Strategic Review of Innovation in the Payments System: Results of the Reserve Bank of Australia's 2010 Consumer Payments Use Study – June 2011 7. Conclusions

This study has sought to gain a clearer picture of how payment methods, including cash, are currently being used in Australia and how that use has changed over time. As an input to the Payments System Board's Strategic Review of Innovation in the Payments System, it has also focused on online and newer payment methods and the potential impediments to further take-up of some of those methods.

The study has found that traditional payment methods – cash, credit card, debit card and cheque – continue to be used for the majority of payments made by individuals in Australia. Cash remains the most widely used payment method and the dominant method for low-value payments (under $40). Cards are the dominant payment method for mid-sized transactions, with the share of card payments made using credit cards increasing with payment value. BPAY, internet/telephone banking and cheques are important payment methods for higher-value payments, particularly those greater than $500, although overall cheque use continues to decline.

Internet/telephone banking and the specialised online payment systems are used for only a small proportion of total consumer payments. Specifically, internet/telephone banking makes up only 2 per cent of all payments, although their high average payment value means that they account for 10 per cent of the value of payments. Specialised online payment methods, like Paymate, PayPal and POLi, account for only around 1 per cent of both transaction volume and value. This small proportion in part reflects the fact that the majority of payments are made in person: only around 7 per cent of the number of total payments are made online.

Consumers indicated that they are reasonably comfortable with the current means available to make online payments. This is important because around 90 per cent of respondents have internet access at home or work and, of those, about 80 per cent have made an online purchase. Notwithstanding this, the risk of fraud was identified as being the most significant deterrent to further adoption of online payments.

The adoption of newer payment methods, such as contactless payments and mobile payments, is so far fairly low in Australia. Only around 3 per cent of respondents had made a contactless payment in the month prior to the study. Less than 10 per cent of respondents had made a mobile payment at any time; most of these were for ringtones, games or applications for their phone.

Overall, the results of the 2010 diary and end-of-study questionnaire suggest that the mix of old and new payment methods available are generally meeting consumers' needs. Nonetheless, the study results reflect some potential areas for improvement, most notable being the security of online payments. There is also some evidence of dissatisfaction with the timeliness of internet-banking transfers. Further, many non-card, non-paper based methods have only been brought to market relatively recently and it is not yet clear whether there are institutional impediments to their growth.

Although it is difficult to be certain how trends in payment patterns will evolve, one clear trend is the decline in cash use. In the past three years, cash use has declined significantly as a share of both the number and value of payments by consumers. While cash remains an important payment method for low-value payments, cards are being substituted for cash for some of these payments. This substitution may increase further over time as the use of contactless payments becomes more widespread, given the importance placed by individuals on processing speed at the point of sale.

The Reserve Bank thanks the individuals who participated in this study.