There’s a shift in a nature of consumer payment behaviour as the younger generation adopts new payment mechanisms, according to the third bi-annual study from HP-RFi.

The September 2012 Australian Payments: Consumer Trends and Behaviour research shows cash is still king when it comes to consumer payment method for 88 per cent of consumers. This is compared to credit cards (50 per cent), BPAY (48 per cent), EFTPOS (46 per cent) and Visa/Mastercard debit cards (45 per cent).

This is in particular for baby boomers (aged 45-64) who are particularly reluctant to stop using cash as their primary method of payment. In fact, 60 per cent of Baby Boomers do not believe in a cashless future, whereby consumers will use contactless payment methods for all their banking needs, compared to 45 per cent of Gen Y (aged 18-29) consumers sharing that same view.

Meanwhile Gen Y is leading in the uptake of contactless contacts, which are bring more payment choices for consumers. Seventy per cent of consumers are aware of this payment method, and contactless card usage experienced growth from 12 per cent to 21 per cent between October 2011 and September 2012.

“The fact that consumers are using contactless payments more frequently also indicates that contactless is the way of the future. In September 2012, the proportion of consumers who used contactless payments at least once a week was at an all-time-high, up from 26 per cent in March 2012 to 32 percent,” HP said in its report.

“This increase highlights that consumers find using contactless payments to be convenient, suggesting that uptake as well as the frequency of use will continue to increase.”

The report also shows smartphones are become more advanced and innovations such as near field communication (NFC) being installed on devices means that the banking world is becoming increasingly focused on mobility payments. Twenty-seven per cent of consumers found contactless payments in the form of a smartphone with built-in capabilities to be appealing.

“While such innovation is inevitable, will contactless mobile payments change the payments market by further driving its shift into the digital realm? Even though the concept of contactless mobile payments is still relatively new in Australia, HP–RFi Australian Payments Research data already identifies that such a payment method will have a part in changing the face of payments,” the report said.

Despite the interest among consumers about contactless mobile payments, there still is resistance. When consumers were asked what concerns they had about making contactless payments with their mobile phone, security as well as a lack of trust were the two most common barriers for uptake of contactless payments.

“Banks and telcos have invested significantly in measures to secure contactless and mobile payment methods. However, this research clearly shows there is still a disconnect between these efforts and Australian consumers’ perceptions of security and trust,” said Dee McGrath, vice president, financial services industry group, enterprise services, HP South Pacific.

“This is a real opportunity for banks and telcos to work closely to better educate consumers and improve perceptions about secure and safe ways to conduct these next-generation payments.”

To see the report in full, click here.