Retailers are welcoming an expected $69.7 billion boost in retail sales during the six-week peak season leading up to Christmas. The holiday season sees a surge in consumer spending, both online and in physical stores. The reliance on efficient payment processing is crucial for smooth transactions, reducing bottlenecks and improving customer satisfaction.
As customer spending, and their subsequent expectations for fast, seamless transactions rise, so too does the urgency for businesses to ensure their payment infrastructure is sophisticated enough to handle this demand. Beyond the silly season, the ever-evolving payments landscape means change is happening faster than before, so an agile, secure, and reliable payments infrastructure is essential to underpin these transactions.
The next wave in payment processing
Businesses need payment infrastructure that can handle high volumes without breaking a sweat. AI-driven technologies that predict and prevent outages are being adopted by the major four banks, ensuring smoother operations and maximising sales opportunities. Commonwealth Bank of Australia (CBA) is investing heavily in these AI functions, which has reportedly played a key role in reducing their customer scam losses by 50% and fraud reports by 30%.
On the consumer side, payment methods being used in transactions are evolving beyond traditional options. Digital/ mobile wallets, account-based transfers, and biometric payments are fast becoming everyday staples. QR codes, for instance, have evolved from a novelty used for connecting online, location check-ins or advertising to a potential global payment standard. Aiming to remove the need for intermediaries like Visa and MasterCard, they aim to enable secure, fast, and seamless payments directly from customers’ banks without the surcharge. Chemist Warehouse is one of the major retailers leading this move, announcing in October their plans to adopt this across their stores. It’s a sign that reflects the growing demand for more convenient payment options.
With so many payment options now available to consumers – such as Afterpay, PayID, BPAY, credit cards, cash, and various other online and in-store methods – it’s essential that the underlying payment infrastructure remains robust and secure. This infrastructure must effectively handle the high volume of transactions, particularly during peak periods like the holiday season, to ensure smooth, uninterrupted experiences for businesses and consumers. A strong, reliable payment system is crucial for managing the complexities and ensuring security during these busy times.
Online retailers need systems that ensure faster transaction speeds to minimise cart abandonment, particularly during online sales events such as Black Friday, and higher authorisation rates to keep payments flowing smoothly and avoid disruptions. Equally important is resilience, particularly for retail vendors, where downtime and delays during peak foot traffic can seriously impact the bottom line. Payment systems must be reliable to prevent lost sales and ensure smooth operations during busy periods. Advanced systems that use AI to predict and prevent outages can provide extra reassurance and protection to these businesses and maintain consistency for consumers.
Current challenges for businesses
Surcharges
Unfortunately, many businesses, particularly SMEs, face challenges such as high processing fees and overheads, which often go unnoticed but can significantly impact profitability. These hidden costs can undermine cash flow and hinder growth, making it essential for businesses to address them for long-term success.
Hackers, Fraud and Cyber Crime – Oh My!
The holiday period is rife with fraudsters who try to exploit payment system vulnerabilities. From cyber-attacks to scammers, they prey on unassuming, stressed, or busy Australians.
As digital transactions become the preferred way to pay, so do the risks of fraud and data breaches. Businesses must ensure their payment processing solutions have adopted advanced security measures to protect sensitive customer data and comply with evolving regulations
Consumer Trends shaping the future
One payment channel that is becoming popular is mobile wallets. According to research from the RBA, payments using mobile wallets reached 39 per cent of card transactions in the June quarter of 2024. Of those card transactions, Australians aged between 18 and 29, using Apple Pay, Google Pay and other digital wallets, make at least one payment a week.
With mobile payments supported by card schemes and now fully integrated into the operating systems of the major smartphone manufacturers, consumers have convenience, speed, and security.
With the rise of identity theft and cybercrime, physical wallets and the risk of losing cards, smartphones incorporate biometric security and multifactor authentication (MFA) protections as standard.
The wallets themselves tokenise the cardholder data so that the merchant does not see the card number, expiry date and CVV/CVC, the three data points that authorise a payment.
From tokenisation, the next stage of the evolution of smart wallets will be adopting virtual cards. While rare in Australia, virtual cards aren’t digital copies of a bank-issued physical debit or credit card. Instead, they exist purely inside a phone with their own card number and CVV/CVC number and can often be generated as a single-use card to make purchases online or in-store.
What lies ahead in payment processing
Looking beyond this year’s holiday season, the future of payment processing is focused on interconnected ecosystems. Open banking and real-time payments are enabling greater customer experiences. Similarly, regulatory changes will also shape the future. As the industry navigates evolving government regulations—from surcharge bans and mandatory cash use to phasing out cheques and adopting newer processes—we must ensure consumers are well-informed. It is crucial that they can access and understand these services without significant disruption to their behavioural patterns.
It’s important for payment processing providers to ensure their services are equipped with secure and adaptable infrastructure so that their clients’ businesses can provide seamless experiences for all Australians, whether they opt for cash, card, or credit.
For many Australian retailers, now is the time to assess whether their payment infrastructure is up to the task. If you’re noticing any gaps or areas for improvement, you should contact your payment provider so they can ensure your system is prepared to handle the challenges of the season and beyond.
Despite often being overlooked by consumers, payment processing remains a key step in both the consumer experience and driving the Australian economy. While we tend to lead the way with payment solutions as a nation, the holiday period reminds us just how impactful and important these payments and the infrastructure that supports them really are.
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Tami Guillemette
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