How PayTo compares to other payment methods in Australia

The payment space in Australia has more competition than the Melbourne Cup. Out of the gates, digital wallets are galloping ahead, with an expected increase in e-commerce transaction share from 31% in 2023 to 45% by 2027, according to Worldpay’s Global Payments Report 2024. Hot on their heels, credit cards are feeling the pressure, their share projected to drop sharply from 27% down to 19%, as more consumers favour the convenience of wallets.

Debit cards aren’t keeping pace, falling back from 21% to 15%, as newer and faster competitors overtake them. Buy Now, Pay Later services are holding steady at 15%, capturing the hearts of younger shoppers with flexible payment plans. Gaining ground rapidly, account-to-account (A2A) transfers push forward, fuelled by the Reserve Bank of Australia’s support of the New Payments Platform (NPP).

Watching this race is challenging for merchants. While they often back many horses to minimise risk, they also know that not all payment options come with the same conditions. They need to be aware of different security risks, fees, cash flow implications, and customer experiences, each directly impacting their operations and bottom line.

As the race intensifies, choosing the best payment method is more important than ever.

Comparing cards, digital wallets, bank transfers (EFT), direct debit and BNPL

PayTo is a payment platform that enables real-time, direct bank transfers between accounts. It is designed to enhance transaction speed and security by allowing users to pay directly through their banking apps, thus eliminating the need for sharing sensitive financial information with merchants. 

NPP’s PayTo service began its rollout at the end of June 2022. As one of the newest payment methods introduced in Australia, many merchants and users are not yet familiar with its capabilities.

This section is designed to help merchants understand how PayTo compares to Australia’s leading payment methods.

Credit and debit cards

• Fees. Interchange fees are paid between banks for the acceptance of card-based transactions. In Australia, typical interchange fees can range as a percentage of the transaction value or a set amount, depending on the card type (debit or credit), the card scheme (Visa, Mastercard), and whether the transaction is domestic or international. They were capped as of February 2022, at 10 cents for debit and prepaid card transactions, or 0.2% for those interchange rates calculated as percentages. For credit cards, it’s eight cents per transaction, or 0.8%. Additionally, merchants pay a merchant service fee to their bank or payment service provider, generally ranging from 1.5% to 3% of the transaction, which includes the interchange fee and additional processing fees.
• Transaction speed. Credit and debit card transactions are typically processed within one to three business days, depending on the card network and the bank involved.
• Security. Credit and debit cards are susceptible to several types of fraud, including physical theft, skimming at machines, card-not-present fraud and data breaches. The card number, security code, and cardholder’s information are all potential points of theft.
• User experience. Users must manually enter their card details (card number, expiry date, and CVV) for each transaction, which can be cumbersome.
• Consumer protection. Credit cards offer significant dispute resolution and chargeback protections, which are valued by consumers but come at a cost for merchants, typically in the form of higher processing fees.
• Recurring payments. Credit and debit cards rely on external payment processors or gateway services for recurring payments, which manage the card details and automate charges. This can be inconvenient when cards expire or are cancelled.

Digital Wallets: PayPal, Apple Pay, Google Pay, etc.

• Fees. Some digital wallets can incur a merchant service fee per transaction within Australia, which can vary depending on the source of funds and transaction type. For example, PayPal charges 2.6% – plus 30 cents – for merchants to receive domestic funds via its wallet. 
• Transaction speed. Digital wallets allow users to complete purchases almost instantly as payment information is stored and autofilled at checkout.
• Security. By using tokenization and encryption, digital wallets protect actual card details during transactions with a unique, one-time code for each transaction.
• User experience. Digital wallets eliminate the need to manually enter card details for each transaction, streamlining the payment process.
• Consumer protection. Digital wallets often offer some level of dispute resolution and fraud protection, depending on the provider and the underlying funding source.
• Recurring payments. Digital wallets automate the billing process for recurring payments by storing user payment details.

Manual bank transfers (EFT)

• Fees. Fees for bank transfers can vary but are generally low for domestic transactions, sometimes even free, depending on bank policies.
• Transaction speed. Bank transfers can take one to three business days for funds to fully transfer and become available.
• Security. Bank transfers are managed within the banking system with high-level encryption and security protocols.
• User experience. Users are required to manually enter bank details for each transaction, which can be time-consuming and prone to errors.
• Consumer protection. Consumer protection for bank transfers is limited; reversing transactions is challenging except in cases of bank error.
• Recurring payments. Managing recurring payments via bank transfers can be tedious as it often requires setting up each payment manually for each cycle.

Direct debit

• Fees. Direct debit fees are typically lower than those associated with credit card transactions, making them an affordable option for regular payments.
• Transaction speed. Direct debit transactions usually take one to three business days to clear and settle.
• Security. Direct debit systems maintain high security standards, thanks to encryption and thorough banking protocols.
• User experience. While direct debit is convenient for set-it-and-forget-it payments, setting up and modifying direct debit instructions typically requires manual paperwork or online forms, which can be less user-friendly.
• Consumer protection. Like bank transfers, direct debit provides limited options for dispute resolution; once a transaction is authorised, consumers have restricted avenues to contest charges except in cases of error.
• Recurring payments. Direct debit is well-suited for recurring payments, as it automates the payment process once the mandate is set up. However, making changes to the amount or date typically requires additional authorisation or setup.

Buy Now, Pay Later Services (e.g. Afterpay, Zip)

• Fees. BNPL services typically charge merchants transaction fees ranging from 4% to 6% of the purchase price. This is considerably higher than most other payment methods.
• Transaction speed. BNPL transactions are generally processed instantly at the point of sale, which allows consumers immediate access to goods or services without upfront payment.
• Security. BNPL platforms employ standard online security measures such as encryption to protect transaction details.
• User experience. BNPL services are attractive to consumers, as they allow them to buy goods and spread the cost over time without interest, if they pay on schedule.
• Consumer protection. Consumer protection in BNPL arrangements varies but generally does not match the level offered by credit cards. Customers using BNPL services have limited recourse in disputes and are subject to terms that may not favour returns or refunds.
• Recurring payments. BNPL services are not typically used for recurring payments as they are designed for one-off purchases that are paid off in instalments.

How PayTo compares to other payment methods 

PayTo stands out by integrating directly with banking systems to offer instant, real-time transaction processing and settlements. 

• Fees. By leveraging direct bank transfers, PayTo bypasses the traditional card network fee structure, significantly reducing transaction costs for merchants. This makes it an economically attractive option, especially for merchants looking to decrease overhead and increase margins.
• Transaction speed. One of PayTo’s standout features is its ability to process and settle transactions in real time. This ensures that transactions are completed and the funds are available in the merchant’s account almost instantaneously after authorisation. Transaction speed improves the customer experience and helps businesses to better manage their cash flow.
• Security. Security is a cornerstone of the PayTo platform. With in-bank app authentication, all transaction approvals occur directly within the user’s secure banking environment. This system employs the bank’s own robust, multi-factor authentication protocols, including biometrics and one-time passwords, making it extremely difficult for fraudsters to compromise transaction details. PayTo also minimises the risk of data breaches since it doesn’t require sharing of sensitive payment details with merchants.
• User experience. PayTo was designed with simplicity in mind. Users don’t need to manually enter their card details for each transaction. Instead, they authenticate transactions directly through their banking app, which is not only more secure but also quicker and more user-friendly. This seamless process removes the friction typically associated with online payments, making it preferable for customers who value convenience and speed.
• Consumer protection. While PayTo does not offer traditional dispute resolutions like chargebacks, it excels in preventing unauthorised transactions through its secure bank authentication system. This approach ensures that all transactions are legitimate and authorised by the account holder, providing a high level of protection against fraud and unauthorised access.
• Recurring payments. PayTo offers merchants the capability to set up and manage regular payments directly through the banking app without the need for third-party providers. The direct connection allows easier management of subscriptions and regular billing, as well as uninterrupted service even when traditional payment methods like cards become invalid.

PayTo: The solution for the digital age 

Today, digital-savvy consumers and merchants seek methods that guarantee low costs, speed, security, and ease of use. Traditional payment methods are struggling to adapt and evolve to meet these fast-changing needs, increasingly appearing as outdated, analogue solutions in a digital-first world.

PayTo, designed from the ground up as a digital solution for the digital age, sets new standards in speed, efficiency, security, and usability with its real-time, secure transactions integrated directly with modern banking technologies.

PayTo may not yet lead the pack, but as merchants and consumers awaken to its potential, they will realise that it is not just part of the future of e-commerce payments in Australia – it is the horse to back. So whether you’re based in Australia, or looking to expand there, now is the time to join the momentum.