Australia's payments landscape is rapidly evolving, driven by technological advancements, infrastructure modernisation and changing consumer preferences. As digital payments options grow and diversify, Australian businesses face the challenge of adapting to new payment options while balancing cost efficiency, security, and the user experience. A well-crafted payments optimisation strategy is crucial for businesses aiming to maintain a competitive edge and maximise their economic and experiential outcomes.
In this article, we explore Seven Key Considerations for businesses, large and small, looking to optimise their payments strategies and outcomes, recognising perspectives of both merchants (payees) and consumers (payers), as well as differences in Consumer-to-Business (C2B) and Business-to-Business (B2B) payment solutions.
1. Old, New & Emerging : A new era of choices & opportunity
Australia has a well-established payments ecosystem that is expanding rapidly as new technologies emerge. Understanding these changes is crucial for businesses to navigate the complexities of modern payments.
Traditional Legacy Payments
Australia's traditional payment methods, such as debit cards, credit cards, BPAY, EFT, Direct Debit, and Buy Now Pay Later (BNPL), remain widely used. Debit cards, for example, still account for approximately 55% of all non-cash payments in the country. While cash and cheques are still in use, their prevalence is declining significantly in favour of digital options. For businesses, these familiar payment options provide stability and ease of integration, but they are increasingly being supplemented or replaced by newer solutions.
Emerging Payment Products
With the growth of the New Payments Platform (NPP), a number of emerging payment solutions are reshaping the landscape. PayID, a service that enables real-time payments using a mobile phone number or email address, is gaining traction, as is PayTo, a service for recurring payments that replaces Direct Debit. Open Banking Initiated Payments (OBIPs), which fall under Australia's Consumer Data Right (CDR), allow for direct, secure payments from bank accounts, bypassing traditional card networks.
Dynamic PayID, a business variant on consumer PayIDs allows for one-time PayIDs to be generated (and then re-used or cancelled) for individual invoices; a modernised, simplified, secure and real-time replacement for BPAY Biller Code + CRN or BSB + Account and Invoice Reference payments.
Looking to the Future: Digital Currencies
The future of payments also includes the possibility of digital currencies and stablecoin-backed transactions. While this remains an area of experimentation and regulatory oversight, the potential for faster, cheaper, and more secure transactions makes it a space worth watching closely. Australian businesses need to prepare for this future by staying informed on regulatory developments and considering how such options could be integrated into their payment systems.
2. Evaluating True End-to-End Payments Costs: The Obvious and the Not-So-Obvious
With Payments Optimisation Strategy, it’s critical to consider and assess not just the direct transaction fees but the total cost of implementation, maintenance, and management. Businesses should consider both the obvious and hidden costs of various payment solutions.
Transaction Costs and Processing Fees
Different payment methods come with their own costs. These include:
Debit Cards: Low transaction fees, but subject to interchange fees set by card networks. Lower cost routing now offers some ability for lower merchant fees.
Credit Cards: Higher fees due to merchant service charges and card network fees but with consideration also of additional consumer protection and loyalty rewards that may be offered.
BPAY: Whilst a reliable solution for many enterprise billers, BPAY does not provide for real-time settlement and for smaller business can be expensive in setup and fees.
EFT: Usually low cost but slower, which may not suit businesses requiring instant payments.
PayID and PayTo: Generally lower costs, especially for real-time payments, but may involve additional setup fees for businesses including investment in payer usage education.
Direct Debit: Often used for recurring payments, but it can involve higher management costs, particularly if processes are manual.
Payments Management Costs
Beyond transaction fees, businesses must account for other management costs, including:
Unmatched Payments Reconciliation Costs: The time and resources spent reconciling payments with invoices or orders.
Fraud and Dispute Management: Fraud prevention and resolution can incur significant costs, especially as fraud tactics evolve.
Compliance Costs: Card scheme compliance (e.g., PCI DSS) and ensuring that payments systems meet industry standards.
Direct Debit Setup and Management: Despite automation advances, many businesses still rely on manual processes for Direct Debit, which adds operational costs.
Change and Implementation Costs
Adopting new payment products often comes with hidden costs. Businesses need to consider:
Project Change Management: Transitioning to new products and platforms will require a level of effort toward project management, staff training, and operational adjustments.
Security and Compliance Reviews: New payment systems must undergo thorough security reviews, including data protection and fraud prevention.
Due Diligence and Procurement Costs: Assessing new providers and ensuring they meet necessary payments regulatory, operational and technical operational standards will require appropriate skilled resource, time and cost investment.
Customer Education and Training: It’s essential to educate customers on how to use new payment methods, especially if they’re unfamiliar.
When all these costs are factored in, businesses can better understand the true cost per transaction and make informed decisions about which payment options to adopt and implement.
3. Finding the Right Balance of Payment Choice, Cost, and Experience for Payers
The balance between payment options, cost, and the overall customer experience is a delicate one. Businesses must ensure that their payment systems provide customers with a seamless, secure, and convenient way to pay, while also optimising for cost efficiency.
Transitioning from Old to New Payment Methods
Shifting from traditional methods like Direct Debit to PayTo, or EFT / BPAY to PayID, can present challenges. Customers need to understand the benefits of these newer systems, such as lower transaction costs, faster payments, and improved security. For businesses, providing clear communication and easy-to-understand interfaces is key to encouraging adoption.
Too Few or Too Many Payment Options?
Offering too few payment options can alienate customers, particularly those who might prefer specific methods (relevant to the payment / purchase type and risk). However, offering too many options can lead to confusion and operational complexity for merchants. Businesses must strike a balance, providing enough choice to meet customer preferences without overwhelming them.
Maintaining Trust and Security
Safety and security of payments we know remains a top priority for all, particularly in the face of increasing fraud and scams. New payment methods like PayID and PayTo must be presented to customers with clear communication around their safety features and fraud prevention protocols. Understanding of the payment security measures are essential to build trust and ensure effective adoption of new payment solutions.
The Look, Feel, and Flow Test
To optimise the payer experience, businesses should ensure their payment providers, products and systems pass the "look, feel, and flow" test:
Look: Businesses should carefully consider the visual design layout of payments options and process. Particularly if there is a desire to encourage payers toward certain payment methods as the merchant preference (whilst balancing the overall consumer experience to find their preferred payment method of choice).
Feel: Customers should feel confident that their payment has been securely processed. Instant feedback on status and progress confirmation messages, is essential for building comfort and trust.
Flow: The number of steps, handoffs, page redirections and time it takes to complete a transaction should be minimised (or at least UX/CX masked). A smooth, efficient process is crucial to prevent cart abandonment and enhance customer satisfaction.
4. Leveraging Multiple Payments Providers for Optimised Outcomes
The rise of Fintechs and alternative payment service providers (PSPs) has created new opportunities for businesses to optimise their payment strategies. By diversifying payment providers, businesses can access innovative solutions that enhance both customer experience and operational efficiency.
Banks and Fintechs: A New Era of Collaboration
Historically, banks provided the majority of payment services, such as EFT, BPAY, and credit cards. However, the introduction of NPP has opened the door for Fintechs to provide real-time payment solutions with greater agility, features, flexibility and speed. For businesses, this means having access to a wider range of options to suit different needs.
Global Payments Service Providers
Major global payment service providers also continue to expand into Australia offering integrated payment solutions for Australian businesses of all sizes, incorporating multi product payment options and strong e-commerce integration capabilities. Collaboration is also occurring with Australian Fintechs and the major Global Payments Services Platforms, offering access into the latest NPP enabled PayID and PayTo features and benefits.
Payments Procurement and Ecosystem Management
While sourcing payments solutions from various providers may offer advantages, it also requires due consideration and efficient management. Businesses must weigh the costs of managing multiple providers against the benefits of a more diverse ecosystem. Choosing a payments orchestration platform that integrates with multiple providers can streamline the management of payments while ensuring flexibility.
5. Prove the Value of New Payment Options Before Full Implementation
Introducing new payment methods should be done considerately and carefully. Rather than a full-scale rollout, businesses can pilot new payment solutions to assess their adoption (experience and economics) before making a broader commitment.
Enterprises often embed payments processes into their own operations in deeper ways than might be initially thought, so assessing change impacts for both merchants (payees) and customers (payers) is essential.
Pilot Programs and Iterative Rollout for New Payment Products
Fintech providers often offer opportunities for businesses to trial new payment solutions before committing to full implementation. Running a Proof of Concept (PoC) allows businesses to test the economic and experiential value of new options in a controlled environment, with limited risk.
Instead of making sweeping changes, businesses can gradually implement new payment methods, learning from each stage of the process. This approach helps mitigate risk and allows businesses to refine their strategy based on real-world feedback.
6. Time is Money – Flexibility and Speed to Market
The speed at which businesses can integrate new payment methods is a key factor in staying competitive. New solutions, particularly those supported by Australian Payments Plus (AP+) and the NPP such as PayID and PayTo, are rapidly gaining traction.
Rapid Integration of New Payment Options
Fintechs provide for faster to market solutions than traditional banks who are typically building for scale, which means businesses can trial and adopt new payment methods with less delay. Businesses must therefore weigh up the benefits of Fintech flexibility and innovation with the need for stability and security (often associated with banks), or alternatively find an optimum payments solution engaging both.
API Flexibility for Future Growth
A flexible cloud-based API driven payments infrastructure also allows businesses to more quickly adapt to emerging payment methods. This future-proofing approach ensures that businesses can stay ahead of the curve and meet evolving customer expectations.
7. Capturing, Monitoring, and Measuring Payments Data
Tracking metrics such as payment success rates, channel preferences, processing costs, and customer engagement with new payment options can provide valuable insights into the effectiveness of a payments strategy.
Some key metrics to monitor include:
Payment Success Rates: Tracking the number of successful, abandoned, and failed payments. Where in the purchase or payments process did these events occur?
Payment Channel Choices: Understand which payment methods are most popular and cost-effective. Assessing and adjusting for where Average Transaction Value (ATV) economics make different payment products more profitable.
Processing Costs: Monitor the per-transaction cost for each payment method; including transaction fees plus any directly associated management costs such as manual reconciliation, fraud, chargebacks and compliance.
New Payment Option Adoption: Measure the uptake of new payment methods and their ongoing repeat usage. Correlating then also with sales volume metrics.
Real-Time Engagement with Payers
In a world of real-time payments, businesses can now engage with customers immediately if an issue arises during the payment process.
Gone are the days of needing to send letters or emails to advise of a payment re-try in 7 - 14 days (and loss in equivalent cash flow).
Real-time communication, supported by modern digital technologies, allows for faster resolution, enhancing merchant protection and customer satisfaction and preventing payment failures from escalating into larger issues.
Conclusion
Optimising for payments choices in Australia is an increasingly complex but essential task for businesses aiming to thrive in an always on and always evolving digital economy. By understanding the changing payments landscape, evaluating the full range of costs and benefits, and importantly, focusing on the customer experience, businesses can create a payments strategy that drives both economic and experiential success.
With the right balance of innovation, flexibility, and cost management, and a considered selection of best-in-class suppliers for specific needs and goals, Australian businesses can not only meet current customer expectations but also position themselves for future growth in a rapidly changing payments ecosystem.
To discuss and dive deeper into strategies and actions on any of the above, please reach out to us at we look forward to the discussion and how we can assist.
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