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Australian Payment Cards: Review of 2011 and Outlook to 2013

Synopsis

This report provides up-to-date information and analysis of the key indicators that will impact the Australian payment cards market and its development through to 2013.

Description

INTRODUCTION

The Australian payment cards market without doubt has reached its saturation point, where future growth will rely on increasing the intensity of payment card usage among users. The penetration of payment cards in Australia is already high and remains relatively high compared to many other countries.

FEATURES AND BENEFITS

  • Providing the latest data, the report focuses on key metrics such as card transaction values, balances, and card numbers.
  • Includes detailed analysis of macro-economic indicators and how these factors will affect the card market through to 2013.
  • By using the latest available market data the report offers in-depth analysis of likely forecast scenarios through to 2013.
  • Includes detailed analysis of Australian regulatory changes, their impacts on issuers and consumers, and how issuers should adapt.

HIGHLIGHTS

  • While the credit card sector is struggling to maintain momentum, debit cards have proven to be resilient during the post global financial crisis era and the sector is expected to perform well in years to come. Overall, the Australian credit card market is expected to recover from a slow year in 2011, to face stronger growth to 2013.
  • The future growth of Australian payment cards is likely to rely on low value payments, with the objective to displace the use of cash as consumers' primary way to pay at the POS. According to Datamonitor's Financial Services Consumer Insight Survey, 70% of consumers are still using cash for retail transactions with a value of less than A$20.
  • New forms of alternative electronic payments will keep pushing a further reduction in consumer demand to withdraw cash from ATMs. While ATM use will not disappear, usage will likely continue to decline in the mid-term.

YOUR KEY QUESTIONS ANSWERED

  • How is Australia recovering from the global financial crisis? How has the cards market changed as a result?
  • What are the key drivers impacting growth through to 2013?
  • How have card balances, write offs, and transaction values changed since the global financial crisis?
  • How will the card market perform in 2012 and 2013?
  • What impact will new regulation have on consumers and issuers?

TOC

OVERVIEW

  • Catalyst
  • Summary

EXECUTIVE SUMMARY

  • The Australian economy: global uncertainty is driving stagnation
  • Consumer demand for all forms of credit continues to weaken, especially outside the housing sector
  • Two-speed economy causes uneven growth across different market segments
  • Australia's payment card market in 2011: low demand, high usage
  • In 2011, demand for new cards was the slowest in 10 years
  • Despite uncertain economic times, transaction values have grown strongly in the past five years
  • The use of ATMs has reached a stagnation point, signifying a step toward cashless payments
  • Balancing the benefits for consumers and the payment industry
  • RBA acts on excessive surcharging to reflect the true cost of acceptance
  • Implementation of new consumer credit protection laws will provide transparency at some cost
  • 2012: a turning point for the Australian cards market
  • Future growth will rely on systemic growth, as new demand will remain low
  • Credit card annual transaction values will grow by 3.7% in 2012
  • Double-digit growth is still expected for debit card transactions
  • Consumers will use less cash, triggering a turning point for ATM transactions

THE AUSTRALIAN ECONOMY: GLOBAL UNCERTAINTY IS DRIVING STAGNATION

  • The economic outlook will remain modest due to a strong dependency on the global economy
  • Uncertainty weakened the demand for credit in 2011
  • The unemployment rate and GDP growth did not provide a clear direction for Australia in 2011
  • Consumer demand for all forms of credit continues to weaken, especially outside the housing sector
  • Two-speed economy causes uneven growth across different market segments
  • Overall, income growth was relatively unaffected during and following the global financial crisis
  • Australia's two-speed economy is reflected in the state of the retail sector

AUSTRALIA'S PAYMENT CARDS MARKET 2011: LOW DEMAND, HIGH USAGE

  • 2011: changes in consumer behavior have shifted the Australian payment landscape
  • Low confidence has pushed consumers to consolidate their accounts
  • However, the use of cards at the POS has increased rapidly
  • The use of ATMs has reached a stagnation point, signifying a step toward cashless payments
  • Demand for new payment cards is down, but usage is up
  • In 2011, demand for new cards was the slowest in 10 years
  • Despite uncertain economic times, transaction values have grown strongly in the past five years
  • Average transaction value has decreased, but not for charge cards
  • There is significant room for payment cards to grow in low value retail payments
  • Cautious consumers are increasing their repayment levels
  • Increased repayments put extra pressure on the growth of outstanding balance
  • Revolving credit card debt grew at the slowest pace in 10 years in 2011
  • Despite economic uncertainty, credit card delinquencies remain within a manageable level

BALANCING THE BENEFITS FOR CONSUMERS AND THE PAYMENT INDUSTRY

  • RBA acts on excessive surcharging to reflect the true cost of acceptance
  • RBA's preferred option: loosely set the limit surcharges based on the cost of acceptance
  • Regulatory landscape 2012: focus on protecting consumers
  • Implementation of new consumer credit protection laws will provide transparency at some cost

2012: A TURNING POINT FOR THE AUSTRALIAN CARDS MARKET

  • Future growth will rely on systemic growth, as new demand will remain low
  • Consumers will remain cautious in 2012, followed by stronger consumer sentiment in 2013
  • Low value transactions will drive further support to the growth of the Australian payment cards market
  • After a weak performance in 2011, the credit card market is expected grow strongly to 2013
  • Credit card annual transaction values will grow by 3.7% in 2012
  • The credit card market is expected to hold a total of A$53.3bn in personal debt by 2013
  • Debit cards will continue to dominate the growth of Australian payment cards
  • Double-digit growth is still expected for debit card transactions
  • Consumers will use less cash, triggering a turning point for ATM transactions

APPENDIX

  • Supplementary data
  • Definitions
  • (Untitled sub-section)
  • Methodology
  • Primary research
  • Secondary research
  • Forecast methodology
  • Further reading
  • Ask the analyst
  • Disclaimer

TABLES

  • Table: Credit card 90+ day delinquencies, 2011
  • Table: Historic and forecast market drivers under neutral, optimistic, and pessimistic scenarios, 2007-13 (1 of 2)
  • Table: Historic and forecast market drivers under neutral, optimistic, and pessimistic scenarios, 2007-13 (2 of 2)
  • Table: Historic and forecast credit card market under a neutral scenario, 2010-13f
  • Table: Historic and forecast debit card market under a neutral scenario, 2010-13f
  • Table: GDP quarterly growth and unemployment rate, 2005-11
  • Table: Personal lending growth in Australia, 2006-11
  • Table: Annual growth of personal income based on the average gross weekly earnings for full-time adults, 2006-11
  • Table: Retail trade annual growth, 2000-11
  • Table: Retail trade annual growth, by category and by state, 2011

FIGURES

  • Figure: New payment tools will move consumers away from using ATMs
  • Figure: Credit card annual transaction values will grow by 3.7% in 2012
  • Figure: Australia narrowly avoided recession during the global financial crisis
  • Figure: Volatility in the Australian economy is reflected in both GDP growth and the unemployment rate
  • Figure: Personal lending is still growing, predominantly driven by the housing sector
  • Figure: Income growth remained unaffected during and following the recent global financial crisis
  • Figure: Retail trade slowed in 2011 as consumers avoided discretionary spending
  • Figure: Overall, there has been a drop in the number of accounts across Australian payment cards
  • Figure: Credit cards were the only payment card sector that experienced positive growth in 2011
  • Figure: Both the number and value of payment card transactions at the POS have grown substantially during 2006-11
  • Figure: Value per POS transaction has declined recently, while both frequency of use and turnover per card have increased
  • Figure: New payment tools will move consumers away from using ATMs
  • Figure: The negative growth in debit cards is responsible for the decline in the overall payment card market
  • Figure: Credit cards represent the lowest growth segment in payment cards by transaction value in 2011
  • Figure: Average value per transaction at the POS has been declining, except for charge cards
  • Figure: Cash still dominates the low value POS payments sector
  • Figure: Outstanding balances on pay later cards increased by A$1.1bn in 2011
  • Figure: Credit card revolving debt grew at the slowest pace over the past 10 years in 2011
  • Figure: A draft example of the key facts sheet for credit cards
  • Figure: Credit card annual transaction values will grow by 3.7% in 2012
  • Figure: The Australian credit card market will reach A$55.3bn of personal debt by 2013
  • Figure: Both the number and the value of ATM transactions are expected to experience a little growth in the coming years
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