Strategic Review of Innovation in the Payments System: Issues for Consultation – June 2011 3. Snapshot of Consumer Payment Patterns in 2010

In late 2010, Roy Morgan Research undertook a study of consumer payment patterns (‘Consumer Payments Use Study’) on behalf of the Reserve Bank. The study was similar to one undertaken as part of the Board's 2007/08 Review of the Payments System Reforms, and provides insight into how different payment methods are currently being utilised by consumers and how this use has changed over the three years since the first study.[3] The 2010 study also examined consumers' perceptions about different payment methods and their attributes, which give some insights into the areas where consumers would see benefits in innovation.

The detailed findings of the survey are provided in a separate paper, Strategic Review of Innovation in the Payments System: Results of the Reserve Bank of Australia's 2010 Consumer Payments Use Study, published in conjunction with this consultation paper. A summary of the findings relevant to the Strategic Review is provided below.

3.1 The Study

The 2010 Consumer Payments Use Study was conducted during October and November 2010, with
respondents asked to record every payment they made during a week in a diary.[4] For each payment, respondents were asked to record the date, the amount, the payment type (e.g. cash, credit card, internet/telephone banking), the merchant category, the channel (e.g. in person, internet) and, if a credit card was used, whether a surcharge was paid. Respondents were also asked about when and how they withdrew cash.

At the end of the week, respondents were asked to complete a separate questionnaire, which, among other things, asked them about factors that influenced their payment decisions and what would make them more likely to make specific types of online payments. These questions were aimed at understanding gaps in current consumer payment options.

In total, 1,240 valid responses were received, including 317 responses from participants that completed both the 2007 and 2010 studies. This resulted in a sample of almost 19,500 payments, with a total value of around $1.3 million. In addition, around 1,800 cash withdrawals were recorded, with a total value of around $320,000.

3.2 Findings

Results from the diary support two key conclusions:

  • the broad patterns of payments behaviour observed in the first study still hold. In particular, cash remains the most widely used payment instrument in Australia and the dominant instrument 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); and
  • payment patterns have nonetheless evolved in the three years between the first and second studies. Notably, use of cash and cheques 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 gaining market share.

Some insight into the reasons for these broad payment patterns, as well as the changes observed in the three years between the studies, was provided by consumers' responses to questions about the factors that influence their choice of payment method at the point of sale.[5] While the most important factor determining payment choice is simply what consumers are carrying with them, consumers also value speed of the transaction and the ability to use their own funds. The importance of speed suggests that, while cash continues to be used for low-value transactions, there is the potential for cash to be displaced as processing times for card payments decline. The roll-out of contactless technology may be important in this regard.

Aside from use of these more traditional payment methods, the 2010 study also explicitly captured the use of online payment methods for the first time. Given that most payments by consumers are made in person, only 2 per cent of all payments are made using internet/telephone banking. Nonetheless, these have a relatively high average transaction size and, as a result, account for 9 per cent of the value of consumer payments. The more specialised online payment methods, like Paymate, PayPal and POLi, account for only around 1 per cent of total transaction volume and value. 

Despite a small share of total consumer payments being made online, Australian consumers appear to be reasonably comfortable with current online payment methods. Around 60 per cent of consumers with internet access have at some time made an online transfer of money to family or friends and a similar proportion pay most of their bills online. About 80 per cent of consumers have bought goods and services online. Consumers, nonetheless, are concerned about the risk of fraud online and this is an important constraint on the use of online payments, both for those consumers that have made online payments and for those that have not. This latter group also views increased privacy as a factor that could encourage them to make payments online. Therefore, the survey results are suggestive of some need for further security innovation in the online payments market. In contrast, despite current online payment methods providing little scope for data or information to accompany a payment, this did not stand out as a factor constraining consumers' use of online payments. This issue, however, may be more relevant for businesses, as reflected by feedback during the initial round of consultations.[6]

The use of two new payment methods – contactless payments and mobile payments – was also examined in the study. To date, adoption of these newer methods has been limited. Only around 3 per cent of respondents had made a contactless payment in the month prior to the survey. Of those that had, the most common payment value was between $21 and $50, suggesting this technology may currently be replacing payments that would have been made as a ‘swipe’ or ‘dip’ credit or debit card transaction, rather than being used in place of lower-value cash payments. Less than 10 per cent of respondents had made a mobile payment at any time, with the main use of these payments being to purchase ringtones, games or applications for their phone.


See Emery, West and Massey (2008). [3]

The Roy Morgan Research Financial Transaction Diary®. [4]

Point-of-sale (in person) payments comprise around 90 per cent of all consumer payments. [5]

It might also be true that consumers do not place value on features that they have not personally had experience with, leading them to focus more on factors that are more familiar, such as fraud. [6]