RDP 2014-05: The Changing Way We Pay: Trends in Consumer Payments 1. Introduction

In November 2013, the Reserve Bank of Australia conducted its third Survey of Consumers' Use of Payment Methods.[1] This seven-day diary study is one of the main sources of information about the use of cash in the Australian economy. It also provides extensive transaction-level data that can shed light on the adoption of new technologies and how the choice of payment method may be influenced by the characteristics of the payment and the demographics of the payer.

This paper explores how payment use by Australian consumers has changed across the three waves of the survey and how these trends relate to the characteristics of the payments being made and the demographic characteristics of the respondents. The trends evident between 2007 and 2010 have broadly continued. The use of cash has continued to decline as a share of all payments, as has the use of cheques, while the use of cards has increased. Comparing across age and household income groups and by location of residence indicates that the declining use of cash and increasing use of cards is widespread, although the change is somewhat more pronounced for younger individuals and respondents in low-income households or living in city areas.

The paper also examines some of the drivers of change. The trend toward greater use of remote payment options explains some of the move away from cash toward cards and other payment methods, but a larger effect is the change in the mix of payments made at the point of sale. We explore how new technologies may be influencing the mix of payments. The rollout of contactless card payment technology at the point of sale has been rapid in Australia and appears to be influencing the mix of payments at the point of sale. In contrast, the use of smartphones to make payments does not yet appear to have influenced the mix of payment methods used at the point of sale.

Finally, the study provides some additional insight into the effects of some of the reforms to the payments system implemented over the past decade. The paper analyses the incidence of card surcharging on Australian consumers and the value of card surcharges, a topic on which there is relatively little systematic transaction-level information. We also provide updated information about the frequency of the payment of ATM fees.


See Emery, West and Massey (2008) for the results of the first survey, and Bagnall, Chong and Smith (2011) for the results of the second survey. [1]