New Zealanders love cashless payments — but have you ever wondered what actually happens when you tap or insert your card at the checkout? EFTPOS stands for Electronic Funds Transfer at Point of Sale. It’s the process that moves money from a customer’s bank account to a merchant’s — in a matter of seconds. In this article, we break down how EFTPOS payments work in New Zealand, step by step.
Who’s Involved in an EFTPOS Transaction?
An EFTPOS payment might feel instant, but it relies on multiple players working together behind the scenes:
1. The Merchant
The person or business accepting payment for goods or services. ‘Merchant’ can refer to anyone from sole traders to large enterprises.
2. The Merchant’s Bank (Acquirer)
This is the bank that supports the merchant’s EFTPOS terminal and processes incoming payments. It provides the merchant number that identifies the business during a transaction.
3. The Customer
The cardholder making a purchase.
4. The Customer’s Bank or Card Scheme
This is the customer’s issuing bank — the one that provided their debit card. If the customer is using a credit card, the payment is processed through the relevant card scheme (e.g. Visa, Mastercard, or Amex).
How EFTPOS Payments Are Processed
Step 1: The Customer Presents Their Card
There are three common ways to initiate a transaction:
-
Swipe: The card’s magnetic stripe is swiped through the terminal and a PIN is entered. This method is becoming less common due to security concerns, like skimming.
-
Insert: The chip on the card is inserted into the terminal, and the customer enters their PIN. This is known as EMV chip processing — a global standard introduced by Europay, Mastercard, and Visa — and is more secure than magnetic stripe.
-
Tap (Contactless): Using RFID (Radio-Frequency Identification) technology, the customer taps their card or device on the terminal. In New Zealand, PIN-free contactless transactions are capped at $80.
Step 2: The Payment Is Authorised
The terminal sends a payment request to the customer’s bank (or card scheme) via a secure network. The transaction is either approved or declined based on available funds and other security checks.
All sensitive data is protected using Point-to-Point Encryption (P2PE) — this means customer card details are encrypted from the moment of entry until they reach the bank’s systems.
Despite multiple steps, this entire process usually takes under three seconds.
Step 3: The Merchant Gets Paid
Once a transaction is authorised, a settlement process begins. The merchant’s daily takings are typically deposited into their business bank account on the next business day. Delays may occur on weekends or public holidays.
Supporting 70,000+ Kiwi Businesses
At EFTPOS NZ, we power payments for over 70,000 businesses across the country — from corner dairies to nationwide retailers. We offer a wide range of advanced Android EFTPOS devices with market-leading features, backed by award-winning 24/7 Helpdesk support & nationwide onsite support.
Want to learn how we can help you? Get in touch with our team.
Comments