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WHEN LESS IS MORE

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Guest blogger Mike Ebstein, from MWE Consulting, observes the impact of contactless technology on everyday card transactions.

In 1995, the average value of a purchase made with a credit or charge card in Australia was $91.00. An average cash withdrawal was $214.00. Almost as steady as clockwork, those values increased year after year so that in the twelve months to March 2010, an average purchase was $145 and a cash advance was $387.00. Fast forward three years and the trend has altered with a purchase lower at $140 and cash advances marginally higher at $390.

The story with debit is similar. In 1995, an average purchase made with debit was $54. In the twelve months ended March 2010, that had increased to $61. That has now dropped to $57. Cash withdrawals have gone from $130 in 1995 to $153 in 2010 to $152 in 2013.

Clearly, the dynamics are altering, but not across the board. The decline in average values seen over the last few years has largely bypassed cash transactions. There has been very little change there during these years and certainly not the shift that has occurred with purchases. Whilst inflation has been low, it does not explain the end of what had been a long term rise in the average value of card based purchases. Rising prices did play a part, as did the broadening acceptance of cards as a payment option. But recently, other factors have been in play.

The most obvious cause of this change has been the introduction of contactless technology. The widespread adoption of Visa’s payWave together with similar enhancements from other suppliers is leading to a shift in cardholder behaviour. The convenience of a faster check-out process at the point of sale through the removal of the need to verify the transaction with a PIN or signature has led to a change in payment behaviour. Consumers are replacing cash with a contactless debit or credit card to further reduce the role of cash in the payments landscape.

The penetration of cards into the lower value transaction space that has been the domain of cash is delivering new growth in transaction numbers. This uplift in growth in volume correlates neatly with the reduction in the average transaction value. It is clearly a case of less delivering more as the impact of innovation produces benefits that are being embraced by cardholders.

 

Mark Ebstein is Director at MWE Consulting, a specialist service provider in card payment products and associated reward and loyalty schemes. 

 


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