RDP 2023-08: The Evolution of Consumer Payments in Australia: Results from the 2022 Consumer Payments Survey 3. Key Trends in Consumer Payments

The 2022 CPS showed a continuation of previous trends, with the longer-run shifts to electronic payment methods and away from cash accelerated by the pandemic. Debit cards were the most frequently used means of payment in 2022, making up half of all consumer payments (Figure 1). Overall, payment cards – debit and credit cards combined – were used for three-quarters of consumer payments in 2022, compared with 63 per cent three years earlier.

The trend towards increased use of electronic payment methods has been driven by the development of more convenient and seamless payment technology as well as changes in consumer behaviour, with the latter accelerated by the pandemic. In particular, payment cards now permit convenient contactless payments, where the cardholder can simply ‘tap’ the payment terminal, which speeds up transactions. There is wide merchant acceptance of contactless card payments, facilitated in recent years by new payment providers, including for low-value payments; this has made it unnecessary for many consumers to carry cash, eliminating the need to regularly top up their cash holdings. Innovation in the payments space has also meant that consumers can now make contactless card payments using their mobile phone, further increasing the convenience of card payments and decreasing the need to carry a physical wallet and cash. The share of in-person payments made by tapping a physical card or mobile device on a payment terminal increased to 77 per cent in 2022, from 56 per cent in 2019.

Consumers are using cards more frequently for payments of all sizes and the adoption of contactless functionality has facilitated particularly strong growth in the use of cards for low-value transactions in recent years. For example, the share of in-person payments of $10 or less that were made with cards rose by over 20 percentage points relative to three years earlier, to 73 per cent in 2022. There was also a further shift to making payments online rather than in person, with 18 per cent of consumer payments made online in 2022 up from 13 per cent in 2019, with most of these payments made using cards. Other means of online payment such as BPAY and internet banking applications account for relatively small shares of the number of consumer payments but a higher share when measured by the value of transactions (Table 1).

With Australian consumers increasingly opting to make their payments electronically, the trend decline in transactional use of cash has continued. In 2022, there were fewer consumers using cash exclusively and more that only used debit or credit cards (Figure 2). In past surveys consumers were more likely to have used multiple payment methods during the diary week, such as cash at some merchants and cards at other merchants. But consumers can now more easily rely on just cards for their day-to-day payments. This is because some merchants that previously only accepted cash, such as small food retailers, now accept card payments, and card payments are increasingly convenient due to contactless and mobile technology.

Compared with 2019, consumers placed more importance on transaction speed when making their day-to-day payments, with around one-third of respondents selecting this as the most important factor when making an in-person payment (Figure 3). This result was consistent with consumers' shift towards contactless card payments over the same period.

The share of respondents indicating their preference for using own funds as the most important factor declined by 9 percentage points, which could partly explain why the ongoing shift towards debit card use slowed in this latest survey. There was also an increase in the share of respondents nominating ‘reward points’ as their most important factor in 2022, a factor associated with credit card use.

Nonetheless, the 2022 CPS results showed that the majority of consumers continued to value merchant acceptance of debit cards, with around 90 per cent of respondents indicating that it was ‘very important’ or ‘important’ that a merchant accepts debit card payments (Figure 4). Merchant acceptance of cash was less important than acceptance of debit cards, but was relatively important for small purchases. By contrast, credit cards and buy now, pay later (BNPL) services were valued more by consumers for large purchases than small purchases. Even so, only around one-third of consumers felt that it was ‘very important’ or ‘important’ for merchants to accept BNPL for large purchases. This result is consistent with BNPL payments making up just 0.7 per cent of the number of payments in 2022.

Similar trends in consumer payments have been apparent in several other economies. Data from broadly similar surveys conducted in a number of other advanced economies show that consumers globally are shifting away from cash to cards, although there are also some notable differences across economies (Figure 5).^[2] Sweden and Norway are prominent examples of jurisdictions where cash is used for a relatively small proportion of consumer payments, whereas cash is more commonly used in some euro area economies.^[3] China is another example of a country in which there has been a marked increase in the relative use of electronic payment methods, facilitated by the widespread adoption of digital wallet services.

Footnotes

Differences in survey design and coverage mean that the results of these surveys are not fully comparable. See Bagnall, Chong and Smith (2011) for an earlier discussion of the results of harmonised payment survey data. [2]

Governments and central banks in some countries – such as the Netherlands, Norway and the United Kingdom – have implemented or are considering a range of policy measures designed to ensure ongoing access to cash services, such as laws requiring banks to provide cash withdrawal services. [3]