You tap your card, the terminal beeps, and you walk away with your coffee. Simple. But between that beep and the merchant actually receiving the money, a surprising number of companies take a cut. Most people have no idea this happens. Here’s what’s going on behind the scenes every time you pay.
The journey of a $5 coffee
You buy a flat white for $5 and tap your card. The payment feels instant, but it passes through up to five different companies before the cafe sees the money.
First, the payment terminal reads your card and sends the transaction details to the acquiring bank — the merchant’s payment processor. This might be Worldline, Windcave, Stripe, or another provider. The acquirer is the company that gave the cafe its terminal and manages the flow of funds into the business’s bank account.
The acquirer then routes the transaction through the card network — Visa or Mastercard. These networks operate the global rails that connect banks to each other. They don’t hold your money, but they control the system that moves it.
The card network forwards the request to the issuing bank — that’s your bank, the one that gave you the card. Your bank checks your account, authorises the payment, and sends the approval back down the chain.
Now the fees kick in. Your bank takes an interchange fee. In New Zealand, the Commerce Commission has capped domestic interchange: contactless debit sits at 0.20%, and in-person credit at 0.30%. The card network takes a scheme fee of around 0.05–0.15%. The acquirer adds a processing margin on top, often bundled into a single rate the merchant pays. Of that $5.00, the cafe might receive somewhere between $4.90 and $4.95 on a domestic card. The rest is split between the companies in the middle.
Why does your bank get paid?
This is the part that surprises most people. The biggest single fee — the interchange fee — goes to the bank that issued your card. Not the merchant’s bank. Yours.
The logic behind it: your bank bears the risk of fraud, provides the credit or debit facility, manages your account, and guarantees the payment to the merchant. In return, it takes a cut of every transaction you make. The higher the risk or the more features on the card, the higher the interchange fee. A premium credit card costs the merchant more than a basic debit card.
So who’s really paying for your Airpoints?
Here’s the key insight. Card rewards — Airpoints Dollars, cashback, loyalty points — are not free. They are funded by interchange fees. Interchange fees are paid by merchants. Merchants either absorb those fees or pass them on through higher prices or surcharges. Either way, the cost ends up with customers.
This creates an uneven system. Every customer pays the same price for that $5 coffee, but only some earn rewards. If you use a premium credit card, you might earn Airpoints on every purchase. If you use a basic debit card, you earn nothing — but the merchant still pays a fee on your transaction, and prices still reflect the cost of processing high-reward cards. In effect, people using basic cards subsidise the rewards programmes enjoyed by people with premium ones.
What about EFTPOS?
Traditional EFTPOS — where you insert your card and enter a PIN — works differently. EFTPOS transactions run on a domestic network with much lower fees, often a flat $0.05 to $0.10 per transaction regardless of the amount. For merchants, this is dramatically cheaper than Visa or Mastercard.
But EFTPOS transactions are declining. As contactless payments have grown, most tapped transactions now route through the Visa or Mastercard network, even when the customer is using a debit card and thinks of it as “EFTPOS.” The card in your wallet probably has both an EFTPOS chip and a Visa or Mastercard paywave antenna. When you tap instead of inserting, you’re almost certainly using the international network — and the merchant pays accordingly.
Is there another way?
Open Banking enables a fundamentally different approach: bank-to-bank payments that skip the card network entirely. Instead of tapping a card, the consumer authorises a payment directly from their bank account. The money moves from one bank to another without passing through Visa, Mastercard, or any card infrastructure.
No card number is involved. No interchange fee. No scheme fee. The merchant pays a fraction of what card payments cost. And unlike a card transaction — where neither party knows who the other is — both the customer and the merchant know exactly who they’re dealing with. The payment is authenticated by the customer’s own bank, making it secure by design.
What tapara does
tapara uses Open Banking so that payments go directly between bank accounts. No card network in the middle. Near-zero fees for the merchant. The customer pays from their banking app, and the money moves bank-to-bank in a single step.
Every payment through tapara also builds a direct relationship between the customer and the business. The merchant knows who paid and how often they visit. The customer gets recognised as a regular. No anonymous transactions, no middlemen taking a cut, no rewards funded by everyone else’s higher prices.
If you’re curious how it works as a customer, visit the consumers page. If you run a business and want to see what this means for your bottom line, check out the businesses page.