The CFO's Guide to Smarter Payments

If you're running a growing Australian business and you're on a global payments provider, you're almost certainly paying more than you should be.

Not because of bad pricing. Not because you negotiated poorly. But because the payment routing logic your provider uses was built for a global market. Australia has its own rules, its own schemes, and its own cost structure that most global providers simply don't optimise for.

This guide explains two concepts that can have a material impact on your payment costs: Least Cost Routing (LCR) and authorisation rates. Both are manageable. Both are often ignored. And both have a direct dollar impact on your P&L.

Part 1: What is Least Cost Routing?

When a customer pays with a debit card in Australia, many of those cards carry two networks: a card scheme network (Visa or Mastercard debit) and the domestic eftpos network. Each network charges merchants different fees.

Least Cost Routing is the practice of directing each transaction through whichever network costs the merchant less. In Australia, this is almost always eftpos, which typically costs significantly less than Visa or Mastercard debit.

The Reserve Bank of Australia (RBA) has actively supported LCR as a way to reduce the cost of payments for Australian merchants. As of 2022, the RBA mandated that acquirers must offer LCR to merchants who request it.

The question is: is your provider using it? And if they say they are, are they actually optimising it for the AU market, or applying a global default?

Part 2: Why Global Providers Fall Short

Global providers are built for a global market. Their routing logic prioritises international card schemes (i.e. Visa and Mastercard) because that's where they have the deepest relationships and the most consistent performance internationally.

In Australia, this creates a structural disadvantage for merchants. Global routing logic doesn't automatically favour eftpos for dual-network debit transactions. Unless your provider is actively configured for the AU market (and has the relationships with Australian acquirers to back it up) you're likely routing more transactions through the higher-cost networks than necessary.

There's also an incentive problem. Global providers earn interchange revenue on card scheme transactions. Routing to eftpos reduces that revenue. So, the motivation to proactively implement and optimise LCR for AU merchants isn'tsymmetrical for a provider with a global book of business.

For a business processing $10M annually, shifting even 30% of eligible debit transactions to LCR routing commonly represents tens of thousands of dollars in annual savings. For larger businesses, the impact compounds.

Part 3: The Authorisation Rate Equation

Least Cost Routing is about the cost of transactions that succeed. Authorisation rates are about making sure transactions succeed in the first place.

Your authorisation rate is the percentage of payment attempts that are approved by the issuing bank. A rate of 95% sounds high, but for a business processing 10,000 transactions a month, that's 500 failed payments. At an average order value of $150, that's $75,000 in lost or delayed revenue every month.

Failed payments fall into two categories:

1. Hard declines: the card is cancelled, over limit, or flagged for fraud. These are largely outside your control.
2. Soft declines: temporary issues like insufficient funds, bank-side risk rules, technical timeouts. These are often recoverable with the right retry logic.

The difference between a good payments provider and an average one is how they handle soft declines. Dynamic retry logic, network tokens, and account updater are tools that turn a failed payment into a recovered one. Businesses using these tools consistently outperform those that don't, commonly by 2–3 percentage points on rebill auth rates, which at scale is material revenue.

For a subscription business processing $5M annually, a 2% improvement in rebill auth rates represents approximately $100,000 in recovered annual revenue. It doesn't show up as a line item. It shows up as revenue you never saw leaving.

Part 4: The Compliance Cost You Don't See

Most Finance leaders are aware that PCI DSS compliance has a cost: audits, penetration testing, remediation, and the legal and reputational exposure of a breach. Fewer are aware of how much their current payments provider is contributing to that cost.

If your business is storing, processing, or transmitting card data directly, your PCI scope is large. Moving to a provider with proper tokenisation architecture (replacing card data with a non-sensitive token at the point of entry) can reduce your PCI scope dramatically. A well-built payments stack can move a business from a full PCI DSS Level 1 or 2 assessment to a significantly simpler SAQ. The compliance cost reduction alone can justify a provider review.

Part 5: Five Questions to Ask Your Provider

Before your next vendor review or contract renewal, ask these:

1. Are you actively routing our AU debit transactions through LCR? What percentage of eligible transactions are being routed through eftpos versus the card schemes?
2. What is our current authorisation rate, broken down by transaction type and card network? How does this compare to your other AU clients in our vertical?
3. What retry logic do you apply to soft declines? Do you use Network Tokens and Account Updater for recurring billing?
4. What is our effective cost per transaction, all-in, including scheme fees, acquiring fees, and gateway fees?
5. What does your AU onshore support look like when we have a payment failure event that's hitting our revenue in real time?

If your provider can't answer questions 1, 2, or 4 with specific numbers, that's the answer.

Part 6: What Fat Zebra Does Differently

Fat Zebra is an Australian payments company, headquartered in Australia, and built for the Australian and New Zealand markets. We have decades of on-shore payments experience.

This matters because our routing logic is built for AU scheme economics, not adapted from a global default. Our team understands AU interchange, LCR, and eftpos relationships at a depth that global providers don't. And when something goes wrong (which, in payments, it eventually does) you reach an Australian engineer, not a global support queue.

We work with mid-market and enterprise businesses across Insurance, SaaS, Utilities, and Telco to run a payment cost review: a 15-minute conversation that maps your current payment costs against what's achievable with LCR optimisation and better authorisation rates.

No obligation and no sales pitch. Just a clear picture of what your payments cost today, and what they could cost.

Ready to find out what you're leaving on the table? Try our Smarter Payments Savings Calculator