Shifting consumer behaviour and the New Normal
Will the sizeable shift in consumer behaviour around payments outlast the pandemic? RFi Group’s Kate Wilson looks at the Australian and Kiwi experience to date.
The last few months have brought unprecedented changes to day-to-day life in every country around the world.
While Australia, and to an even greater extent New Zealand, have largely been held up as best practice examples of how to respond to a global pandemic, we have not been immune to various impacts of the pandemics, with widespread lockdowns forcing consumers to significantly change their lifestyles.
The lockdowns have resulted in consumers changing their purchasing behaviour, with a sizeable impact on payment preference which, I personally believe, will outlast the pandemic.
One of the immediate impacts of lockdowns in Australia and New Zealand was a sharp decline in spending and card transactions as a result of businesses closing.
Publicly available data in both markets highlights this, with the number of card transactions decreasing significantly in April. Card volumes recovered somewhat in May but remain down on historical trends. However, looking at card volumes only tells one half of the story.
One of the biggest trends we have seen in our consumers payments research is a significant decline in cash usage and preference.
Australia leads New Zealand on contactless card adoption and usage
In fact, RFi Group data has seen the largest ever decline in the proportion of regular cash users in both markets since we first started reporting on this topic, with this shift evident across all demographic segments but greatest among younger consumers.
In New Zealand, the proportion of consumers using cash in a typical month dropped from 56 per cent to 42 per cent over a 6-month period, while in Australia usage dropped from 80 per cent to 70 per cent over the last 12 months.
Australia leads New Zealand on contactless card adoption and usage, with RFi Group Payments Diary data indicating that the majority of in person purchases have been paid for with contactless rather than PIN for several years now and just under 90 per cent of card purchases captured during the 2020 research (conducted in May) being contactless.
In both markets we’ve also seen an increase in contactless limits to allow customers to use contactless for higher value purchases without using a PIN, this change will have helped to drive greater contactless usage across a wider range of purchases types and scenarios.
In New Zealand this could also lead to a push for a change in the contactless limit, with 1 in 3 consumers preferring a contactless limit of $100.
Neither of these trends are new, the move away from cash and greater usage of contactless card, and even mobile payments, has been happening in Australia and New Zealand for a number of years now.
These pre-existing trends have been driven by younger consumers in both markets, with consumers <35 significantly more likely to be frequent contactless users and less likely to use cash.
While card volumes may be down currently, we can expect that we will see a resurgence when consumer spending returns to normal as the decline of cash continues and cards pick up greater share of wallet.
As Millennials and Gen Z continue to make up a larger proportion of the population in both markets we would, therefore, expect these trends to continue.
The COVID-19 pandemic has accelerated both trends and resulted in an unprecedented shift in consumer behaviour. The fact that both trends were already happening, albeit at a slower pace, suggests that these changes in consumer payments behaviour will continue and will become the ‘new normal’ over the longer term.
Furthermore, even in New Zealand where lockdown restrictions have begun to ease and consumers are returning to something resembling normalcy, these changes in consumer behaviour took place over a long enough period of time that it is highly likely that new payment habits have been formed.
So, while card volumes may be down currently, we can expect that we will see a resurgence when consumer spending returns to normal as the decline of cash continues and cards pick up greater share of wallet.
Kate Wilson is the deputy general manager of RFi Group. The full report will be included in the August edition of AB+F.