Personal Finance

RBA Shows Cost of Convenience for Average Australians

MELBOURNE, Australia – Based on the recent Reserve Bank of Australia’s survey, the average Australian shoulders a lot when it comes to convenience in payment methods.

The Reserve Bank revealed that the cost of convenience for average Australians in the country could go as much as $460 in hidden fees.

Meanwhile, according to the fifth yearly Worldpay Global Payments reports from the FIS global, digital wallets are posed to take around half of the eCommerce sales three years from now in 2023.

The findings gotten over the report includes the shifting balance of payment methods. By 2023, the digital and mobile wallets are expected to be the widely used online payment method and are projected to reach a market share of around 52%. The report findings also included the rising trend of by now, pay later schemes. Based on the report, this kind of personal financing is predicted to be the fastest growing online payment platform in the entire world five years from now. Report findings also come with the forecast of the global eCommerce market, which is set to increase by around 53% in 2023. By then, the expected worth of the global eCommerce market will reach by $5.9 trillion.

The FIS Global released its Worldpay from the Global Payments report in 2020. It is composed of a comprehensive analysis, as well as the forecast of the payment trends in consumers. These come from 40 different countries all over the world.

Based on the recent report, the growth of the global eCommerce marketplace is increasing further as mobile and digital wallets are transforming the behaviors of consumers online. The report cited a lot of factors affecting this rapid change in the marketplace, including the widespread adoption of the technology, urbanization of most emerging economies, the rapidly growing amount of spend of Generation Z consumers, and the upsurge of the social commerce market.

For a lot of consumers, according to the Worldpay report, their smartphones have become the new wallet, replacing the traditional payment methods when purchasing in-store. In 2018, the rate of in-store purchases made using mobile or digital wallets on a global scale was only at 16%. However, the figure sharply went up by 6% after a year to reach a total of 22% in 2019.

According to market forecasters, the number of shoppers paying their purchases through digital and mobile wallet payment methods in 2020 will reach more than one billion.

The external Vice President and the head of global eCommerce of the Worldpay Merchant Solutions at FIS, Shane Happach, said that mobile commerce is poised to reach around half a percent of the total eCommerce spending five years from now. Happach cited the main reason for the growth in the marketplace. He said that it is the scale and the reach of the technology that allows consumers to pay for their purchases. It’s anytime and anywhere.

Happach further stated that with the lack of mobile-first payment solutions like mobile or digital wallets and the buy now, pay later option in the payment strategy of merchants, they could be facing a massive loss against their competitors who offer such payment solutions.

And while mobile or digital wallets are rapidly becoming the favored choice for both in-store and online commerce, the buy now, pay later, or BNPL methods are slowly but consistently developing into a global payment option for consumers. BNPL payment solutions such as Klarna and Afterpay offer consumers a delay in the overall payments for their purchases, allowing them to complete the payment through installments over a predetermined period.

According to the FIS report, the BNPL method is currently the fastest-growing online payment option for consumers in Australia, France, Brazil, Japan, the United States, United Kingdom, and the Netherlands. The payment option is also looking towards a global growth of around 28% compounded annually in the next five years.

Meanwhile, the leading region for the BNPL method usage is the Europe-Middle East-Africa region, which comprises around 5.8% of the overall eCommerce purchases. That figure is also forecasted to reach by approximately 8.9% in 2023. Meanwhile, only less than one percent of the total eCommerce purchases through the BNPL method is under the North American region but is expected to rise to 3% by 2023.

In the Asia Pacific, China remains to be the leading country in terms of using digital payment methods based on the findings of the Worldpay report. Around 71% of the eCommerce purchases in the country and 48% of its in-store sales were led by digital wallets Alipay and WeChat Pay.

Further, in Australia, people have also become increasingly reliant on contactless tap-and-go payments to purchase anything, from their lunches to lattes. But according to the Reserve Bank, the convenience that this payment method offer comes at a price.

According to Jason Bryce of Info Choice, every Australian consumer tapping out when they purchase in a shop, there is a hidden fee involved. According to the RBA, the cost of convenience will rapidly add up to around $460. Also, average Australian consumers have to fork out of their accounts every year.

Mr. Bryce said that what is going on behind the scenes and those cash registers in shops are not strictly legal. He noted that consumers often pay a lot more than they thought they were paying.

Based on the guidelines from the RBA regarding fees that vendors can charge for every purchase includes a 1.63% fee for payments using credit cards, a 0.6% fee for payments using debit cards, and around 20 cents worth of cost for payments using EFTPOS.

Meanwhile, financial experts are urging more Australian consumers to embrace and make use of the cash economy.

After 30 years since ATMs were first introduced in the country, there are now countless of them and available from around three kilometers from each other.

Next Payment’s Tim Walsh also said that around 85% of all transactions in the country are free, so consumers don’t have to pay extra or hidden fees. However, he said, that currently, there are around 15% of total transaction in the country that comes with additional charges, which can be valued between $2 to $3 per transaction.

Meanwhile, while merchants are allowed to do surcharge when purchases are made using these mobile or digital payment methods, retailers aren’t allowed to profit from these extras. But without any fixed policy regarding this stuff in Australia, financial experts say that it will mostly be up to consumers to become aware of these charges they call the cost of convenience.

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