or Visa or Mastercard to take use the network with the lowest fees (usually eftpos). The majority of debit cards issued in Australia are dual network cards, which enables LCR.

The RBA said that, as of mid-2022, LCR is available to 85 per cent of merchants, with these merchants accounting for 88 per cent of the total value of debit transactions.

But LCR has been enabled for only 50 per cent of merchants, with these merchants accounting for just 33 per cent of the total value of transactions.

The RBA said: “Having LCR technically available does not necessarily mean that it is accessible in practice. Merchant groups have consistently highlighted that acquirers and payment facilitators provide insufficient information and assistance.”

It said that very few acquirers and payment facilitators offer dynamic LCR, which maximises savings by routing each transaction to the cheapest network for that particular transaction.

The RBA said: “The Bank is taking further action to support LCR under its mandate to promote a more efficient, competitive and safe payments system.”