2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - Australia Country Insights

AUSTRALIA INSIGHTS REPORT


Australia offers a market notable for its growing youth population and an overall base of consumers that are willing to adopt a variety of emerging e-commerce techniques – from shopping via social media to paying in installments with new businesses. E-commerce merchants must make sure they can provide simple, fast, seamless shopping to meet the needs of this sophisticated audience.  To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Introduction

 

The Australian economy grew close to potential in 2018, buoyed by strong export growth and an acceleration in household spending, helping support e-commerce.1 However, these two influences are expected to weaken in 2019, a moderation in real gross domestic product growth is expected as a result.2 The expected softening in household spending owes to a confluence of factors including weak wages growth, high levels of household debt and an already low saving rate.3 These factors should persist in 2019 and act as a headwind to household spending and the e-commerce sector. 4 Looking further forward, any slowdown in the Chinese economy, Australia’s largest trading partner, would impact domestic growth. Meanwhile, falling housing prices could also impact spending in the short-to-medium term.5   

This document is based on projected figures and is subject to change at any time.

Fashion, one-off events and social shopping are in vogue

 

Australia’s business to consumer e-commerce market is worth $33.1 billion16 having grown at a double-digit rate over the last few years.17 With a small population of 24.6 million,18 sales have been supported by a healthy economy and strong internet infrastructure,19 rather than a high volume of customers.20

That said, growth is expected to decelerate in the coming years, at a compound annual growth rate of 8.9 percent to 2021.21 This is broadly similar to the growth forecasts of other mature and developed e-commerce markets like the UK (9 percent)22 and the U.S. (10.2 percent).23 The slowdown in Australia is being influenced by a strong preference for discount shopping, which is rising rapidly in prominence. Online marketplaces and discount department stores were the most popular sites for internet shoppers in recent years, with purchases using these channels growing by more than 50 percent.24 This trend for seeking bargains is reflected in the fact that year-on-year, Australians are making more online purchases, but the value of their purchases is decreasing.25 The average online spend in Australia is $1,644 per year. Luring customers away from discount sites will be key to driving this figure up.26

The gap is narrowing between the rates of metropolitan and regional shoppers, suggesting acceptance of online shopping is now widespread across cities and rural areas.27 November is now the biggest month for online sales, a phenomenon thought to be driven by the introduction of four major discounting events in that month – Black Friday, Cyber Monday, Click Frenzy and Singles Day.28 E-commerce merchants that participate in these events can take advantage of their growing popularity.

One challenge is the sheer size of the country, which makes logistics for e-commerce difficult, something also witnessed in the Canadian market. Australia’s population density is just 3.1 people per square kilometer. This compares with a country like the Netherlands, which has 488 people per square kilometer, and subsequently has developed a reputation for very fast e-commerce delivery.

 

Youthful shoppers crave online fashion fixes

 

Social media is an important tool for e-commerce merchants to connect with Australian consumers, with usage rising across all age groups.29 It is worth noting too that Australia’s youth population is increasing. The latest census showed that Australia’s 18 to 36 age demographic has increased by half a million people, and this group now makes up 26% of the population.30 Fashion is a key market for this group, and sales have been an Australian e-commerce success story, growing at a double-digit rate every year since 2011.31

Australia’s proximity to China offers import and export opportunities; it is therefore no surprise that China is the primary overseas shopping destination for Australian online consumers, followed by the U.S. and Japan.32 However, international e-commerce merchants should be aware that as of July 2018, Australia imposed a sales tax on foreign sales of products costing AUD1,000 ($727.50) or less, which e-commerce merchants must charge at checkout. For items over AUD1,000, the charge is levied and collected at customs instead.33

Apps offer opportunity to capture an eager audience

 

Smartphone penetration in Australia is strong, at 68 percent,34 helping the mobile commerce market to reach a value of $8.3 billion.35 Sales are also projected to rise quickly, at a compound annual growth rate of 19 percent to 2021,36 to reach a value of $16.6 billion.37 A quarter of all e-commerce transactions are now completed on a mobile device,38 and just under half of all smartphone owners make a purchase via mobile at least once a month.39

The speed and convenience of mobile commerce is being complemented by the rise of social media browsing on smartphones. Consumers now shop via social media channels like Instagram, which introduced shoppable posts to Australia in March 2018.40 Social media discovery has risen rapidly to become an essential sales and marketing channel for merchants: 85 percent of Australian e-shoppers have made a purchase from a site after finding it via social media.41

As mobile commerce increases, so too do customer expectations of a seamless experience when shopping via mobile devices. Despite high smartphone penetration, customers are still unhappy with omnichannel experiences they receive.42 Consumers are increasingly abandoning shopping carts when a site is not mobile optimized or where there are security concerns,43 so merchants must make offering smart, secure and seamless sites a priority if they are to drive sales.

Dedicated mobile-shopping apps represent a major opportunity for retailers to leap ahead of their competition. Australian online shoppers much prefer apps to mobile-supported websites with 68 percent of mobile commerce now completed in-app,44 accounting for $5.6 billion of sales.45 Given the Australian trend in e-commerce for discount shopping, 46 businesses designing apps should also consider adding loyalty functions to their product.

Buy now, pay later becomes popular payment online

 

Used in 52 percent of transactions and accounting for $17.2 billion of sales, cards represent Australia’s primary way to pay online.47 Debit cards are in far higher circulation than credit cards, at 1.9 per capita, compared with just 0.68 per capita for credit cards.48 While debit cards tend to be more common in most countries than credit cards, it should also be noted that Australia is a highly diverse country with a sizeable first-generation population from developing nations. These shoppers, due to cultural reasons, may have an aversion to using credit or even prefer cash. Indeed, cash payments make up 7% of online sales by value. However, interchange fees have now been capped on debit cards and credit cards in Australia, which will make payment processing cheaper. This could encourage shoppers to use cards more as they will not have to pay surcharges.49

Visa® and Mastercard® payment options are expected as standard by Australian shoppers, with digital wallets Visa Checkout and Masterpass both well recognized.50 American Express is another international brand with good brand recognition and use.51 Meanwhile, when it comes to digital wallets, mobile shoppers are increasingly opting for PayPal®, 52 as their payment method, which allows for both debit and credit cards to be linked to their PayPal® account.

Bank transfers are also popular, with a 13 percent stake of total payments.53 Bank-based payments have been facilitated by younger customers embracing ‘buy now, pay later’ online shopping, a method facilitated by a credit-providing intermediary between the shopper and the e-commerce merchants.54 Customers purchase an item immediately and then repay the cost in instalments. Domestic payment provider Afterpay, for example, takes four interest-free payments in fortnightly installments from the customer’s bank account.55 Card providers can also benefit from this trend, as the schemes typically accept payment via the user’s bank account or via a nominated card. Risk to the merchant is perceived to be low, as the ‘buy now, pay later’ provider typically assumes the risk of payment defaults on the merchant’s behalf.56

This payment method is also driving event-based shopping. Afterpay Day is a new shopping event launched by Afterpay in August 2017. On designated days, e-commerce merchants signed up to the scheme offer discounts to shoppers who use the payment method. The company reported AUD15 million ($10.4 million) in sales during the latest event, with more than 70,000 orders, and 1.5 per second in the first hour alone.57

Nationwide schemes are emerging to facilitate faster payments. The New Payments Platform (NPP) launched in February 2018 was developed and continues to be run by 13 financial institutions, including Australia’s central Reserve Bank. It operates 24/7 and facilitates instant fund transfers between payer and payee. 58 The New Payments Platform also offers a ‘PayID’ service, where payments can be made to a registered smartphone, Australian Business Number – a unique code that identifies your business to the government – or via a registered email address.59

Meanwhile, the introduction of open banking could also impact the payments sector. Similar to the UK, this regulation will require banks to share their current account data in a standardized, secure format between authorized online organizations. This could lead to a rise in a number of innovative products that help customers track their finances. However, unlike in the UK, third parties will not initially be able to initiate payments on a customer’s behalf.60

Incoming regulation aims to curb rising fraud

 

Online card-not-present fraud has risen year-on-year since 2012, as fraudsters shift their efforts from physical counterfeit cards and ‘skimming’ practices to using stolen card data online.61 Card-not-present fraud in Australia totaled AUD476.3 million ($330.9 million) in 2017, up 13.9 percent on 2016.62 E-commerce fraud currently stands at 0.075 percent of online transactions.63

Fresh regulations against card-not-present fraud are being developed. The rules, if approved, would make it mandatory for merchants and issuers to perform strong customer authentication on card-not-present transactions acquired in Australia when fraud rates exceed certain specific thresholds. Acquirers will become responsible for monitoring and reporting on merchant fraud rates and ensuring their merchants are complying with the framework.64

Key takeaways

 

Given the acceptance of foreign platforms and the convenience of e-commerce shipping, international brands are developing strategies to appeal to Australian consumers. The majority of online shoppers in Australia buy from overseas, and cross-border e-commerce generates more sales than from domestic retailers. China, the U.S. and Japan are all popular digital shopping destinations for Australian consumers. However, this disparity is likely to be affected by an amendment to the sales tax on foreign sales of products, introduced in July 2018. Sales of low-value products, which were previously exempt, are now subject to a charge at checkout. The methods of payment used to shop online are also changing. Although cards remain the primary way for consumers to pay for their goods online, other methods are growing in popularity.

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

* J.P. Morgan Payments Trends – Global Insights Report 2019 includes the following countries: Australia, Brazil, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, Thailand, Turkey, U.S., Vietnam.

 

Global Payments Trends Reports

International e-commerce success can hinge upon understanding the needs, nuances and growth patterns of individual nations. J.P. Morgan’s Global Payments Trends Reports aims to offer merchants the knowledge they need for global success through in-depth, country-by-country analysis.

For more information, please contact:

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/europe/merchant-services/payment-insights

 

This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client or potential J.P. Morgan client to whom it is directly delivered and/or addressed (including subsidiaries and affiliates, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions or other business relationship and does not carry any right of publication or disclosure, in whole or in part, to any other party.  This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan.  Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan. This presentation does not constitute a commitment by any J.P. Morgan entity to extend or arrange credit or to provide any other services to Company.

In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us.  The statements, views, and opinions that will be expressed during the presentation are those of the presenters and are not endorsed by, or reflect the views or positions of, J.P. Morgan.  The information herein may not take into account individual client circumstances, objectives or needs and is not necessarily intended as a recommendation of a particular product or strategy to the Company and Company shall make its own independent decision. J.P. Morgan is not liable for decisions made or actions taken in reliance on any of the information covered during the presentation. Furthermore, J.P. Morgan makes no representations as to the actual value which may be received in connection with a transaction or use of the products and services mentioned nor the legal, tax or accounting effects of consummating a transaction.

J.P. Morgan, Chase Paymentech, Chase Merchant Services, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “J.P. Morgan”) and if and as used herein may include as applicable employees or officers of any or all of such entities irrespective of the marketing name used.  Products and services may be provided by commercial bank affiliates, securities affiliates or other J.P. Morgan affiliates or entities.  In particular, securities brokerage services other than those which can be provided by commercial bank affiliates under applicable law will be provided by registered broker/dealer affiliates such as J.P. Morgan Securities LLC, J.P. Morgan Institutional Investments Inc. or by such other affiliates as may be appropriate to provide such services under applicable law.  Such securities are not deposits or other obligations of any such commercial bank, are not guaranteed by any such commercial bank and are not insured by the Federal Deposit Insurance Corporation.  Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by J.P. Morgan or its affiliates/subsidiaries.

IRS Circular 230 Disclosure:  J.P. Morgan does not provide tax advice.  Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with J.P. Morgan of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

© 2019 JPMorgan Chase & Co

 

 

1 Australia Economic Research, J.P. Morgan Chase Bank, January 2019.

2 Australia Economic Research, J.P. Morgan Chase Bank, January 2019.

3 Australia Economic Research, J.P. Morgan Chase Bank, January 2019.

4 Australia Economic Research, J.P. Morgan Chase Bank, January 2019.

5 Guardian, January 2019. ‘Australian house prices falling at fastest rate in a decade.’ Accessed May 2019.

6 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2018.

7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Factbook, 2018.

8 Data.WorldBank.org, 2019. ‘Australia GDP (current US$).’ Accessed January 2019.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Australia Post, Business Insider, and EDC, 2018.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Internet World Stats (2017).

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2018.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn & Company via the Reserve Bank of Australia, 2018.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Australia Post, Business Insider, and EDC, 2018.

17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2018.

19 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Internet Live Stats (2015 & 2016) and Internet World Stats (2017).

20 WebAlive.com.au, March 2017. ‘Australia’s Growing Ecommerce Industry and How It Is Changing Retail Trends.’ Accessed January 2019.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

22 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

23 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2017.

24 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

25 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

26 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

27 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

28 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

29 WebAlive.com.au, March 2017. ‘Australia’s Growing Ecommerce Industry and How It Is Changing Retail Trends.’ Accessed January 2019.

30 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

31 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

32 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Ecommerce Foundation, 2017.

33 Avalara.com, August 2018. ‘Australian consumers suffer limited shopping over taxes.’ Accessed January 2019.

34 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, via Internet Live Stats (2015 & 2016) and Internet World Stats (2017).

35 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

36 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

37 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC estimate based on historical data.

38 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

39 Ecommerce Wiki. ‘Ecommerce Report Australia 2017.’ Accessed January 2019.

40 Smartcompany.com, March 2018. ‘Shoppable Instagram posts hit Australia: Here’s how retailers plan to use the new function.’ Accessed January 2019.

41 PowerRetail.com.au, October 2018. ‘How Australia’s E-Commerce Market Stacks Up Against APAC Region.’ Accessed February 2019.

42 SAP, 2017. ‘Australian Digital Experience Report.’ Accessed January 2019.

43 Internetretailing.com. ‘This is why Australian shoppers abandon cart.’ Available January 2019.  

44 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

46 Ventura Insights, Feb 2018. ‘Online retail gathers momentum in Australia.’ Accessed February 2018.  

47 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

48 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via the Reserve Bank of Australia, 2018.

49 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via the Reserve Bank of Australia.

50 Eshopworld.com, 2019. ‘Spotlight on: Online Payment Methods in Australia.’ Accessed February 2019.

51 IMRG.com, 2019. ‘Payment methods in Australia: Payments.’ Accessed February 2019.

52 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

53 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

54 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

55 News.com.au, August 2018. ‘Best deals from the AfterPay Day sale’. Accessed January 2019.

56 Eshopworld.com, 2019. ‘Spotlight on: Online Payment Methods in Australia.’ Accessed February 2019.

57 AusPost.com.au, 2018. ‘Inside Australian Online Shopping.’ Accessed January 2019.

58 RBA.gov.au, October 2018. ‘New Payments Platform Functionality and Access: Consultation.’ Accessed February 2019.

59 Business.gov.au, November 2018. ‘Register for an Australian Business Number (ABN).’ Accessed February 2019.

60 Bpay.com, September 2019. ‘Open and shut: How Australia’s open banking regime will operate.’ Accessed May 2019.

61 Bankinfosecurity.com, August 2018. ‘Australia Battles Fraudulent Online Purchases.’ Accessed January 2019.  

62 Bankinfosecurity.com, August 2018. ‘Australia Battles Fraudulent Online Purchases.’ Accessed January 2019.  

63 Australian Payment Card Fraud Report 2018 by Australian Payments Network.

64 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via the Reserve Bank of Australia, 2018.

Asia & Pacific