Payments in Australia: Costs and Use Carl Schwartz (on behalf of - PowerPoint PPT Presentation

Payments in Australia: Costs and Use Carl Schwartz (on behalf of many others) Reserve Bank of Australia

Overview � Payment activity � Payment costs - Aggregate - Financial institutions - Merchants - Overall per payment costs - The influence of payment size

Payment Activity

Cash Payment Share by Number Other BPAY Cheque Credit Scheme debit EFTPOS

Cash Payment Share by Number Other BPAY Cheque Credit Scheme debit EFTPOS

Cash Payment Share by Number Other BPAY Cheque Credit Scheme debit EFTPOS

Payment Share by Value Other BPAY Cheque Scheme debit Cash Credit EFTPOS Scheme debit EFTPOS

Use of Cash Per cent of number of payments % % � Cash � Other methods 80 80 60 60 40 40 20 20 0 0 11-25 26-50 51-75 76-100 101-150 151-200 201-500 500+ 0-10 Payment value ($)

Median Payment Values Scheme debit Personal cheque Cash EFTPOS Credit BPAY 20 80 100 0 40 60 Transaction value

Payment Costs

Measuring Costs � Resource costs

Measuring Costs � Resource costs � Average costs

Measuring Costs � Resource costs � Average costs � Sample of financial institutions and merchants

Measuring Costs � Resource costs � Average costs � Sample of financial institutions and merchants � Indicative rather than definitive estimates

Aggregate Costs of Payments by Individuals � Around 0.8 per cent of GDP Financial institution Merchants account overhead costs Financial institution direct payment costs

Aggregate Costs of Payments by Individuals � Around 0.8 per cent of GDP Financial institution Merchants account overhead costs Financial institution direct payment costs

Financial Institution Account Overhead Costs Annual average per account $ $ 100 100 80 80 60 60 40 40 20 20 0 0 Credit card accounts Transaction accounts

Financial Institution Card Payment Costs Per average transaction for each payment method $ $ 1.20 1.20 0.90 0.90 0.60 0.60 0.30 0.30 0 0 Credit card EFTPOS

Financial Institution Card Payment Costs Per average transaction for each payment method $ $ 1.20 1.20 Credit function and reward program 0.90 0.90 0.60 0.60 Payment function 0.30 0.30 0 0 Credit card EFTPOS

Financial Institution Cash Costs Per Withdrawal / Deposit � ATM withdrawals $0.75

Financial Institution Cash Costs Per Withdrawal / Deposit � ATM withdrawals $0.75 � EFTPOS cash-outs $0.22

Financial Institution Cash Costs Per Withdrawal / Deposit � ATM withdrawals $0.75 � EFTPOS cash-outs $0.22 � Branch withdrawals / deposits $3.40

Financial Institution Cash Payment Costs* Per average transaction for each payment method $ $ 0.20 0.20 EFTPOS cash-out and currency production 0.16 0.16 ATMs 0.12 0.12 0.08 0.08 Branches 0.04 0.04 0 0 Cash * Including public sector costs of currency production

Merchant Payment Costs Per average transaction for each payment method $ $ 0.40 0.40 0.30 0.30 0.20 0.20 0.10 0.10 0 0 Credit card EFTPOS Cash

Merchant Payment Costs Per average transaction for each payment method $ $ 0.40 0.40 Other costs 0.30 0.30 0.20 0.20 0.10 0.10 Tender time 0 0 Credit card EFTPOS Cash

Total Payment Costs* Per average transaction for each payment method $ $ 1.20 1.20 1.00 1.00 0.80 0.80 0.60 0.60 0.40 0.40 Financial institution** 0.20 0.20 0 0 Cash EFTPOS Credit card * Resource costs excluding account overhead costs ** Including costs of currency production for cash

Total Payment Costs* Per average transaction for each payment method $ $ 1.20 1.20 1.00 1.00 0.80 0.80 Merchant 0.60 0.60 0.40 0.40 Financial institution** 0.20 0.20 0 0 Cash EFTPOS Credit card * Resource costs excluding account overhead costs ** Including costs of currency production for cash

Total Payment Costs* Per average transaction for each payment method $ $ 1.20 1.20 Consumer 1.00 1.00 0.80 0.80 Merchant 0.60 0.60 0.40 0.40 Financial institution** 0.20 0.20 0 0 Cash EFTPOS Credit card * Resource costs excluding account overhead costs ** Including costs of currency production for cash

Total Payment Costs - Non-point of Sale* Per average transaction for each payment method $ $ Consumer 5 5 Merchant 4 4 3 3 2 2 Financial institution 1 1 0 0 Cheque BPAY Direct debit * Resource costs excluding account overhead costs

The Influence on Costs of Payment Size

Costs and Payment Size � Cash and credit card costs rise more with payment size than EFTPOS

Costs and Payment Size � Cash and credit card costs rise more with payment size than EFTPOS � EFTPOS therefore becomes lowest cost for payments of moderate value

Costs and Payment Size � Cash and credit card costs rise more with payment size than EFTPOS � EFTPOS therefore becomes lowest cost for payments of moderate value � On narrow measure of costs, credit card becomes lower cost than cash for higher payment values

Key Findings � Aggregate payment costs � Cash � Cards � Other payment methods