Eftpos, or electronic funds transfer point-of-sale, first appeared in New Zealand in 1984, only five year’s after the country’s first bank automated teller machine was installed. The first terminal operated from a service station and a supermarket attached to a BNZ bank computer.
From this humble beginning, the system now involves all major banks, and there are 65,000 terminals nationwide. Around 90% of Kiwis now have a debit card, using them for 60% of purchases. Around 2 million Eftpos transactions are made daily, with transactions processed in just 0.05 seconds.
In August, the Knuckle Sandwich café in Tauranga processed the six-billionth payment for New Zealand company Paymark, which handles payments for the ASB, Westpac, BNZ and other banks; equivalent to 80% of New Zealand Eftpos transactions.
The popularity of Eftpos means cheques and even the use of cash is becoming a thing of the past. While Eftpos seems to have been around forever, the technology continues to evolve.
Richard Tims, CIO for Paymark, says his company is developing "complimentary channels" to traditional Eftpos. This includes Mcommerce, with services including the ability to top up mobile phones using the internet.
Paymark is also investigating "contactless" payments, with future cards featuring RFID tags, so instead of using a swiping a card at an Eftpos terminal and punching in numbers; instead the card would "tap" the terminal and the payment would be made.
A system similar to the text-a-park service might see payments made using mobile phones.
Paymark is also looking to install generic cash dispenser ATMs in New Zealand, accepting any Eftpos card, as already seen in Australia. These will allow retailers to serve customers more quickly, as they don’t have to spend time giving out cash.
Tims says Paymark in recent years has hugely invested in infrastructure to guarantee overnight settlement of payments. Initially the system used a single switch, but there is now a primary and secondary system, that also allows "cold stand by". Next year, will see a second switch installed, allowing load sharing and minimising the risk of the system failing.
Card security is also set to improve with the use of EMV chips on debit and credit cards, which are harder to copy or abuse.
Eftpos terminals must be EMV (Europay, MasterCard, Visa) — compliant by January 1, 2008 and Eftpos supplier Provenco says 33,000 Eftpos terminals still need upgrading.
Provenco claims to be the first Eftpos provider in New Zealand to achieve 5.2 certification — the highest level of security available under the new EMV global security standard for credit cards.
The company’s Hypercom T7Plus terminal meets this standard, which promises to meet compliance needs until 2014.
Other developments include POS increasingly integrating with backend point-of-sale systems.
Provenco has a product called SyncroPlus that gives retailers centralised access to their Eftpos network and can also allow upgrades and troubleshooting on the network performed from head office, rather than in individual stores.
Provenco believes that over the next decade, all Eftpos terminals will migrate to IP communications. The motivation for merchants to upgrade to IP won’t necessarily be based around Eftpos, but that once they install broadband into the business, they will find efficiencies in including their Eftpos transactions with the rest of their IP traffic.
Some of Provenco’s largest retailers are already able to communicate over IP to send their Eftpos traffic to payment switches. In fact, Provenco built the IP Gateway into the ETSL-switch that handles Paymark’s processing five years ago with a product called VNAC. Companies such as Whitcoulls have been processing their transactions over it since then.
Since upgrading all the terminals across The Warehouse at the end of last year, Provenco has also been involved in a roll-out of new systems at the Foodstuff South Island group, Foodstuffs Auckland group and other retailers.
In August, Provenco rival Cadmus announced major changes in its strategic direction emphasising R&D to move the company away from "commodity" Eftpos. CEO Julian Beavis says a shift to IP will make links between Eftpos terminals, cash registers and back-end systems seamless, allowing for faster and more detailed reporting.
IP and broadband will also allow two way traffic so head office could easily push dialogue down to the stores, say offering ‘instant 10% discounts’. Beavis also expects contactless payments, saying Cadmus is investigating it for its future products.
New Zealand, he says, is unique in that customers are all too trusting in handing over their cards to potentially unscrupulous retailers. User rules say it should be the customer that should swipe the card. Contactless payments will also be quicker, he says.
Investigations, Beavis continues, are also underway into fingerprint scanning, using biometric technology, to help people cope with the proliferation of pin numbers in their lives. This might see new products being released as early as next year.
Cadmus believes that EFTPOS technology is becoming less proprietary and this process is accelerating, making it easier to integrate payments into other systems, allowing for “payments anytime, anywhere”.
This switch to open systems, with terminals running on Linux instead of a manufacturer’s system, will also see the technology integrate.
“Therefore, it is fair to expect most of the experiences of wider technology. There will be more bang for your buck from extra competition. There will be a shift towards applications and software and specifically one around customisation,” Beavis says.
“The interesting corollary with commoditisation; basic pin pad terminals are getting simpler and retailers don’t always want the same as the next person. People are prepared to pay extra to differentiate themselves. We are seeing the start of that and that is a trend likely to grow,” he says.