Payments in Australia: An in-depth guide

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  1. Introduction
  2. The state of the market
  3. Payment methods
    1. Current usage
    2. Emerging trends
  4. Ease and friction of entry
    1. Taxes
    2. Chargebacks and disputes
    3. International payments
    4. Security and privacy
  5. Key success factors
  6. Key takeaways
    1. Enable contactless payments
    2. Bolster security measures
    3. Enhance the customer checkout experience

As the 11th largest e-commerce market in the world, Australia represents promising opportunities for expansion. But entering this market means contending with local laws and regulations, Australian customers’ preferences for contactless payments, and various other aspects of accepting payments in Australia.

Below is an overview of Australia’s payments landscape to help businesses take a well-informed, strategic approach to payments in Australia, including:

  • Enabling contactless payments
  • Bolstering security measures
  • Enhancing the customer checkout experience

The state of the market

The Australian payments sector is a well-balanced combination of traditional banking strength and disruptive financial technologies. The majority of in-person card payments in Australia are contactless, while digital wallets and real-time payments are quickly becoming two of the most common payment methods.

Australia’s main currency is the Australian dollar, often abbreviated to AUD or presented with an A$ symbol to differentiate it from other dollar currencies. The Reserve Bank of Australia (RBA) serves as the country’s central bank and plays a key role in monetary policy, the payments system, and overall financial stability. Regulatory bodies including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) oversee compliance and stability in financial markets.

Payment methods

While credit and debit cards are widely accepted in the country, newer electronic payment methods are becoming increasingly prevalent. Here’s a look at popular payment methods:

Current usage

Technological advancements have affected payments in Australia, with the rise of digital payments making it easier for customers to move away from paper currency. According to RBA’s Consumer Payment survey, only 13% of payments were made with cash in 2022, down from 69% in 2007, and card payments accounted for 76% of all transactions in 2022.

Contactless payments have also taken a firm hold, making up over 95% of in-person card payments in Australia in 2022, with mobile payments accounting for over 30% of in-person card payments. This adoption trend is accelerated among younger customers who are more technologically savvy and receptive to digital financial solutions. With the advent of digital wallets, such as Apple Pay and Google Pay, and wearables such as smartwatches, new avenues for contactless payments are becoming commonplace.

Real-time payments solutions such as PayTo and Osko are also becoming popular, largely due to their speed and lower cost. PayTo is a service offered by banks, financial institutions, and payment service providers that allows businesses to initiate real-time payments from their customers’ bank accounts. It was developed by the New Payments Platform (NPP), which had more than 88 million accounts in 2022 and is changing the payments landscape in Australia for real-time payments and bank transfers.

  • Credit cards
  • Wire transfers
  • Electronic funds transfers (e.g. BPAY)

Cryptocurrency adoption in Australia has been experiencing noticeable growth. According to Statista data, one in four Australians owned cryptocurrency in 2022. Sydney and Melbourne have emerged as hubs for crypto-related activity, including the establishment of cryptocurrency exchanges and blockchain-focused startups, and companies such as CanYa and Powerledger demonstrate Australia’s increasing involvement in the sector.

A variety of factors have fuelled consumer interest in cryptocurrencies in Australia, including a dissatisfaction with traditional financial institutions that has led to the exploration of alternative financial systems. A 2023 Money Transfers Comparison survey found that 59% of Australians believe bank account fees are too high. Another driver of crypto adoption is the potential for investment returns, particularly among younger adults who view crypto as a way to diversify their portfolios. However, crypto is not yet recognised as money or foreign currency in Australia.

Ease and friction of entry

Businesses looking to expand into Australia need a strategic vision that encompasses every aspect of operation, from collecting goods and services (GST) tax to ensuring the highest levels of payment security. Here are a few factors to consider:

Taxes

A GST rate of 10% is applied to most goods and services in Australia. The business collecting payment is responsible for collecting this tax and remitting it to the Australian Taxation Office. Negligence in managing GST can lead to penalties.

Chargebacks and disputes

Similar to European regulations, Australian rules include strong consumer protections. For instance, the Australian Securities and Investments Commission (ASIC) enforces regulations that require financial institutions to investigate disputed transactions. Laws such as the ePayments Code also provide both businesses and customers a foundation for resolving such issues.

Customers typically have between 45 and 120 days to make a claim, depending on their card scheme. The onus is on businesses to provide detailed evidence counteracting a chargeback claim – which can include sales receipts, delivery confirmations, and any correspondence with the customer.

International payments

The increasing volume of cross-border transactions spurred by the proliferation of ecommerce purchases means businesses and payment providers need to address currency conversion and fluctuating exchange rates, adding another layer of complexity.

  • Currency conversion
    For cross-border transactions that involve currencies other than the Australian dollar, businesses must deal with currency conversion, and be aware of fluctuating exchange rates and associated fees. Several third-party platforms, including Stripe, facilitate currency conversion in Australia.

  • Transparency regulations
    The Australian Securities and Investments Commission (ASIC) is the primary body overseeing currency conversion. Financial institutions must meet ASIC’s transparency and disclosure requirements, which include clarity about all associated fees and the exchange rate markup over the exchange rate used by banks.

  • Platforms from emerging markets
    Accepting popular payment methods from countries in Oceania and Asia, such as China’s WeChat Pay, can help improve conversion rates for international customers.

Security and privacy

The regulatory environment in Australia combines rigorous data protection laws with requirements for financial integrity, balancing consumer protection and the needs of the financial industry. Here are some regulatory and industry requirements to consider:

  • Data protection laws
    The Privacy Act of 1988 covers sectors such as healthcare, telecommunications, and finance. This act requires explicit consumer consent for data collection and has provisions for data breach notifications. The Consumer Data Right (CDR) legislation allows customers to safely share their data with accredited businesses in specific sectors.

  • Anti-Money Laundering regulations
    Compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 (AML/CTF) is obligatory for financial institutions and designated services. The law requires entities to establish and maintain an AML/CTF programme to identify, mitigate, and manage the risks of money laundering and terrorism financing. Australian Transaction Reports and Analysis Centre (AUSTRAC), an Australian government financial intelligence agency, oversees compliance and can levy penalties for non-compliance.

  • Payment card security standards
    Compliance with the Payment Card Industry Data Security Standard (PCI DSS) is mandatory for businesses that store, process, or transmit credit card data. This standard outlines security protocols and policies to protect cardholder data. Businesses found to be non-compliant may face hefty fines or be barred from processing credit card payments.

  • Open banking regulations
    Open banking in Australia allows customers to share their financial data securely between accredited service providers, and the Consumer Data Right (CDR) legislation aims to foster innovation and competition among financial services while maintaining data protection standards.

  • Digital wallet and cryptocurrency laws
    The ASIC regulates digital wallets and cryptocurrency platforms. Although cryptocurrencies are not recognised as legal tender in Australia, they are subject to AML/CTF laws. Digital wallet providers must also adhere to data protection and compliance regulations.

Key success factors

Although Australia’s payment ecosystem is advanced, several challenges persist. These challenges range from technological adoption and cybersecurity to regulatory demands and hyper-local payment systems. Combined, these issues create a complex environment that demands continued vigilance and adaptation. Here are a few ways businesses can approach these complexities within the Australian market:

  • Varied payment options
    Contactless payments and digital wallets are becoming standard in Australia as cash usage dwindles. Offering a mix of digital payment options, including contactless credit and debit cards and digital wallets, is important for succeeding in the Australian market.

  • Cybersecurity and fraud mitigation
    Australia faces a growing challenge in payment fraud and cybersecurity risks. According to the Australian Payments Network, online card fraud increased by 3.8% in 2020 to almost $419 million AUD, necessitating investments in advanced security measures to protect against fraudulent transactions.

  • Customer identity verification
    Digital identity verification has emerged as an important component of secure online transactions, protecting users and businesses against fraudulent transactions. Providers must find the right balance between the need for robust verification and user-friendly experiences.

  • Real-time payment integration
    Australia’s payments infrastructure incorporates real-time payment methods such as PayTo, which runs via the New Payments Platform (NPP), and accepting these systems allows businesses to more closely tailor their payment options to local preferences. According to the RBA, the NPP processed around 1.3 billion payments worth $1.5 trillion AUD from 2022 to 2023.

Key takeaways

To keep pace with evolving customer expectations and technological advancements, businesses operating in Australia can improve customer payment experiences with a multi-faceted strategy. Accommodating diverse payment preferences, strengthening security protocols, and making the customer checkout experience as seamless as possible are all imperative. Here’s a recap, along with tips to help your Australian strategy succeed:

Enable contactless payments

  • Accept mobile payments and digital wallets
    Embrace contactless card payments, mobile payments, and digital wallets such as Apple Pay and Google Pay for quick and hassle-free transactions.

  • Implement real-time transactions
    Use domestic payment methods such as PayTo for real-time payment options that Australian customers are familiar with.

  • Make use of added security benefits
    Tokenisation, a process that replaces sensitive data with a one-time code, provides additional fraud prevention for contactless payments and digital wallets. Take advantage of this built-in security measure by accepting contactless payments.

Bolster security measures

  • Maintain strong fraud detection and prevention measures
    Implement robust fraud prevention mechanisms, including 3D Secure authentication for online transactions, to build customer trust and mitigate financial losses from fraudulent transactions.

  • Protect customer data at every turn
    Adhere to Australian data privacy regulations such as the Consumer Data Right (CDR) and the Privacy Act of 1988, as well as international standards such as PCI DSS.

  • Adapt to emerging digital identity solutions
    Verify customers’ identities through two-factor authentication and passive biometrics for secure online payments.

Enhance the customer checkout experience

  • Focus on transactions in Australian dollars
    Although multi-currency options might be popular in other markets, the focus here is local. Advertise prices in Australian dollars, and accept local payment methods.

  • Provide real-time customer support
    Offer top-tier customer service, particularly live chat and real-time support options for e-commerce customers.

  • Communicate regularly and proactively
    Inform customers about new payment options, security updates, and any potential disruptions. Consider offering newsletters or FAQ pages specifically catered to the Australian market.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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