Australia is leading innovation in areas such as contactless payments, bill payments, digital commerce, and point-of-sale applications, and the market is ready to make the next transformation with the start of the New Payments Platform in October this year. The Reserve Bank of Australia was one of the first regulators to introduce interchange fee regulation back in 2003, and regulators around the world have since introduced interchange regulation following the Australian example. Can an assessment of today’s Australian market offer an idea of what is in store for payment markets in other geographies?
Based on conversations with representatives from leading banks, fintech companies, public authorities, and industry associations, this report surveys the Australian payments market for key trends and initiatives.
- The Australian market continues to be a test bed for new initiatives. The combination of a highly developed digital commerce and payments infrastructure, a concentrated banking and retail sector, and an active regulator has provided interesting examples for the world to learn from. This report surveys the Australian payments market for key trends and initiatives. It is based on conversations with representatives from leading banks, fintech companies, public authorities, and industry associations.
- Payments constitute a significant business for Australian banks. The total domestic payments income in 2015 from account and transaction fees and net interest on credit card balances can be estimated at AU$11 billion.
- The Australian payment mix is shifting heavily toward electronic payments. Consumers are continuing to switch to electronic payment methods from paper-based methods - cash and checks - for their purchases. The dominant payment method in Australia is cards; more than 50% of consumer payments in 2016 were made with cards.
- The fast-increasing use of contactless card payments, the development of new digital cash substitutes, such as mobile P2P payments, and the high adoption of smartphones (89% in 2016) position Australia as a firm candidate for a “cashless” society. It is certainly possible that the country can make the turnaround to a contracting cash demand, following the example of the Scandinavian countries, within the foreseeable future.
- The design of the New Payments Platform (NPP) carefully took on board the best-in-class features of existing systems elsewhere in the world. With this “late-mover advantage,” Australian banks seem well positioned to grow the NPP volume and develop the customer proposition faster than other markets have been able to.
This 40-page Impact Report contains 14 figures and five tables.
- Impact Points
- The Australian Payments Market
- Australian Banking - a Profitable Undertaking
- The Economics of Payments
- Organization and Self-Regulation of the Australian Payments Market
- Trends in the Australian Payment Mix
- Cards - Regulated, But Still Going Strong
- Cash - No Longer King, But Still Very Much Alive
- Checks - Volume is Declining Rapidly
- Bill Payment
- Direct Entry
- Driving Innovation
- Mobility of Payments
- Instant Payments (NPP)
- Open Access to Bank Data
- Growing Cross-Border Commerce With China
List of Figures
Figure 1: Profitability of Australian Banks
Figure 2: Fee Income from Households
Figure 3: Fee Income from Businesses
Figure 4: Composition of Banks’ Domestic Payments Income
Figure 5: How Australian Consumers Pay
Figure 6: Evolution of Non-Cash Payments
Figure 7: Weighted Average Total Annual Merchant Fees as a Percentage of Transaction Value for Different Schemes
Figure 8: Currency in Circulation Compared to GDP
Figure 9: Trends in the Australian Payments Market
Figure 10: Timeline of EFTPOS Transformation Plan
Figure 11: The Albert Terminal
Figure 12: Square EMV and Contactless Reader
Figure 13: NPP Architecture
Figure 14: Potential Evolutionary Path of Instant Payments in Australia
List of Tables
Table A: Public and Private Organizations Involved in Payments Governance
Table B: Background and Scope of the Revised Card Payments Regulation
Table C: Card Payment Regulation Compared Across Global Markets
Table D: Mobile Wallets Supported by the Largest Card Issuers in Australia
Table E: How Instant Payments Were Used in the U.K. FPS System (2013)
- Alibaba Group
- American Express
- Australia and New Zealand Banking Group (ANZ)
- Australian Payments Network
- Commonwealth Bank of Australia (CBA)
- Diners Club
- Envestnet Yodlee
- Fintech Australia
- National Australia Bank (NAB)
- Quest Payment Systems
- Reserve Bank of Australia (RBA)
- This report mentions Adyen