What is EFTPOS and How Does it Work?

You use EFTPOS every day—but do you know what is EFTPOS and how EFTPOS works?

Just like your phone or car, EFTPOS powers your business behind the scenes, processing transactions seamlessly.

Let’s break it down and explore the basics of EFTPOS, and how you can ensure you’re getting the best deal for your business.

Key Takeaways about EFTPOS

• EFTPOS stands for Electronic Funds Transfer at Point of Sale, which allows you to pay for goods electronically with a card or device.
• EFTPOS was introduced in New Zealand by BNZ in 1985 and is now the everyday way Kiwis pay by card.
• A transaction runs in three steps: Payment → Processing → Settlement (money usually lands by the next business day).
• Several parties are involved: the customer, the merchant, banks, the card scheme, the acquirer, and your EFTPOS provider.
• Traditional EFTPOS (domestic debit) is usually the cheapest option for merchants; contactless and scheme cards add a merchant service fee.
• Your costs depend on your provider and payment mix; Shift4 specialises in low-cost EFTPOS for NZ businesses.

What is EFTPOS?

EFTPOS is a payment system available in New Zealand that lets customers transfer money from their bank account to your business electronically, quickly, and securely.

Customers swipe, insert, or tap their credit or debit card, smartphone, or smartwatch on the EFTPOS machine at checkout for quick, easy transactions. EFTPOS with Shift4 lets businesses accept secure, convenient electronic payments, while customers love the speed and simplicity.

Every transaction is electronically tracked by EFTPOS machines, giving you a handy record for accounting and tax purposes.

Essentially, EFTPOS is there to make payments convenient for businesses and customers (and even simpler with Shift4 as your provider!).

What Does EFTPOS Stand for?

In New Zealand, EFTPOS is colloquial shorthand for what you’d call ‘paying by card’ or ‘credit card payments’, even though leaps in tech have revolutionised the ways you can pay, including your phone and wearable devices.

When Did EFTPOS Start in NZ?

EFTPOS technology was first introduced to New Zealand by the Bank of New Zealand in 1985 through a pilot program with Shell petrol stations. The system was developed by the major banks to create Electronic Transaction Services Limited (ETSL), now known as Cuscal Paymark, to speed up the checkout process and reduce reliance.

Meet Shift4, your go-to for all things EFTPOS. A Kiwi business from day one, we’re the top independent full-service EFTPOS provider in New Zealand and Australia for over 20 years. With over 40,000 merchants and around 56,000 secure, feature-packed terminals, we’ve got you covered!

Who Do EFTPOS Transactions Involve?

An EFTPOS transaction in New Zealand involves several parties:

• Customer: The person swiping, tapping or inserting their EFTPOS, debit or credit card to make a purchase.
• Merchant: The business that accepts the customers’ payment and processes it through their EFTPOS terminal.
• Merchant Bank: The bank where the customer’s money lands after you make a purchase.
• Payment Network: The superhighway that moves funds between the customer’s bank account and the merchant’s bank account.
• Card Issuer: In New Zealand, this is typically the bank or scheme that gives customers their trusty debit or credit card.
• Acquirer: The party that links up with the card issuer and the payment network, and then settles funds into your account. 
• Scheme (Visa, Mastercard, AMEX etc.): The network that makes sure the money goes where it’s supposed to, handling the rules and smooth operation of EFTPOS payments.
• EFTPOS Provider: The business that sells or rents your physical EFTPOS machine.

These parties work both behind the scenes and in front of the scenes, partnering with you and your business to process your customers’ payments for the goods and services that you provide. 

How Does EFTPOS Work?

EFTPOS systems are an important part of businesses, big and small. Here’s how EFTPOS keeps money flowing into your business:

Step 1: Payment

When you begin a transaction by entering the purchase details into the terminal, your customer uses their card or device to complete the payment. This can be done in three different ways:

• Swiping: Customers swipe their card through the terminal and punch in their PIN.
• Inserting: Swiftly and securely, customers insert their card into the terminal and then enter their PIN.. 
• Contactless (Tap/Hover): Customers can complete contactless payments in seconds with a quick tap of their card or device. It’s a seamless transaction in the palm of their hand.

Step 2: Processing

Once the customer has paid with their card or device, the transaction is approved or declined based on whether they have sufficient funds in their account. Your payment data is safe with EFTPOS, with all data encrypted in a lightning-fast exchange.

Step 3: Settlement

For the money to reach your account, your terminal needs to ‘settle.’ This is like cashing up and depositing the earnings at the bank. The acquirer handles this daily settlement for you, moving your funds from the customers’ bank to yours. Depending on the settlement schedule, your money usually reaches your account by the next day.

Is EFTPOS Secure?

Rest assured that EFTPOS is secure for both businesses and customers alike. 

EFTPOS transactions in New Zealand use multiple layers of security to protect customer payment data, including: 

• Encryption during transmission helps prevent interception or fraud.
• PIN protection 
• PCI DSS (Payment Card Industry Data Security Standard) requirements for handling card information securely.

All EFTPOS transactions are processed through New Zealand’s banking and payments networks, which have fraud monitoring and security controls across participating banks and payment providers.

Traditional EFTPOS vs Contactless and Scheme Payments

In traditional EFTPOS setups, which rely on New Zealand’s domestic debit network, funds are drawn directly from a customer’s bank account. Cards are swiped or inserted into a terminal and often don’t have contactless capabilities, making them the cheapest option for businesses. By contrast, scheme cards (e.g., credit and debit cards) and contactless cards operate on an international network and incur a merchant service fee. 

You can see more of the features of traditional and contactless payments in the following table:

It’s important to understand the differences between traditional and contactless setups, as your payment mix can affect your costs. This is why surcharging and New Zealand merchant fee regulations exist. For more information, check out how payWave works, debit cards vs EFTPOS cards, and how contactless payments work.  

Types of EFTPOS Machines

EFTPOS machines come in four main types: 

• Countertop/fixed machines: As their name suggests, these machines are fixed in place at a business counter. They’re the best option for hairdressers, cafes, and others who conduct business primarily from a fixed location.
• Mobile/portable machines: Equipped with 4G and Wi-Fi, these battery-powered EFTPOS machines can be taken from place to place as needed. Mobile EFTPOS machines are suited to on-the-move business operations, such as food trucks, event vendors, and tradespeople.
• POS-integrated: Unlike other EFTPOS machines, POS-integrated EFTPOS machines automatically send transaction amounts from the point-of-sale to the payment terminal, preventing manual input errors and speeding up the checkout. They’re an excellent option for businesses with a high volume of transactions, such as supermarkets. 
• Smart device tap-to-pay: This EFTPOS setup allows for payments to be made on a compatible smartphone or tablet via an app, without a dedicated EFTPOS machine. They can be quite limited in some of the features they offer and the payment methods they can accept.

How Much Does EFTPOS Cost?

Your EFTPOS machine cost depends on the types of payments you accept. In New Zealand, traditional EFTPOS systems are usually the lowest-cost option, while contactless payments carry a merchant service fee. New Zealand businesses can offset these contactless fees by implementing surcharging on transactions. 

If you’re a business looking to reduce your payment costs, our Low Cost Tap & Pay plan can reduce your hardware and setup expenses with free terminal rental* and low merchant fees, while still delivering the features you need.

How EFTPOS Helps You Get a Grip on Your Finances

EFTPOS helps boost your business’s cash flow, reporting, and ability to accept payments. Here’s how EFTPOS helps businesses like yours manage their finances.

Tap Into Popular Payment Methods

Unlock payments from all the popular providers and payment methods, including digital and wearable devices, using Apple Pay, Google Pay, and Samsung Pay. Attract new customers and capture more sales by taking all kinds of payments in the palm of your hand.

Hands-off Transaction Reporting

With automatic transaction reporting, you’ll get detailed insights for better record-keeping and valuable data for strategic decision-making.

Super-charge Your Turnover 

Don’t lose customers to an outdated payment method. With EFTPOS, you have the means to get money flowing through your terminal like never before and step up your turnover at your fingertips. Faster checkouts, automatic reconciliation, and higher sales capture rates all lead to fewer errors and more revenue. 

Let Shift4 Lend you a Hand with Specialised EFTPOS Solutions

Shift4 provides handy EFTPOS services that keep things as simple as possible for businesses. So while it’s great to know all the behind-the-scenes stuff, with Shift4 as your provider, you won’t have to worry about how EFTPOS works.

Get started with Shift4 today, and enjoy our Low Cost Tap & Pay EFTPOS services.