On the road to cashless? Inside Australia’s innovating payment scene
Cash as a payment method is on its way out of the Australian economy. Between 2010 and 2016, the proportion of payments made in cash dropped from 62% to 37%, now accounting for just 18% of the overall value of transactions.
A dramatic decline, and one caused by the explosion of alternative payment methods entering the market over the past five years. Starting with the major rollout of contactless in 2012 at the likes of Woolworths and Coles, a number of digital payment innovations have since opened up a wealth of choice to consumers.
Keen observer of this unfolding story is Matt Barr, Mastercard Australasia’s Senior Vice President of Core and Digital Products. Having spent three years rolling out digital solutions in the US, he returned to Australia in April 2017 to drive not only digital, but a whole range of technologies that create convenient, secure and rewarding experiences for end consumers and businesses.
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“It is certainly an interesting time for the Australian market,” Barr says. “A lot of investment is being made in payment platforms, tokenisation platforms and ways to get customers embracing new digital experiences like P2P and push payments.”
Around 10% of payments in Australia are made using digital technologies like wearables and smartphones, a figure forecast to reach 17% in five years’ time.
“The speed at which these services will be adopted depends on our ability to show that we’re solving a problem,” Barr states. “This is something we have learned from the pilots we have carried out on various ways to pay – consumers aren’t necessarily interested in the mechanics of the payment method, but they are looking for ways to make their lives more convenient.
“People don’t wake up wanting to make a payment with a contactless card, they want to grab a quick coffee on the way to work and be out of the café as quickly as possible.”
Australia is a developed, well-banked market with solid tech infrastructure and a high smartphone penetration rate - a lot of the ingredients needed for adoption of digital payments. However, Barr says there is still a long road ahead, especially in the ecommerce space, where Amazon’s arrival is sure to shake up the retail industry.
“Amazon is a formidable ecommerce power and has been so successful because it has focused on solving problems for the consumer, and a lot of Australian retailers can learn from that experience,” he observes. “Competition is certainly a good thing, and we look forward to working with our customers and improving their ecommerce offerings as well.”
The introduction of contactless is undoubtedly the single-biggest factor in the shift away from cash.
For Barr, the massive popularity of contactless cards is what makes Australia a unique and exciting market to work in. Around four in five Australian consumers use this method of payment, one of the highest penetration rates seen anywhere in the world.
With the contactless boom having been initiated by the rollout in major supermarkets back in 2012, Mastercard is now helping to extend this into transport.
“Transport for New South Wales is looking very closely at what Transport for London has achieved in London, and we have helped them adopt the first contactless card system on the ferries here,” says Barr. “We expect this to stretch across the whole transit system.”
Wearables, biometrics and mobile
Mastercard is also looking beyond contactless cards, working behind the scenes with financial companies and retailers to develop new methods of payment.
For example, major bank Westpac recently unveiled its own range of wearable payment technology, a series of gadgets that are compatible with everyday banking accounts eligible for a Debit Mastercard.
Barr adds: “One of the big enablers new payment rollouts like this is tokenisation technology we’ve put in place. This gives the banks comfort that they can deploy these solutions securely, which may not be news for the consumer, but it is a vital component in making this happen.”
Another increasingly common layer of security being added to payments comes in the form of biometrics, especially the use of fingerprint technology. Mastercard also developed and rolled out Selfie Pay technology in late 2016, and is in conversation with a number of potential partners in Australia with a view to deployment.
“We’ve also helped develop wearables that detect your heart rhythm as a means of verifying your identity,” says Barr. “Recently, we acquired Canadian company Nudata which specialises in behavioural biometrics, using how people interact with their device as a layer of security.
“The way I type and the spelling mistakes I make could be a very secure way of authorising a sign in to internet banking. We start and stop with the question of security – if it is not secure then we will not bring something to market. The trick is to combine security with convenience in a way that does not interfere with the consumer experience.”
And what of smartphone payments? The massive popularity of contactless cards has actually resulted in a relatively low interest in the likes of Samsung and Apple Pay, contrary to the American market where these mobile solutions offer a convenient alternative to the chip and pin cards, still the most common form of plastic payment.
“Unless we add more value into that experience, then we won’t see a big shift to mobile in places like Australia where contactless cards are already so commonplace,” explains Barr, who points to ideas such as app-based coffee shop loyalty schemes as a way of demonstrating the value of mobile payments to contactless card-bearing Australians.
A cashless future…
Amid the contactless boom and rising uptake of alternative payment methods, does Barr foresee a future where cash is eradicated from the Australian economy?
“I think you can see Australia coming close to cashless in the medium term,” he says. “Cash will still be around for quite a long time in parts of the economy, but the data is showing pretty rapid declines in cash usage.
“Cash is expensive to handle and process, and many organisations I have spoken to are trying to take cash out of their operations.”
Increasingly, retailers are removing minimum card spend limits and charges for using plastic payment, a vital step if Australia is indeed to move closer to cashless.
“Australians are now voting with their feet and walking past places that either don’t accept cards or impose minimum spend limits and charges,” Barr adds. “We will see a lot more of this, especially when wearables start to be adopted more widely.
“The future is about payments, services and creating compelling experiences for consumers and merchants. Australia can lead the world in this, and I am excited to be back down here and working with Mastercard. We are well-placed to make this happen.”