New data shows Australians are turning their back on credit and using debit

Covid-19 has fuelled a major shift in the way Australians make payments, with one form expected to continue its decline, new data shows.

Coronavirus has prompted a major shift in the way Australians are making payments, new data from the nation’s peak banking body shows.

The Australian Banking Association has found debit has become the most popular mode of payment since the beginning of the pandemic and has dwarfed credit card transactions by more than threefold.

According to the ABA, cash transactions, which are mostly measured by the volume of ATM withdrawals, have not recovered and are still well below pre-virus levels.

Chief executive Anna Bligh said the use of debit had accelerated during the lockdown, which saw a number of businesses move to digital transactions only and more people buying online.

Australian Banking Association CEO Anna Bligh. Picture: Bianca De Marchi/AAP

“Debit cards continue to be the number one choice when Australians purchase something in person or online, and that means the majority of us are paying with our savings instead of credit,” Ms Bligh said.

“This trend hasn’t always been the case. In 2006, Australians used credit and debit cards equally.”

Ms Bligh noted other payment schemes such as buy-now-pay-later were acting as a sector disrupter and had captured a market share of customers averse to credit, but still wanting some form of lending.

“We are seeing a generational shift away from traditional credit cards and debt to different forms of payments,” she said.

Ms Bligh says Australia is moving towards a cashless society. Picture: Paul Braven/AAP

Credit cards are high risk for a bank, due to the product being an unsecured loan.

However in recent years, banks have widened the interest rate spread with some cards offering rates of less than 10 per cent.

ABA’s research based on figures from the Reserve Bank of Australia shows debit transactions rose 17 per cent last year compared to the prior corresponding period, while cash transactions slumped 10 per cent.

In 2002, cheques made up almost 20 per cent of the payment landscape, however in 2020 accounted for less 0.3 per cent of all transactions.

Ms Bligh said the data showed Australia was moving to a cashless society.

“We are moving towards a cashless society but we are a long way away yet,” she said.

“Australians love new technology.

“More and more of us are doing our banking online or through apps and we can expect the use of cash to continue its decline in 2021 and the future.”

Originally published as New data shows Australians are turning their back on credit and using debit