Payments costs in a rut

Key payments costs are stuck at 2007 levels, though the advent of contactless payments is helping to pull down costs, a study by the Reserve Bank of Australia shows.

Cash, however, is the lowest cost day to day payments method of all, averaging 51 cents per transaction.

Among key findings of the study, revealed in a discussion paper released yesterday, the RBA estimates the aggregate resource cost incurred by merchants and financial institutions in receiving payments from consumers at about A$8.4 billion in 2013, or about 0.54 per cent of GDP.

Financial institutions incur the majority of these costs, with around one-third of costs incurred by merchants. For merchants, the tender time (the time taken at the till to process the payment) is the most significant cost.

"Aggregate costs associated with consumer-to-business payments are estimated to have changed little in nominal terms since a 2007 study," the RBA said, though costs had fallen as a percentage of GDP.

"The fall primarily reflects that per transaction costs have fallen across most instruments. Marginally offsetting the fall, the shift towards greater use of more expensive instruments has worked to raise the cost of the payments system," the RBA said.

Cash, Eftpos and contactless MasterCard and Visa debit transactions have broadly similar resource costs for transactions that are under $20.

Above $20, Eftpos is the second lowest-cost payment method, at 70 cents for an average transaction.

BPay payments cost 73 cents and direct debits 41 cents.

MasterCard & Visa debit cards cost 94 cents per transaction, while credit cards cost $1.34 on average.

Using the average transaction size for each instrument for comparison, MasterCard and Visa debit card payments "are more resource intensive than Eftpos, while credit card transactions are the most resource-intensive card payment method, even when excluding the costs of credit and rewards," the RBA said.

Of all methods considered in the study, direct debit remains the lowest cost, while cheques remain the most expensive. Contactless card payments incurred costs ten per cent to 20 per cent lower than comparable contact-based card transactions.