Strategic Review of Innovation in the Payments System: Results of the Reserve Bank of Australia's 2010 Consumer Payments Use Study – June 2011 1. Introduction
This paper reports the results of the Reserve Bank of Australia's 2010 Consumer Payments Use Study. This is the second study of this kind undertaken by the Reserve Bank. The first study was undertaken as part of the 2007/08 Review of the payments system reforms.[1] This second study was undertaken to complement the Payments System Board's Strategic Review of Innovation in the Payments System.
The 2010 Study has several aims. The first is to identify how different payment methods, including cash, are currently being utilised in Australia and how this has changed over the three years since the first payments use study. The second is to gain a better understanding of the reasons for individuals' use of different payment methods, which may shed light on the ways in which the Australian payments system can be made more responsive to the needs of its users. The third is to provide information on consumer responses to recent payment reforms, including surcharging of card transactions and direct charging at ATMs.
The 2010 Consumer Payments Use Study was conducted during October and November 2010. Around 1,200 participants carried a payments diary with them for one week and recorded details of each payment and cash withdrawal made. Participants also completed a separate questionnaire about their payment behaviour and views on making different types of payments.
The following are the main conclusions of the study.
- The broad patterns of payment behaviour observed in the first study still hold. In particular, cash remains the most widely used payment method in Australia and the dominant method for low-value payments (under $40). Cards are the dominant payment method for mid-sized transactions, while BPAY, internet/telephone banking and cheques are important payment methods for higher-value transactions (particularly those above $500).
- Payment patterns have nonetheless evolved in the three years between the first and second studies. Notably, cash use has declined significantly as a share of both the number and value of payments by individuals. Debit cards appear to have been substituted for cash, with both eftpos and scheme debit (MasterCard/Visa debit cards) gaining market share.
- Cheque use continues to decline, but cheques remain important for some high-value payments. Fewer than 40 per cent of respondents made a payment by cheque in the preceding year. The most common reason people gave for using a cheque was that there was no alternative for the type of payment they were making.
- The 2010 Study explicitly captured the use of online payment methods for the first time. Even though only 2 per cent of all payments are made via internet/telephone banking, they are typically high-value payments and, therefore, account for 10 per cent of the value of consumer payments.[2] Specialised online payment schemes, like Paymate, PayPal and POLi, account for only around 1 per cent of total transactions by both number and value.
- Overall, Australian consumers appear to be reasonably comfortable with making online payments. However, a significant proportion of respondents identified risk of fraud as a factor discouraging them from making more online payments.
- Adoption of contactless payments (where the consumer holds their card in proximity to, or touches their card against, the terminal and does not have to sign or enter a PIN) and mobile payments is quite low to date. Only around 3 per cent of respondents recorded that they had made a contactless payment in the month prior to the study. Around 9 per cent of respondents have made a mobile payment at some stage, although the payments made were mainly to purchase ringtones, games or applications for their phone, rather than for a broader range of goods and services.
The rest of the paper is structured as follows. Section 2 describes the data in more detail, while Section 3 summarises the overall results from the 2010 Study. Section 4 then compares the results from the 2007 and 2010 studies to determine how payment patterns have evolved in recent years. This section also examines the reasons why people choose the payment methods they do and their views on making different types of payments. Section 5 examines consumers' use of newer payment methods and Section 6 examines the effects of selected payment systems reforms on consumers' payment behaviour. Section 7 summarises the main findings and concludes.