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Changing money habits in Australia

After an extended period of low-interest rates and high spending, Australians are experiencing a pronounced period of tightening fiscal policy. 

For many young families and first-home buyers, this is the first time they’ll have faced a serious budgeting challenge. The writing is on the wall: Australians are in a cost-of-living crisis, and a recession isn’t off the cards.

With everyone feeling the crunch (grocery prices surged by almost 10 per cent in the last quarter of 2022 alone), we investigated how the wider macroeconomic situation affected everyday Aussie spending habits.

Through an in-depth GoCardless study conducted with YouGov of over 1,000 Australian consumers, we discovered that the way Aussies want to access, understand and handle their money is fundamentally changing.

Interestingly, the findings point to new opportunities for businesses willing to accommodate new habits in how Aussies approach payments.

Visibility is a virtue

In our recent report, ‘Demystifying Payer Experience’, we discovered that Australians want payment features that can provide new levels of insight into their financial health in order to help to budget.

As the focus on careful budgeting increases, the visibility of finances has become a significant priority for households. Our data revealed that Aussies always want to know what’s in their bank account. Essentially, 20 per cent of Australian consumers prefer to pay invoices directly from their bank account, and 24 per cent cite their main reason as wanting to pay straight away. This suggests respondents want to see their bank balance in real time – especially relevant as inflation hits and every grocery shop represents another knock to the household budget.

The second most preferred aspect of payment methods is ‘speed’ (the highest priority was security, but we’ll get to that shortly). People want to know what is sitting in the bank at any given time, whether that’s money being transferred out of an account or expecting a due payment.

Previously, providing this degree of visibility took a lot of work – even with account-to-account payment methods like Direct Debit. Through the New Payments Platform’s PayTo, account holders can immediately and clearly see what is in their account and what is due to come out, including transactions, transfers and subscriptions. As more banks ‘come online’ with PayTo this year, this will become a feasible option for more Australians and – based on our research – will be the payment method of choice for budget-focused households.

Security sells

The Demystifying Payer Experience report revealed interesting findings about security specifically; people are concerned about losing money through user error or external vulnerabilities nationwide.

Compared to global respondents, Aussies are the most likely in the world to be concerned about their privacy and security when checking out online or paying in person – 87 per cent of Australian respondents indicated this was a priority.

However, this focus on security doesn’t mean they’re sticking to old habits; 42 per cent of Aussies said they would try a new, unfamiliar payment method if it was more secure than their current approach.

Given PayTo’s heightened focus on security compared to traditional payment platforms, the platform is appealing to anyone seeking up-to-date and safe approaches to financial management. The data also suggests that for vendors, becoming a PayTo adopter will lead to better returns, with shoppers seeking security.

For example, Aussies will stop their purchase (70 per cent) if their preferred payment method isn’t available. This means that vendors could increase conversions if they provide secure payment methods that don’t add complexity to the check-out experience.

Cutting cards, ditching debt

Aussies are also seeking to reel in any debt or credit card usage that could also be hurting budgets.

According to our 2022 State of Pay report, 43 per cent of all consumers in Australia want to avoid accruing debt when making purchases. In addition, a greater proportion tends to pay with a debit card rather than a credit card for both online (12 per cent vs 6 per cent) and in-person (17 per cent vs 12 per cent) purchases.

Gen Z, Millennials and Gen X are also all more likely than Baby Boomers to say that cards will soon be “outdated” due to new payment options becoming popular (23 per cent, 23 per cent and 15 per cent respectively compared to 8 per cent).

Physical cards are becoming much less of a preferred payment option overall, with 17 per cent of people more likely to pay with their phone. This jumps to 26 per cent when we consider only respondents between the ages of 18-34.

These findings are corroborated by the Demystifying Payer Experience report. Australians say they trust digital wallets (74 per cent) and mobile wallets (74 per cent) more than credit cards (72 per cent), indicating that even though the margin is slim, there is increasing enthusiasm for convenience-focused payment methods that draw purely from available funds.

Essentially, ongoing economic stress could accelerate these trends – and with PayTo’s national integration slated to conclude in April 2023, many of those looking to gain greater financial visibility, slash their debt and grow their security will likely consider becoming PayTo users.

A silver lining

As the nation’s belt tightens, behaviours continue to change, and consumers will lean on payment methods that allow them to keep to their budgets. Businesses need to remember this and consider providing new and more options that will empower conscientious consumer habits.

After all, businesses are also feeling the crunch of month-on-month interest rate rises, so there’s an opportunity amidst the doom and gloom of current economic projections for merchants to reduce their hidden costs, for instance, by moving away from credit cards (and related costs and logistical headaches) and getting ahead of the competition by becoming PayTo compatible.

For budgeters, it’s unclear how many more interest rate rises are on the horizon or when the shock at the checkout may begin to subside. While mass adoption is likely to still be a while off, PayTo certainly represents one-way shoppers can ensure they have a firm grip on their finances.

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Luke Fossett

Luke Fossett

An experienced GTM Leader and an expert in all things payments, Luke has led the Australian GoCardless team for more than three years, working to take the pain out of getting paid for businesses. Under Luke’s leadership, GoCardless became the first ‘PayTo ready’ international payments company in Australia and prides himself on sharing his insights with the industry in the interests of helping the ANZ region become a world leader in payments.

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