consumer behaviour Archives - Page 3 of 4

The times they are a ’changin’…

We seem to be getting a lot of media queries at the moment about electronic payments, how they work, and how quickly they happen. Maybe this is a consequence of the increasing use of mobile banking – people can see things happening on their accounts wherever and whenever. This means that the mechanics of payments are more “in your face”. In line with changing customer expectations, payments processing is speeding up, but doing this in a reliable and secure way itself takes time, given the size and importance of the system. Australia’s “direct entry” electronic payments system handles around 8 million payments a day, between about 35 payments organisations (banks and others). There are around 300,000 registered users – these are businesses that routinely use the system – and millions of account-holders. The system is the backbone of Australian business, supporting every kind of payment from big outlays, like commercial rents, through salary and wages (these days, nearly all of us get paid by direct entry) down to the little payments we make to each other on internet and mobile banking.

RBA data suggests 40% of credit card values in Australia are now card-not-present

Change is pretty well the only constant when it comes to consumer payments. In Australia, we have seen a rapid uptake in contactless card use as well as increased use of online payments. Conversely, we have seen a rapid decline in personal cheque use as well as an ever-diminishing use of cash. Monitoring changing payment usage can be notoriously difficult. The Reserve Bank of Australia (RBA) and APCA collect and publish statistics from industry participants on cheques, cards and electronic payments as well the number of ATMs and POS devices. However, other types of usage such as cash use and the split between card-present (point-of-sale) and card-not-present (internet, telephone and mail) transactions are more difficult to track. Consumers and merchants don’t regularly record or report their own payments activity – meaning we only get a partial picture of how payments use is evolving.

The prospects for mobile contactless payments in Australia

16 April, 2014
Brad Pragnell
Payment System

Many Australians believe their smartphone might one day replace their contactless cards. Research by Lonergan Research, on behalf of CBA, found that 73% of Australians believed their smartphone would replace their wallet by 2021. Australian financial institutions have, to date, met the demand for mobile payments through the use of NFC-enabled stickers and cases. The February 2014 announcement by VISA and MasterCard on “host card emulation”, where the secure element for a contactless payment can live in the cloud rather than in the phone, has reignited global interest in use of mobiles at point-of-sale, with a local trial being announced in Australia in March 2014. With consumer sentiment and facilitating technology shifting in its favour, what are the prospects for wide-scale embrace of mobile contactless payments in Australia?

Australia, South Africa and mobile payments

When it comes to consumer payments, the future is obviously mobile. But the "how" of mobile payments turns out to be rather complicated. I recently had the opportunity to participate in the Annual Conference of the Payments Association of South Africa. Systemic comparison is one key benefit of such an experience. Here we have two resource-driven economies of roughly similar size, similarly large physical distances but markedly different population demographics. The retail payments systems are diverging, rather than converging. This highlights the obvious point that payment systems are shaped by people's habits, not by economics. Consider, for example, some simple comparisons between bank account ownership and mobile phone ownership. According to the World Bank, Australia is one of the most heavily banked populations on earth, with a 99% banking rate in 2012 - that is, 99 out of 100 Australians over the age of 15 had a bank account in 2012. South Africa, by contrast, has a 54% banking rate, and therefore a large community that is still cash-based. Now let's look at mobile phones: the "phoned" rate in Australia is a healthy 106%; in South Africa, 135%. Yes, every person in South Africa has a mobile phone subscription, and every third person has two. If you suspect the interaction of these two comparison pairs leads to different payment evolutions, you would be right.

Australia and the electronic payments leagues table

Today electronic payments are the norm in Australia. In the direct entry system, there are about 7 million items per day equal to about $45 billion. Employers and governments use direct entry to pay wages and benefits, while individuals use direct entry to pay for goods and services through direct debits and internet banking. These direct entry payments, which include direct credit and direct debit, account for 96 per cent of non-cash value (excluding high value payments) and about one-third of the number of non-cash payments. From these figures, one would suspect that Australians are reasonably prolific users of electronic payments, which stands in contrast to some commentary that Australia is somehow “lagging behind” other countries in this respect.