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Mobile Security

Digital Australia: Overcoming the Tyranny of Distance

Australia’s remoteness means the time spent bridging vast distances has shaped the country’s identity. Even internally Australians have struggled against this ‘tyranny of distance’.

Being one of the largest countries while having one of the lowest populations per square kilometre, meant travelling, as well as shipping goods and making payments always needed time and patience. It is the reason Australians have always enthusiastically adopted innovations that would bind them closer to the world: the radio, telephone, car, aeroplane, and television were all keenly and early taken up, while Wi-Fi was invented there.

It is no surprise then that fast pay electronic transactions are booming in Australia. At the end of 2017, Capgemini released a report showing that the number of digital payments was rising almost 10% a year, a rate much faster than in other wealthy countries where the growth is 6.8% in 2015.

This enthusiasm for fast non-cash transactions means Australia now ranks fourth in the world, only lagging the United States, South Korea, and Denmark in non-cash transactions per capita. This growth could lift towards 15% by 2020, according to Euromonitor, as Australians increasingly move away from using cash for small payments.

Phil Gomm, the Banking and Capital Markets Industry Practice Director at Capgemini Australia, said during the release of the report that Australia is ‘A litmus test for new and innovative solutions’.

‘Contactless’ culture

The Australian government recently announced a ban on cash for purchases over AUS$7,500 (€4,870) to be introduced in July 2019. This will hasten the decline of cash, but the trend has been obvious for a decade. In 2007, people used cash for 70% of day-to-day transactions. This figure has fallen to around 35%, according the Reserve Bank of Australia, the country’s central bank. ‘Australian consumers are increasingly using their debit or credit cards instead of paying cash’, notes the Reserve Bank.

And the trend is gathering speed. Data show the number of non-cash payments in Australia grew by 9.9% in 2015, a quickening after an 8.9% expansion in 2014. While cash is still favoured for lower-value transactions and one-off or informal purchases, its influence is waning.

In 2012, local supermarket chains like Coles and Woolworths pioneered ‘tap-and-go’ technology, or as it is more commonly known in Australia, ‘tap-and-pay’. Since then, digital transactions have continually reduced in value while the transaction volumes have increased.

Growth in non-cash transactions

15%

increase is expected by 2020.

Tap-and-pay in the Outback

Such technologies are now found throughout the entire retail and hospitality industries. Even in some of the most remote parts of the Outback, such as the legendary Birdsville Hotel and the rugged Mt Dare Hotel, on the edge of the inhospitable Simpson Desert, payment via tap-and-pay, or contactless card, payments are possible.

In fact, Australia has one of the highest penetrations rates in the world for contactless cards and is leading the race in tap-and-pay technology. Around four in five Australian consumers use this method of payment. A victim of the uptake of digital transactions is the traditional ATM. The main banks want to rationalize and merge their machines as a way of saving costs as Australians move increasingly to digital transactions.

Australian consumers are increasingly using their debit or credit cards instead of paying cash.

Reserve Bank of Australia.

The digital wallet puzzle

The puzzle about Australia is why digital wallets are slow to take off Down Under. While there are 16 million smartphones in Australia (from a population of 24 million), according to Deloitte’s Mobile Consumer Survey 2016, using the mobile-based technology to make payments has lagged compared to other countries.

When the Reserve Bank of Australia assessed the payments system in 2016, it found about 45% of in-person payments were made by credit or debit card (up from 37% in 2013). Yet, in-person payments by mobile devices accounted for only 1% of point-of-sale transactions.

The popularity of contactless cards is one factor in the low interest in solutions like Apple Pay, Google’s Android Pay and Samsung Pay. This is unlike the American market where such mobile solutions offer a convenient alternative to the chip and pin cards, still the most common form of plastic payment.

The early days of digital wallets in Australia also involved a fight between Apple and the local banks for access to payment technology in Apple’s iPhone. The banks wanted to deliver their own in-app payments rather than pay transaction fees to use Apple Pay.

Push by younger generation expected

Now the dust is settling, consumers are becoming more comfortable about paying with smartphones. While it is still a developing space, Sydney’s famous ferries began accepting digital wallet payments in July 2017, a first for public transport in Australia. As more public transport networks have followed, people are becoming more comfortable with contactless payment by phones.

Experts also believe the younger generation, given that their phone is their primary life device, is more likely to move jump cards and move directly to mobile technology. Card providers may follow the lead of China and India and offer new customers access straight via mobile.

Given Australia’s fascination with technology has made it one of the leaders in the world in the use of digital deployment and engagement, the shift to electronic transactions is likely to continue apace there. In 2017, for example, CIO magazine reported that Australia was leading the world on cloud adoption and DevOps.