APCA – Digital Finance Analytics (DFA) Blog

Australians Choose Digital Payments

Australians are embracing digital payments according to the latest Milestones Report released by the payments industry self-regulatory body Australian Payments Network (previously Australian Payments Clearing Association). As a result, cash and cheques are in decline. Australia’s digital economy underpins what can increasingly be characterised as a less-cash society.

Cheque use plunged 20% to 111.6 million – the largest drop ever-recorded. The value of cheques dropped by 6% over the same period, after remaining flat in 2015 and dropping by less than 1% in 2014. Over the last five years, cheque use has dropped 56%.

The number of ATM withdrawals dropped 7.5% to 648.5 million in 2016 following a 5.5% drop in 2015 and a 4.7% drop in 2014. Since 2011, ATM withdrawals have dropped by 22%.

CEO of the Australian Payments Network, Dr Leila Fourie said “Looking at the payment choices that Australians make, it’s clear that the vast majority of us are moving away from cash and cheques faster than ever before. This is happening because of widespread use of new technology combined with a strong preference for faster and more convenient payment options.”

Consumers’ preference for digital payments is reflected in the strong year-on-year growth in card and direct entry transactions:

Australians used their cards 12.3% more in 2016, making 7.4 billion transactions.
Direct entry transactions (direct debit and direct credit) increased by 8.6% to 3.5 billion.

Over the last five years, card transactions grew by 72% and direct entry by 36%.

Increased smartphone penetration, which reached 84% in 2016, up from 76% in 2014, is an important contributing factor.

Australia’s online retail spend was estimated at $21.6 billion in 2016 and encouragingly from a digital inclusion perspective, this spend is not restricted to digital natives. Older Australians are using online shopping platforms more, with domestic online spending growing by 8.7% for those in the 55-64 age group, and 7.5% for 65+.

The Report also tracks progress on initiatives supporting Australia’s transition to the digital economy including the industry’s New Payments Platform and Australian Payments Plan.

Digital payments taking over from cheques – APCA

A report released today by the Australian Payments Clearing Association, the payments industry self-regulatory body, shows that the drop in cheque use in the 12 months to June 2016 is the greatest annual drop in the last decade.

Today’s report shows that cheque use dropped by 17.2% to 126.4 million. This compares to a 15.7% drop in 2015 and 13.5% in 2014. Since 2006, cheque use has dropped 73%. Cheques now only account for about one percent (1.2%) of all non-cash retail payments.

Cash use also continues to drop steadily. The number of ATM withdrawals dropped by 6.6% to 675.8 million – also the greatest annual drop in the last decade – having dropped 4.9% in 2015 and 4.2% in 2014.

In contrast, the use of digital payments is growing strongly:

Direct entry transactions (direct debit and direct credit) grew by 7.2% to 3.3 billion.

Card payments (credit and debit cards) grew by 12.1% to 7.0 billion.

APCA CEO, Leila Fourie said “Australia is making great strides in moving away from paper payments – both cheques and cash. This is important from an efficiency view point, for customer convenience and for digital inclusion.”

Online payments are increasingly attractive to older Australians. Citing recent research, the Milestones Report notes that in 2015 more than half of internet users over the age of 65 made banking transactions online (53%) and just under a half (48%) had paid bills online.

The Report also highlights that:

Australia is reported second in the world for smartphone use, with 77% of Australians owning a smartphone.

7.7 million Australian households have internet access – this represents 86% of all households, up from 83% last year.

“Australia is leading the way in digital payments with continued strong growth in card payments, impressive smartphone penetration and improved digital literacy. The industry’s New Payments Platform will provide a stimulus for yet more innovation,” said Dr Fourie.

The Report notes that the New Payments Platform, new national infrastructure for fast, flexible, data rich payments, will further support the transition to digital payments. Other industry and government initiatives noted in the Report include:

The Australian Payments Council’s initiatives set out in the Australian Payments Plan

Electronic conveyancing for property settlement through the PEXA service

Government’s SuperStream for the superannuation system

Payments Evolving Fast In Australia

The Australian Payments Clearing Association (APCA) has released their annual review. APCA has 103 members including Australia’s leading
financial institutions major retailers, payments system operators and other payments service providers.

They say “this has been a landmark year for Australia’s digital economy. With accelerated adoption of electronic payment methods, fewer cash and cheque transactions and increased support for Fintech organisations, we’re at the forefront of a global trend”.

Australians used their cards 12.1% more often, and spent 6.7% more on them than in 2015.

With 75% of facetoface transactions estimated to be “tap and go”, Australia leads the world in contactless uptake.

Direct entry transactions grew by 7.2% in number and 2.6% in value.

On average, every Australian over the age of 15 has 3 payment cards.

Online spending by Australians grew by 13.5%

There is 1 point-of-sale terminal for every 20 Australians over the age of 15.

This year, there were over 3.3 billion direct entry (direct debit and direct credit) transactions, a 7.2% increase on the previous year. The total value of
direct entry transactions grew 2.6% to $14.4 trillion.

Debit cards at point-of-sale in Australia continue to grow strongly, with a 13.3% increase in number, and 8.9% increase in value this year.

Credit card volumes increased by nearly 9.8% this year, the strongest increase in the last decade, and a likely reflection of consumer confidence. Similarly, credit card values grew by 5% this year to $310 billion, up from $295 billion in 2015.

Australians spent $689,470 million on their payment cards in 2015, whilst Fraud accounted for 0.07% of this total.

The decline in cheques and cash is accelerating as ATM withdrawals dropped by 6.6%, compared to 4.9% in 2015 and Cheques use dropped by 17.2%, compared to 15.7% in 2015.

On the other hand, Australia has one of the highest smartphone
penetration levels globally, and 59% of Australians with smartphones have used them to pay for goods or services. Tablets are an important part of the puzzle. 71% of Australians over the age of 18 have made a payment using a mobile phone or tablet.

Investment continues in Fintech, with 70 members forming its peak body, and $438m invested in the Fintech market in Australia.

The New Payments Platform (NPP) is a major industry initiative to develop new infrastructure for Australian payments. It will provide Australian governments, businesses and consumers with a fast, versatile, data-rich payments system for making their everyday payments. The industry is taking a unique layered approach that separates the basic infrastructure, which connects all financial institutions, from “overlay” services – innovative, customised payment services. APCA is providing corporate services to NPP Australia Limited, the company it established in December 2014 to oversee the build and operation of the NPP.

In October 2015, NPP Australia reached agreement with Australia’s premier bill payment system provider – BPAY – to deliver the first overlay service to use the NPP once it is operational in the second half of 2017. This initial convenience service will let consumers immediately transfer funds to and from their banking accounts via their mobile phone, tablet, or via the internet.

Payment Fraud Up – APCA

The Australian Payments Clearing Association (APCA) have released their 2016 Payments Fraud Report. The rate of fraud across all Australian cheques and cards increased from 20.8 cents in 2014 to 24.5 cents in 2015.

In 2015, Australians spent $1.92 trillion using their cards and cheques; of this overall total, 0.025%, or $469 million, worth of transactions were fraudulent. While some areas of card fraud have declined, overall card fraud has risen due to a significant increase in CNP fraud. Card-not-present (CNP) fraud occurs when valid card details are stolen and then used to make purchases or other payments without the card, mainly online or by phone.

Australian payment cards fraud

Australians are spending more than ever on their cards and the rate of fraud is increasing. The total amount spent on cards in 2015 increased 5% to $689,470 million. The rate of card fraud increased to 66.8 cents per $1,000, up from 58.8 cents in 2014. This compares to the UK’s 2015 card fraud rate of 83 pence per £1000. CNP fraud increased to $363 million, with 62% or $226.3 million occurring overseas. Most of this fraud is likely due to sophisticated malware and phishing attacks and large-scale data breaches. It reflects the growth in cyber-crime generally.

Domestically, CNP fraud increased 38% to $136.7 million. This channel is increasingly attractive to criminals as Australians spend more online and as measures to tighten up card present channels, both in Australia and overseas, take positive effect.

As the US transitions to chip technology – the last significant economy to upgrade from magnetic stripe – criminals are increasing their focus to online domains. Similar to the cards of other jurisdictions such as the UK, this is impacting Australian cards, which are often captured by data breaches occurring in the US.3 Counterfeit / skimming fraud on Australian cards domestically dropped 10% to $22.9 million.

However, knowing the window of opportunity is closing, fraudsters are rushing to use fake cards at US merchants where the magnetic stripe is still accepted. This largely explains the 77% increase in counterfeit / skimming fraud on Australian cards overseas.

Fraud on Australian cards domestically

With chip technology providing strong protection against counterfeit cards in Australia, fraud is increasingly migrating online. Counterfeit / skimming fraud dropped 10% in 2015 to $22.9 million, down from $25.4 million in 2014. Card-not-present (CNP) fraud increased 38% to $136.7 million, up from $99 million in 2014.

Fraud on Australian cards overseas

Fraud on Australian cards is occurring in the US and other countries at terminals that haven’t yet been upgraded to chip technology. Counterfeit / skimming fraud increased 77% to $28.1 million, up from $15.8 million in 2014. Australian cards have been caught up in large scale data-breaches overseas. CNP fraud increased 13% to $226.3 million, up from $200.9 million in 2014.

Overseas payment cards used in Australia

Chip technology is protecting overseas cards used for card present transactions in Australia. Counterfeit / skimming fraud dropped 14% to $8 million, down from $9.3 million in 2014. However CNP fraud on overseas cards in Australia is increasing. CNP fraud increased 7% to $47.8 million, up from $44.7 million in 2014

Cheques used in Australia

Cheque use has dropped more than 70% in Australia over the past 10 years. The total rate of cheque fraud increased to 0.7 cents per $1,000 in 2015, up from 0.5 cents in 2014 – remaining under 1 cent per $1,000.

The rate of fraud increased to 66.8 cents per $1000 spent, up from 58.8 cents in 2014.

APCA is the self- regulatory body for Australia’s payments industry and has 100 members including Australia’s leading financial institutions, major retailers, payments system operators and other payments service providers.