RDP 2014-05: The Changing Way We Pay: Trends in Consumer Payments 9. Conclusion

The Reserve Bank's third Survey of Consumers' Use of Payment Methods allows an evaluation of the changing use of consumer payment methods and is one of the only direct sources of data on the use of cash by Australian consumers. The 2013 survey indicates that the main trends evident between 2007 and 2010 have continued; the share of payments made using cash continued to decline, associated with a significant rise in the share of card payments. In addition, the use of cheques declined further and there was an increase in the share of payments made using PayPal.

Cash remains a key payment method, particularly for lower-value payments and for older or lower-income respondents. However, the share of the number of payments made using cash has fallen rapidly over the six years, from 69 per cent to 47 per cent. The decline in the use of cash is evident across all payment values, and has occurred across all age and household income groups.

Cash use has fallen in line with the growth in online retail payments and also due to the continuing increase in the use of cards at the point of sale. The latter reflects both the continued growth in the availability of card terminals at merchants and innovations in card acceptance technology, such as the widespread adoption of contactless card payments, which have a shorter tender time than PIN or signature card payments.

While new card technologies are being adopted rapidly, the take-up of other new technologies has been somewhat slower. The use of smartphones to make payments at the point of sale was not widespread at the time of the survey; this technology was being used primarily for established online banking tasks. The shift to online retail payments, however, has been associated with greater use of PayPal by respondents.

The survey can also shed light on some of the effects of recent reforms to the payments system. In the 2009 ATM reforms, the requirement to notify a user of a foreign ATM fee at the time of the withdrawal was intended to increase the transparency of costs. Over time, this reform has encouraged people to use ATMs provided free of charge by their own financial institution, with the 2013 data indicating a fall since 2010 in the proportion of ATM withdrawals attracting a fee.

The removal of ‘no-surcharge’ rules a decade ago was also designed to improve transparency and provide a price signal to customers as to the cost to the merchant of accepting card payments. Despite the strong growth in card use and online retail sales between 2010 and 2013, the frequency of surcharges was stable at around 4 per cent of card payments, indicating that individuals were typically able to use alternative methods of payment if they were not willing to pay the surcharge. Furthermore, there is evidence that consumers who pay surcharges are more likely to place a value on rewards programs than those who do not pay surcharges.

While this paper has provided an overview of the key results of the latest Survey of Consumers' Use of Payment Methods, some issues warrant further investigation. Such topics include the determinants of the choice of payment method, how individuals value the use of different payment methods, and the effect that new technologies have on the use of existing payment methods. The three waves of this survey provide a rich dataset for future analysis of such issues.