##a over the past decade. if two systems perform exactly the same function, we should of course prefer the cheaper one. but the reality is more complicated than that. each system typically has different attributes from every other system, and so end users need to make choices as to which one most costeffectively meets their needs. that means that costs need to be transparent, so that those choices can be well - informed. these, then, are some of the qualities that we might regard as desirable in an efficient payments system. you can probably think of a few more. but having given a list like that, we also need to recognise that there are trade - offs. investment in innovation comes at a cost, borne initially by industry but ultimately by the customer. so in conducting the review, we ’ ll need to be talking with providers and users of payment services about both the costs and benefits they see in different approaches. payments use study one important source of information about that from the end - user perspective will be the reserve bank ’ s latest payments use study. this was a study of around 1, 200 households conducted in october / november last year, updating an earlier study from 2007. participants were asked to keep a diary of their payments over a one - week period and were also asked about their attitudes to newer payment methods not covered in the diary, like contactless or mobile payments. 2 we expect to publish a detailed analysis of the findings later in the year, but i can give you a few preliminary results today that throw some useful light on the innovation review. results from the diary data suggest two main conclusions on payment patterns. 1. first, the broad patterns of payments behaviour observed in the 2007 study still hold. a. cash remains the most widely used payment instrument in australia and the dominant instrument for low - value payments. the study was conducted by roy morgan research on behalf of the rba, and is largely a repeat of the payments diary study undertaken as part of the 2007 / 08 review of the card payments reforms. it asked around 1, 200 study participants in late october and early november 2010 to carry a payments diary with them for a week and record details of all their payments and cash withdrawals. details recorded included : the payment method used ; the size of the transaction ; the merchant category and the payment channel ( for example, in person, internet, phone, or mail ). bis central bankers ’ speeches 2. b. cards are the dominant payment method for mid - value

payments ( between $ 50 and $ 500 ), with the use of credit cards growing relative to debit cards as the transaction value increases. c. bpay and internet banking are used frequently for bill payments and highvalue transactions. second, payment patterns have nonetheless evolved to some degree in the three years since the initial study. in particular : a. use of cash has declined somewhat. this is especially noticeable in cash ’ s share of the value of what we would call traditional payment methods – down from around 40 per cent to 30 per cent of the value of those payments ; b. debit cards appear to have been substituted for cash, with scheme debit and eftpos transactions both gaining share. those are the broad results on the pattern of actual payments made. a questionnaire conducted at the end of the diary study also gives some additional information as to how people think about different payment methods. here are just a few samples. first, on the use of cheques : fewer than 40 per cent of consumers reported making a payment by cheque in the past year. of those 40 per cent, this graph shows the main reason that they chose to use a cheque ( graph 1 ). graph 1 the most common reason was that people felt that they had no alternative for the type of payment they were making. that is significant, given that one of the issues being considered both by the industry and the current review is the scope for phasing out cheque use. next, in order to understand the attributes that people value for point of sale payments, we asked people what factors influence their choice of payment method at the checkout. perhaps not surprisingly, the most important factor was what they happen to be carrying with them at the time. beyond that, the main factor cited in determining how people pay is the speed of processing the transaction, followed by the ability to use their own funds and the ease of managing finances ( graph 2 ). the importance of speed is significant because it helps explain why people continue to use cash for small value transactions, and it also indicates that the current push towards contactless cards might be quite important for many consumers. bis central bankers ’ speeches graph 2 given the increasing importance of internet payments over recent years, we also spent some time exploring consumers ’ use of, and attitudes towards, different types of online payments. first of all, we found what seems to be quite high adoption of online payments. around 90 per cent of respondents had access to the internet