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Winning Down Under.

Australia has been a trailblazer for payment innovations such as real-time payments, contactless payments and BNPL.

The Thredd team

December 20, 2023

Australia has been a trailblazer for payment innovations such as real-time payments, contactless payments and BNPL. We caught up with Damien Gough, our Head of APAC, to find out why the country has led the way in adopting new payment technologies and what the future holds for the industry.  

The payment landscape in Australia is somewhat unique for the Asia-Pacific (APAC) region. While several countries within the region have unbanked populations and many others have nascent digital infrastructure, Australia is an outlier. The country has an almost completely banked population (99.32%), according to the World Bank, compared to just 82% in China and 83% in India.1  

Australia’s banking sector is dominated by the so-called ‘Big Four’ banks: the Australia and New Zealand Banking Group (ANZ), the Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB), and Westpac. Yet the competition between these four means there is plenty of innovation in the industry, as they each compete to capture new customers.  

The Australian market also has a very vibrant fintech scene, with circa 830 independent Australian-headquartered fintech companies operating in November 2023, according to KPMG.2 


Early adopters 

When it comes to adopting new payment technologies, few countries can rival Australia’s enthusiasm, says Damien Gough, Thredd’s Head of APAC. “In certain markets, the adoption of digital and contactless payments hasn’t really evolved. But Australia is really a digital-first country. Contactless payment is almost ubiquitous.” In fact, according to a report by Cognizant, Australia is second only to China in terms of adopting new payments technologies.  

Australia invested early in the digital infrastructure required for a modern payments system, thanks largely to the competition between the Big Four, explains Gough. “In Australia, the Big Four invested upfront because of a strong demand from customers for better digital experiences, with a willingness to adopt modern technologies. All the banks were fighting to get the edge over each other and to win the hearts and minds of customers. The industry collaborated, supported, and drove promotions to help increase adoption.” 

In the last few years, digital payments have become increasingly important around the world. Brought on partly by necessity resulting from Covid-19 lockdowns, there has been a flurry of innovations in payments as people and businesses shift away from using cash and rely on their smartphones for buying and selling.  

In Australia, the payments market continues to evolve. From the current rise of real-time payments for consumers and business through the New Payments Platform (NPP), to the adoption and growth of Open Banking and changes in regulation surrounding Buy-Now-Pay-Later (BNPL), the country is going through a digital payment revolution.  

In Australia, the Big Four invested upfront because of a strong demand from customers for better digital experiences, with a willingness to adopt modern technologies. All the banks were fighting to get the edge over each other and to win the hearts and minds of customers. The industry collaborated, supported, and drove promotions to help increase adoption.

Damien Gough Head of APAC
New ways to pay 

Cash usage is now very low in Australia. In 2017, cash was used by 19% of consumers at the point-of-sale (POS), falling to just 6% by 2022.3 

While the pandemic accelerated digital commerce across much of the world, the shift was already well underway in Australia. The Big Four and a multitude of fintechs were already striving to deliver better digital experiences, and regulators were pursuing improved wellbeing in financial services through greater transparency, security, and easier access.  

One area where Australia has been a particular leader is in the use of BNPL. In 2022, it accounted for 20% of the country’s e-commerce payments.4 By comparison, the figure for the whole of APAC is just 1.6%, while the global share is 2.3%.5 

Several Australian companies are now global leaders in BNPL, including Afterpay, Zip, and Latitude. That success has been down to partnering with big brands, says Gough. “They've done a good job of winning over some of the bigger brands early in the process, especially those popular with younger generations, who have embraced BNPL as a much easier purchasing option than traditional Credit.” 

While BNPL has struggled to take off in other countries because of concerns over credit risks to consumers, Gough says that Australia’s “open-minded, ‘give-it-a-go’” culture meant many people there were willing to try it. “When BNPL came out, especially with millennials and Gen Z, it wasn’t seen as ‘credit’,” he explains.  

Another cultural quirk in Australia – the concept of ‘lay-by’ purchases, where items are paid for with interest-free instalments and only delivered upon completion of the payment – also helped BNPL get off the ground. “The spin with BNPL was that you didn’t need to wait for the item yet remained seemingly debt-free, with long interest-free periods.”  

As a result of this relaxed attitude, the BNPL market wasn’t tightly regulated when it first emerged, which helped to support its rapid growth. Big international firms like PayPal and Klarna have since entered the market and despite a challenging economic environment the sector is still witnessing solid growth. However, concerns are being raised about profitability and sustainability as debts grow and restrictive credit regulation looms to protect consumers. 

Yet despite Australian’s enthusiasm for digital technology, the adoption of digital wallets has been relatively slow compared to many other countries. In 2017, they accounted for just 2% of POS transactions, rising to only 12% in 2022.6 By contrast, Indonesia saw adoption soar from 5% to 28% over the same period. And while cash usage in Australia fell from 19% to 6%, in Indonesia it dropped from 79% to 45%.7  

For Australia, credit and debit cards are still dominant, consistently making up three quarters of payments over the last five years. Part of the reason for this is Australia’s highly-banked population who have used cards to pay for items for years. Whereas in relatively un-banked countries liked Indonesia (51% of the population have bank accounts), people have transitioned straight from cash to digital wallets like Alipay or GrabPay, Australians are still attached to bank cards that are underpinned by Visa and Mastercard.  

“With highly developed reliable payment infrastructure already providing a near ubiquitous level of contactless cards acceptance, there was little friction driving consumers to change habits towards alternatives such as digital wallets,” Gough noted.   

An attractive regulatory environment 

Australia’s regulatory environment for payments has encouraged many fintech start-ups to enter the market. In 2018, the Reserve Bank of Australia launched its New Payments Platform (NPP), which provides open access infrastructure for real-time payments. The country was an early mover in providing such infrastructure, and it’s helped to propel the sector.  

NPP created a new service, PayID, that allows users to use a phone number, email address or other identifier to facilitate fast payments without a bank account or traditional card rail scheme. The next step came in 2022 with the launch of PayTo, which allows third parties to initiate payments on behalf of users and helps make one-off and recurring payments more seamless.  

However, the initial light-touch approach is being replaced with stricter protection rules. For example, the BNPL market will soon be under the National Consumer Credit Protection Act. Yet Gough says that, despite regulation coming in, the industry is already too established for adoption to drop by too much: “The reality is, even with the regulatory environment changing, there’s enough traction in the space that I don’t think growth will necessarily taper off. I expect growth to still be in the 8-12% range, which is healthy, especially if providers are kerbing their growing outstanding debt under new regulation.”

Elsewhere, there are other rules being brought in that Gough says will, in theory, “streamline and bring more clarity to the licencing process” for fintechs entering the market. In June, the government unveiled a Strategic Plan to modernise the country’s payment system. This included five key points of focus: 

  • Promoting a safe and resilient payments system. 

  • Updating the payments regulatory framework. 

  • Modernising payments infrastructure. 

  • Uplifting competition, innovation, and productivity. 

  • Making Australia a leader in global payments.

Other areas of focus will aim to protect consumers. The regulator is very tough on consumer rights and data privacy, says Gough. “You can’t get away with non-solicited marketing activities in Australia. You have to be very careful.” The regulator has also created a taskforce to combat data breaches, and in November it unveiled a series of reforms to protect consumers from scammers, including a $100 million investment to build a new Confirmation of Payee system.  

However, the most contentious new legislation is the Consumer Data Right (CDR), which was introduced in 2022. The rule provides fintechs with better access to data and holds banks accountable for improving the quality of the data they hold. “The problem today is that the banks haven’t really played ball and given access to quality data that fintechs need to utilise it,” says Gough. 

A bright future 

Australia’s payments industry continues to evolve and expand as fintechs continue to deliver new innovations. Many of them are specialising in specific areas that unbundle traditional value chains and bring greater efficiencies that rival or complement traditional card rail schemes. As we start to see more use of artificial intelligence, blockchain, cloud computing and big data (the ABCD of fintech), the possibilities for new markets and industry growth are plentiful.  

Efforts by the government to modernise Australia’s payments industry are certainly welcomed by many fintechs, although arguably the work is a continuation of years of foresight by regulators and the industry itself. Despite continued economic challenges in the environment, there remains a vibrant fintech community that is committed to using new innovations to build sustainable businesses that can scale locally and globally. 

Spurred on by a forward-thinking government, tech savvy customers, and a highly competitive market, Australia is a land of considerable opportunity for innovative payment providers. 

If you’re interested in exploring more about the exciting potential in this market, get in touch to speak with one of our regional experts. 


1 World Bank, 2021
2 KPMG Australia, 2023
3 Statista Preferred Payment Methods Australia
4 GlobalData BNPL 2026
5 GlobalData BNPL 2022
6 Statista Payments Australia
Statista Preferred Payment Methods Indonesia

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