Over the past three decades, the way people spend and send money has changed as a direct result of the emergence of new technologies. If we were to go back in time to as little as forty years ago, it would come as a great surprise to a large portion of people to learn how few people carry cash around with them on a regular basis today. Technology, and the Internet in particular, has impacted every industry in existence, and so it’s no surprise that it’s shaping the future of how people interact with money.
This article has been written to provide an overview of the state of Australian payments in 2022. To do this, we will look at a number of aspects that influence how people choose to pay in Australia today, as well as what what we can expect in the near future. These topics will include a review of the rise of digital wallets, the Buy Now Pay Later (BNPL) industry, how Australia is moving towards a cashless society, and how inflation is influencing the way which Australians spend money on, both at home and when it comes to overseas payments. So, without further ado, let’s get started…
The rise of digital wallets
First, a digital wallet, also known as an e-wallet, is an electronic device, online service or software that allows one party to conduct an electronic transaction with another party, by trading digital currency units for goods and/or services. Essentially, the digital wallet is an online payment tool, usually in the form of an app on a smartphone, that hosts virtual versions of bank cards, meaning individuals do not need to carry a physical card. or enter card details in order to make a payment.
A 2022 Australian Payments Report from FIS predicts digital wallets are set to become the primary means of paying for goods for Australians by 2025. While today’s fastest growing offline payment method continues to be an integral daily life for Australians, the Land Down Under will become the most cashless APAC region by 2025, with the Australian e-commerce market expected to grow by up to 51% between 2021 and beyond. This will allow it to reach a transaction value of 70.7 billion US dollars. In contrast, this will see credit cards, which are currently the most popular method of purchase, decline in popularity by 33% to 26%.
Buy now pay later
When it comes to online payments, Buy Now Pay Later (BNPL) is the fastest growing payment method in Australia. By 2025, it is expected to represent 14% of the value of e-commerce transactions. According to a global payments report, the BNPL industry was worth approximately US$14.3 billion at the end of fiscal 2021.
BNPL does exactly what it sounds like, offering users the ability to obtain both goods and services without paying for them at the time of purchase. Instead, payment is made over time in installments. Because BNPL services do not charge interest on repayments, they take advantage of a legal loophole and avoid falling under the National Credit Act.
Although Australians have clearly embraced this method of payment, it is not without risk. A total of 30% of Australians are said to have used the BNPL payment method in the past year. Of these, half have been late on a refund, with 78% of them suffering some form of financial hardship. There are many suggestions that Australia should follow the UK’s approach and organize an independent review of the BNPL industry to identify potential issues and then implement the appropriate safeguards to ensure these services are safe for the Australian public.
Australia is moving towards a beltless society
Not so long ago, the idea of a cashless society sounded like something out of a science movie. However, over time it is becoming more and more evident that cash is being used less and less as the main form of payment. This, of course, was initially due to the popularity of card payments, a trend which has been further reinforced by the rise of digital wallets and BNPL services. In fact, it is predicted that in Australia, cash will only represent 2% of the value of all point-of-sale transactions by 2025. To confirm, this does not mean 2% of all transactions, but refers to the fact that the actual value of specific cash purchases will be eclipsed compared to those made using other payment methods. a staggering 98%.
The digital age has directly influenced the way people live and organize their daily lives. This has already been reflected in the decline in the number of people actually visiting physical banking establishments, which in turn has signaled the closure of banks around the world. It is no longer uncommon for Australians to leave their homes without even bringing their wallets. The importance of the smartphone is widely known, and with this latest trend, it is set to become an even more integral part of our lives.
How Inflation Will Affect Australian Spending
Inflation is measured and based on what is called the Consumer Price Index (CPI). The CPI tracks the price of a pre-determined set of goods, services, and energy costs to track all price fluctuations. This is why we hear for the first time of an increase in the price of items such as milk and bread, as well as gasoline. The cost of building a house is another that is constantly monitored.
Although inflation, especially at the rate we are experiencing in 2022, is impossible to avoid or completely dodge, you can see how it can potentially affect individuals to varying degrees depending on their lifestyle. Inflation will be felt most directly by a car owner who drives regularly because he will be paying for gas on a weekly basis. If we compare this to someone walking, cycling or using public transport, it will not feel the same way. Likewise, those who have a home loan or mortgage in Australia will feel the effect of rising interest rates relative to those who don’t.
There are several ways to combat the impact of inflation on ordinary Australians. By raising interest rates, it is possible to keep inflation levels low and stable. The RBA will do this in order to prevent the cost of living from rising dramatically before collapsing, which would likely lead to another recession. In addition, this tactic will allow more people to continue to pay off their mortgages, thereby lowering housing prices. All of this will of course leave people with less money to spend on things. This will also see the Australian dollar exchange rate increase, which in turn will see many Australians looking to buy cheaper things overseas.
Australians can do this in a number of ways, including searching for the best money transfer abroad service on comparison and review sites, such as moneytransfercomparison.com, to gain access to wholesale exchange rates. By using sites such as the one linked above, users can rest assured that they are using a safe and reliable money transfer service for their overseas payments.
Money transfer service reviews consider a wide range of aspects, allowing individuals to find the perfect site for them. They describe and provide information on customer satisfaction, quality of customer service, exchange rates and much more. By taking advantage of the best money transfer services to Australia, it’s simple to send money abroad for regular payments, as well as transfer money from an Australian bank account to a bank account abroad for a favorable exchange rate with no hidden fees.
The bottom line
Based on the above information, it is clear that the state of Australian payments in 2022 is one of transformation. New payment methods are now replacing the use of cash, and technology is the main reason for this. These new methods suit the lifestyle of modern Australians perfectly in terms of wanting to be able to do things when and where they want. More and more individuals are moving away from cash and more businesses will follow suit over time. As fewer and fewer businesses accept cash, it will soon be a matter of necessity, in terms of giving up cash, rather than choice.
Overall, the future of payments in Australia is something that should be embraced rather than considered a matter of concern. While every individual should keep their wits about them as the world transforms into a cashless society, it seems like something inevitable and not something we can entirely control or restrict. For this reason, Australians’ willingness to use new payment methods is a sign that adaptation may be easier than many would have initially thought.