RDP 2009-04: Price Incentives and Consumer Payment Behaviour 4. Data and Summary Statistics

4.1 The Data

The transaction-level data used in this paper were obtained from a survey of how consumers pay for goods and services, commissioned by the Reserve Bank in 2007 as part of its review of payments system reforms (RBA 2008c). The Reserve Bank employed a private research company, Roy Morgan Research, to help design and conduct the survey, which involved individuals recording the details of every purchase and bill payment they made over a two-week period in a specially designed pocket-sized diary. For each payment, participants were asked to record information on the payment instrument, the value of the transaction, the merchant category, the channel (for example, point of sale, internet, telephone or mail) and mark a check-box if they were charged a fee by a merchant (or billing organisation) for using the particular payment instrument chosen (a ‘surcharge’).[11]

Roy Morgan Research selected a nationally representative sample of 1,000 individuals, aged over 18 years, from its database to participate in the survey. Participants were asked to complete the survey over a two-week period in early June 2007. Completed diaries were received from 677 people. Fifteen individuals were excluded owing to inconsistencies in responses, resulting in a final sample of 662 individuals.[12]

Demographic information on each respondent was provided by Roy Morgan Research, including information on the individual's age, gender, regional location, educational level, income, and credit card holding status (that is, whether they hold a credit card, and if they do, whether they usually pay their bill in full each month). Furthermore, information was available on whether or not the cardholder held at least one credit card with a loyalty program attached to it.

The diary captured data on the use of 9 different payment instruments in 17 different merchant categories and generated a sample of almost 17,000 payments for a total value of around A$850,000. In addition, the diary captured data on the use of 4 methods of obtaining cash and generated a sample of around 1,800 cash withdrawals for a total value of around A$320,000. Table 1 presents a selection of sample statistics and Appendix A contains more detailed information on the fields contained in the diary survey.

Table 1: Sample Statistics
Proportion of respondents, per cent
Age (years)   Education level  
18–29 22 (10) Under grade 10 14 (15)
30–44 28 (26) Grade 10/11 17 (19)
45–59 26 (32) Grade 12 10 (8)
60+ 24 (32) Technical qualification 26 (25)
  University degree 33 (32)
Personal income (pa)   Loyalty program(a)  
<$20,000 39 (40) Loyalty program 69 (69)
$20,000–$39,999 28 (27) No loyalty program 31 (31)
$40,000–$59,999 16 (15)    
$60,000–$79,999 9 (8)    
$80,000–$99,999 5 (5)    
$100,000–$119,999 2 (2)    
$120,000+ 2 (3)    
Gender   Location  
Male 49 (42) Capital city 62 (57)
Female 51 (58) Regional 38 (43)
Credit card holding   Transactor/revolver status(a)  
Credit card 50 (61) Transactor 66 (67)
No credit card 50 (39) Revolver 34 (33)

Notes: Roy Morgan Research applied weightings for age, gender, location and credit card holding status. The unweighted shares for these variables are in brackets. The weighted and unweighted shares sum to 100 except for some rounding issues.
(a) Proportion of credit card holders.

Sources: Roy Morgan Research; RBA

4.2 Summary Statistics

4.2.1 Influence of transaction characteristics

Despite strong growth in the use of non-cash payment methods in recent years, cash is still by far the most commonly used payment instrument in Australia, accounting for around 70 per cent of the number of consumer payments and 38 per cent of their value (Table 2). Nevertheless, the diary results suggest that the choice of payment instruments by the consumer is closely related to the transaction amount. Cash is the most commonly used payment instrument for low-value transactions, accounting for nearly all transactions under $10 and three-quarters of transactions between $11 and $25 (Table 3). Conversely, cheques and BPAY are used relatively more for higher-value consumer payments, together accounting for 29 per cent of the payments above $500. Cards are used extensively across all but very low transaction values. For transactions between $25 and $200, debit and credit cards account for 45 per cent of transactions.

Table 2: Payment Methods(a)
Per cent of number Per cent of value
Cash 70 38
EFTPOS 11 14
MasterCard/Visa debit card 4 6
MasterCard/Visa credit card 9 17
American Express/Diners Club card 1 2
Petrol/store card * *
Cheque 1 9
BPAY 2 9
Other(b) 1 3

Notes: (a) Amounts less than 0.5 per cent are marked with an asterisk.
(b) ‘Other’ payment methods include instruments such as money orders and Cabcharge payments.

Source: Roy Morgan Research

Consumers' use of payment instruments also appears to be related to the merchant environment. Cash is used extensively in many merchant categories, for example in take-away food stores and pubs, but less so for travel and insurance purchases (Table 3). Likewise, the share of payments made by debit cards is largest at petrol stations and supermarkets and credit cards' share of payments is largest for travel and insurance payments.

Table 3: Payment Method Use
Share of the number of payments, per cent
Cash Debit card Credit card Cheque BPAY Other methods
Transaction value ($)
0–10 95 3 1 0 0 0
11–25 74 16 8 0 1 1
26–50 56 23 17 1 2 2
51–75 39 29 24 2 3 3
76–100 37 28 21 3 9 2
101–150 34 29 22 4 6 3
151–200 31 28 24 3 11 3
201–500 31 21 21 7 15 5
500+ 19 18 30 15 14 5
Merchant category
Take-away 94 5 1 0 0 0
Pub/bar 90 6 3 0 0 0
Small food store 89 7 4 0 0 0
Sporting/entertainment 86 6 5 1 0 1
Transport 83 7 6 1 2 0
Restaurant 78 9 12 0 0 0
Other 69 9 7 5 6 4
Education/childcare 67 13 5 9 2 4
Liquor store 65 19 15 0 0 0
Retailer 64 19 15 1 1 2
Supermarket 62 25 12 0 0 0
Health/medical 57 19 20 3 1 1
Professional services 52 13 17 13 2 3
Petrol 48 32 17 0 0 4
Housing/utilities 39 12 13 5 28 3
Holiday/travel 27 20 42 6 2 2
Insurance 26 13 23 6 18 14
Age (years)
18–29 69 19 8 0 3 1
30–44 65 19 11 1 3 1
45–59 70 14 11 2 2 2
60+ 79 8 9 2 1 1
Personal income (pa)
<$20,000 76 13 8 1 1 1
$20,000–$39,999 70 18 7 1 3 1
$40,000–$59,999 64 18 13 1 3 2
$60,000–$79,999 65 16 15 1 2 2
$80,000–$99,999 67 12 18 1 1 2
$100,000–$119,999 69 6 21 1 3 0
$120,000+ 65 10 19 2 2 3
Transactor/revolver status
Transactor 64 10 22 1 1 1
Revolver 62 19 12 1 4 2
No credit card 79 17 Na 1 2 1
Credit card holders
Loyalty program 61 12 23 1 2 1
No loyalty program 66 16 11 1 3 2

Notes: Payment methods' shares sum across categories; in some cases the sum does not equal 100 due to rounding. These shares reflect weights applied by Roy Morgan Research for age, gender, location and credit card holding status. This table excludes payments where the cardholder did not provide information on key variables. For instance, payments where a cardholder did not report a payment method or transaction amount were excluded.

Source: Roy Morgan Research

These differences across merchant categories are likely to reflect a number of factors. For example, consumers' desire for quick transaction times for certain purchases like take-away food may lead to high use of cash in these situations. Use of debit cards in petrol stations and supermarkets is likely to reflect, in part, the availability of EFTPOS cash-out facilities. Differences across merchant categories may also reflect different average transaction values and restrictions such as which instruments or channels are available to consumers. For example, the share of payments made by cash is much lower for travel and insurance purchases and this may partly reflect a ‘channel’ effect as consumers deal with these types of businesses via the internet relatively more than other businesses.

4.2.2 Influence of demographics

Age appears to play some role in determining consumers' use of payment instruments. While cash is used extensively across all age groups, older individuals appear to use cash more than younger people (Table 3). People over 60 years of age use cash for almost 80 per cent of their payments, compared to around 65 per cent for those aged between 30 and 44 years.

The use of debit cards is highest in the younger age groups and declines for older age groups. Conversely, the use of credit cards is relatively low for the youngest age group, reflecting the fact that younger people are not as likely to hold credit cards. Around one-third of respondents aged 18–29 years in our sample held a credit card; this compares to around half for the adult population.

The use of cards also appears to be influenced by an individual's personal income. Credit cards are used relatively more at higher income levels, while debit card use is highest for middle income bands. Those with a personal income of more than $100,000 used credit cards for around 20 per cent of their total payments, more than twice the share of those earning under $40,000. However, it is difficult to separate the influence of higher credit card holding among high-income individuals from higher use of credit cards as income increases. In Section 5, we examine the effect of income on credit card use, conditional on holding a credit card.

4.2.3 Influence of price incentives

In addition to the influence of transaction and demographic characteristics described above, credit card holders' use of payment instruments also appears to be influenced by the relative price of payment instruments. In particular, credit card holders' transactor/revolver status appears to be important.

According to the diary survey, transactors use credit cards relatively more often than revolvers – for around 22 per cent of their transactions compared to 12 per cent for revolvers, and 35 per cent of the value of spending compared to 22 per cent for revolvers. Conversely, revolvers tend to use debit cards more often than transactors (Table 3). In part, this pattern is likely to reflect the fact that for revolvers an additional purchase on their credit card accrues an interest charge immediately, increasing the relative price of credit cards compared to other payment methods.

Loyalty programs are another important factor affecting the relative price of payment instruments. According to data from Roy Morgan's Single Source database, almost 70 per cent of Australian credit card holders aged over 18 years have a loyalty program attached to at least one of their credit cards. Loyalty program participation appears to be more common for transactors, with three-quarters of transactors participating in loyalty programs compared to 59 per cent of revolvers. On average, credit card holders with loyalty programs use their credit cards around twice as often as those who do not participate in a loyalty program (Table 3).

4.2.4 Merchant surcharging

Participants in the diary study were asked to record each transaction they made where they paid a surcharge. However, instances where the merchant applied a surcharge for a particular payment method but where the consumer chose to use an alternative payment method are not observed. Consequently, the sample size for the number of credit card transactions attracting a surcharge is small, limiting its usefulness. Further, obtaining information on the range of choices and limitations the consumers faced when making their decisions is difficult because often it is not readily available to the consumer at the point of sale and it can add a significant reporting burden, reducing the likelihood that consumers will participate in the survey. For example, if anything, the presence of surcharging is likely to be higher than suggested by our survey results, because we do not directly survey whether the merchant applied a surcharge or not, we only observe if the consumer paid the surcharge. Given these limitations of the data, it is not possible to incorporate the surcharging variable into the econometric models used below. In addition, Roy Morgan Research noted that some respondents may have incorrectly understood the instructions on surcharging, as a number of respondents reported being surcharged for the use of cash.

Notwithstanding these limitations, there are a number of interesting findings that can be made using the data available. Cardholders reported paying a surcharge for around 5 per cent of credit card transactions. Of those respondents who filled in the automated debits and surcharging questionnaire, and reported facing a credit card surcharge at least once over the two-week period, 44 per cent reported that it affected their choice of payment instrument ‘very much’ or ‘somewhat’, while 52 per cent thought it affected their choice ‘very little’ or ‘not at all’.

Credit card holders appear to be more likely to pay a surcharge the higher the transaction amount, with a noticeable increase in the share of transactions that attracted a surcharge for amounts above $150 (Figure 5). Only around 1–2 per cent of department store and supermarket credit card transactions were reported as attracting a surcharge compared to around 29 per cent of holiday/travel credit card purchases and 18 per cent of sporting/entertainment purchases. This difference across merchant categories could partly reflect the influence of the payment channel. For example, it was reported that 16 per cent of credit card payments made over the internet attracted a surcharge, compared to 4 per cent of those made in-person. In addition, people who participate in a loyalty program paid surcharges for credit card transactions at about twice the rate of people without a loyalty program (5.7 per cent versus 2.9 per cent of credit card payments made). Given these interesting statistics, we hope to make greater use of these surcharging data in later work.

Figure 5: Proportion of Credit Card Purchases Attracting 


Participants were also asked to record details in the diary of every cash withdrawal they made during the survey period, including the method used to withdraw the cash and the amount of cash obtained. In addition to completing the diary, participants were asked to complete a one-page questionnaire on their personal use of automated debits and surcharging experience at the end of the two-week period. This questionnaire was returned by 587 individuals. [11]

While the sample was designed to be representative of the Australian adult population, the response rates were such that ultimately some demographic groups (for example, older people) were over-represented in the final sample. Accordingly, Roy Morgan Research applied weightings to ensure that the final data were more representative of the population as a whole. These weighted data are used in the descriptive analysis in this section. However, the estimation of the econometric models uses unweighted data, since it is not clear whether the weights, which were derived to ensure representativeness of the total population in a few demographic dimensions, would be appropriate for our specific econometric model. [12]