The number of non-cash transactions in Australia is rising rapidly and Australians are fourth on the global list of non-cash transactions per capita, according to the World Payments Report 2015.

Non-cash transactions grew at 9 per cent in Australia in 2013 (the most recent official data) according to the report produced by Capgemini and Royal Bank of Scotland. Capgemini expects that to be sustained or exceeded in the near term thanks to the rapid adoption of payWave technology.

Globally, the number of non-cash transactions is rising rapidly, both in the developing world and in established markets, as the transition away from cash continues. The report reveals there were 358 billion non-cash transactions in 2013, up 7.6 per cent on the previous year.

“We don’t see this trend as doing anything but accelerate,” says Philip Gomm, Industry Practice Leader for the Au/NZ Core Banking, Cards and Payments practice at Capgemini. He notes that payments growth outstrips GDP growth and accelerates in a quickly growing economy.

Australia ranks fourth in the world in terms of electronic transactions per capita, just behind the Netherlands and the USA. Finland is at the top of the list thanks to government efforts to move to a cash free society.

“We’re performing more transactions at lower value, particularly with the payWave technology and we think this is the ongoing trend. The pace of uptake is staggering,” says Gomm.

Gomm expects the transition away from cash to pick up pace in Australia. “We’re almost at the point where you can go out the front door with just your phone,” he told Banter. “The reality is we simply won’t carry much cash.”

Australians have a propensity to adopt technology when the efficiency outweighs any of the barriers to adoption, such as security and friction, or ease of use. “If it’s a lot easier to use we’ll be very fast to take it up.”

Sticky bank customers

“It tracks back to our fundamental trust in our banking systems in Australia. Today we are very confident that if there is a problem with a transaction our bank will sort it out for us and we’re incredibly sticky customers as a result of our implicit trust in our financial institutions,” Gomm says. “That’s a credit to our banks, they’ve done a good job in maintaining consumer confidence in the payment systems.”

But Gomm says the frictionless challenge of mobile is yet to be solved, because it’s still easier to present a credit card than a phone. He also counts 260 commercial mobile wallet providers in the global market, with no preeminent wallet.

However, Australians are increasingly using their phone to transfer funds around their bank accounts.

Hidden payments – those which aren’t reported to regulators and hence aren’t counted in official statistics – are also growing rapidly. Capgemini estimates that globally hidden payments comprise an additional 10 per cent on top of the transparent payments, and that proportion is probably growing.

They are unregulated with no requirement to report transactions, and they are usually non-bank providers. For instance, once the value has been loaded onto a Starbucks card (a payment which is recorded) coffee and muffin purchases at the café chain go unreported.

Gomm says that when regulators perceive that the volume of some of these new payment methods is high enough that a failure could impact consumer confidence then they will regulate them and require their transaction volumes to be reported.

“What that will do is drive up their costs in terms of service provision because you’ve then got all the regulatory and compliance overheads, together with someone watching carefully that your processes and procedures are robust,” he says.

The report also identifies immediate payments as presenting an opportunity for both banks and non-bank payment providers.

“The banks are now thinking carefully about how they can improve the payment experience for their customers, and regulators are thinking about how these infrastructures can further their objectives around modernisation of solutions and whether the right sort of consumer protections in place,” says Gomm.

“Banks are exploring whether they can maintain a competitive advantage through their own scale and customer intimacy, and the non-banks are thinking whether they can deliver lower cost services by directly accessing the new payments infrastructure by using the competitive principles which are inbuilt by the regulatory and compliance drivers.”

Payments growth is also picking up pace in emerging Asia, with growth of nearly 38 per cent in China. Payment volumes in China are now in fourth position globally, behind the US, the Eurozone and Brazil.
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