Growing demand for contactless payment will replace traditional credit and debit cards payment systems by 2020 for transactions under $100.

Overall, PIN-only and contactless credit card and debit card purchases are likely to continue to take lead over cheque and cash options, after posting annualized transaction growth of 6.6% and 14.2%, respectively over the four years through 2013-2014, according to the report.

IBISWorld Australia general manager Dan Ruthven said: "The prospects for credit cards and debit cards are rosy, although contactless payments are taking over from traditional PIN transactions for purchases of less than $100.

"With the increase in online shopping, credit and debit transactions will continue to dominate the payments system for personal use and carve an increasing piece out of ATM withdrawals, despite holes in the wall being in more locations than ever before."

The report also highlights that growing popularity of digital banking services are major contributors of branch closures. Bank, credit union and building society branches declined by 130 during 2012-2013, which means there is one branch for every 3,558 Australians.

While the big four retail banks continue to dominate the Australian market, new entrants including supermarkets, airlines and department stores are increasingly competing with the banks, offering convenient financial services.