Cash remains king but Australian households and businesses are becoming increasingly reliant on non-cash and online payments, according to new research conducted by Bankwest.
Launched today, the second Bankwest Cash Report found that the frequency of noncash payments in Australia has increased by 8% over the past year since November 2010, and by a substantial 45% over five years.
During the past 12 months, over 7.1 billion retail non-cash transactions were made by both households and businesses in Australia. This equates to 311 non-cash retail transactions per person over the year, up from 232 transactions per person five years ago.
Bankwest Business Chief Executive Ian Corfield said, “There is a clear long term trend away from cash payments as Australia’s households and businesses choose card based and online methods for their purchases and payments.
“Debit cards are the favourite method of non-cash payment for smaller transactions, and over the past year have seen the fastest growth of any transaction type.”
Over 2.6 billion debit card transactions were made over the last 12 months with a total value of $155bn – this is a 14% annual increase with a 81% rise over five years.
The latest report in the Bankwest Financial Indicators Series also points to an increase in cash in circulation across Australia in the past year, despite the longer term trend to online and card based transactions. Over the past 12 months, cash in circulation rose by 7%, which is markedly higher than the 2% growth a year ago.
Mr Corfield said “The recent rise in cash in circulation isn’t a sign that we are about to see a major shift back to cash transactions. The upswing seems more related to the RBA’s recent interest rate cuts and reflects that a degree of the uncertainty which consumers and business felt during the GFC has come back to the market, this time due to recent European problems.”
Despite recent consumer caution about taking on debt, the number of credit card transactions made over the past year has also increased, rising by 6%. Credit cards are the most popular payment type for online purchases, accounting for 61% of these type of purchases, according to RBA data.
Mr Corfield commented “Although households are cautious about raising their debt levels at the moment, the number of credit card purchases continues to rise. A key explanation is that credit cards are the most popular way of making online retail purchases, with nearly two thirds of online purchases made using a credit card. ”
The amount of online payments has increased and RBA data shows that they now account for 17% of all non-cash retail payments, with online retail purchases of goods and services making up 25% of all online payments.
Australian businesses are also embracing online ordering and payment systems, with a quarter of local businesses receiving internet orders during 2009/10, worth an estimated $148bn according to ABS data.
Nearly half of all Australian businesses place orders via the internet, with 73% of large businesses (more than 200 people) placing orders online, compared with only 40% of businesses with less than four employees using the internet for orders.
“Consumers and also businesses are looking for the convenience of online payment systems. To meet this demand and to remain competitive, SMEs need to adapt to an increasingly online world,” commented Mr Corfield.
In contrast to the increasing number of online payments, the number of cheques written has dropped significantly. This is a continuing trend with a 12% drop over 12 months and 42% less cheques being written over the past five year period.
“The use of cheques is in sharp decline and we would not be surprised to see them fade out over the next decade as households and businesses become more reliant on electronic payment methods for their higher value transactions,” said Mr Corfield.
The Bankwest Cash Report is compiled using data from the Reserve Bank of Australia, the Australian Bureau of Statistics and the Australian Payments Clearing Association.
- The amount of cash in circulation per person in Australia was $2,156 in September 2011. This is a rise of $50 per person over the past year.
- Cash payments continue to dominate Australia’s household transactions. 62% of payments are made with cash, compared to 29% for debit and credit cards.
- There are 1.1 billion notes on issue in Australia. The greatest proportion is $50 notes - 486 million notes or 45% of the total.
- The total value of non-cash retail transactions over the year to November 2011 was $13.6 trillion, up 4% over the past year.
- Direct credits, which include salary and tax payments, account for half of the value of non-cash retail payments at 50% or $6.7 trillion over the past year.
- Although debit card transactions are rising quickly, they continue to have the smallest share of non-cash retail transactions by value, at just 1%.