The Australian payment card market, which has been on the rise for the past few years, registered a slowdown in 2020 due to the COVID-19 pandemic with reduced consumer and commercial spending. However, the market is expected to rise by 8.3% in 2021, forecasts GlobalData, a leading data and analytics company.

According to GlobalData’s Payment Cards Analytics, the value of card payments registered subdued growth of 0.8% in 2020, much less compared to 5.8% in 2019. With improving economic conditions and vaccination program gathering pace, the card payments market is set to rebound and reach A$749bn (US$577.3bn) in 2021.

The value of card payments is forecasted to grow further and register a compound annual growth rate (CAGR) of 6.6% between 2021 and 2025 to reach A$967.9bn (US$746.1bn) in 2025.

Sowmya Kulkarni, Senior Payments Analyst at GlobalData, comments: “Australia has a developed card payment market with a strong payment infrastructure and high consumer preference for electronic payments. Australians are prolific users of payment cards, with high frequency of card payments at 185 times per card in 2020. While the card payments market was affected in the short-run due to the pandemic, it is expected to rebound and continue its growth trajectory from 2021.”

The growth in card payments will be supported by the rising usage of contactless cards and e-commerce payments. The use of contactless cards is on the rise as even smaller merchants are now insisting on non-cash and contactless payments amid hygiene concerns arising from COVID-19. To support this, the limit for contactless card payment was increased from A$100 (US$77.08) to A$200 (US$154.16), effective April 2020.

In addition to physical cards, payment via mobile wallets with stored debit and credit cards are also gaining prominence in Australia. According to the Commonwealth Bank, as of March 2021, over 40% of the bank’s debit and credit card contactless transactions was made via mobile wallets.

In addition, the drop in overall consumer spending during the pandemic has been offset by a rise in online spending, as wary consumers are staying home and using the online channel. Payment cards are the major beneficiaries of this as they are the most preferred tool for e-commerce payments in Australia.

Debit cards are the most preferred card type for payments, accounting for 58.5% of the overall card payments value in 2021 while credit and charge cards account for the remaining 41.5% share.

The share of credit and charge cards segment is on constant decline over the past few years due to the changing consumer attitude towards credit-card debt, and growing prominence of alternate financing options such as buy now, pay later. The reduction in consumer spending amid the pandemic also adversely affected the segment with credit and charge card payment value declining by 10.7% in 2020.

Ms Kulkarni concludes: “While the COVID-19 pandemic hampered the growth of payments market in the short-run in Australia, it is expected to grow at a robust pace over the next four years, supported by the gradual economic recovery, a rise in consumer and commercial spending and high contactless adoption.”