Australian consumers are increasingly opting for digital payment methods over cash or credit cards, according to a report released this week by the Australian Payments Clearing Association.
The report comes after a Commonwealth Bank survey in March suggested the use of traditional wallets could be made obsolete by mobile payments within the next eight years.
According to the association’s report, titled The Evolution of Cash: An Investigative Study, the number of payments made with cash has fallen by 5% since 2005.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
The number of consumers opting to pay with cash is expected to drop a further 20% over the coming years before reaching a plateau sometime around 2018.
Overall, the percentage of payments made with cash fell from 73% in 2005 to 59% in 2013, and is expected to fall further to just 43% by 2018.
In total, the report forecasts $56,551 million in transactions which could have been made with cash will instead be displaced by electronic forms of payment between 2013 and 2018, with 68% of the displacement going to card-based payments.
The report also notes a significant and rapid decrease in the use of cheques, with the rate of decline accelerating from 12.5% in 2012 to 13.3%.
Cheques are increasingly used for higher value business payments, rather than for personal consumer use.
According to the study, the next expected development in electronic payments is the increased use of NFC-based mobile payments using smartphones.
The report notes around 20% of Australian consumers are likely or very likely to use NFC-based smartphone payments when they become available, with the major banks all currently trialling the technology.
However, the study notes that the use of smartphone payments has only become common in overseas markets after being adopted as a public transport ticketing option, which has “trained” consumers in tapping on and off with their mobiles.
APCA chief executive Chris Hamilton told SmartCompany while mobile-based payment systems such as PayPal would be increasingly common over the long term, in the short to medium term, offering a range of payment options is a good option for SMEs.
“Our suggestion is, without anyone needing to panic, is that they have a range of payment alternatives available aside from cash and cheque,” says Hamilton.
“If you have cards in good shape and contactless on the counter, that’s where you need to be.”
Meanwhile, Telsyte analyst Foad Fadaghi told SmartCompany NFC-based mobile payments are likely to have a rapid take-up rate by consumers, or none at all.
“Technology diffusion often happens quickly, but consumer behaviour changes slowly, making the predicted uptake of mobile payments a difficult task,” says Fadaghi.
“Telsyte’s view is that mobile payments have huge potential if the current payment stakeholders decide to roll out mobile payment solutions that handle consumer concerns around physical phone security and unauthorised payments,” he says.