Australia on path towards cashless economy

- By Collaborative Media & Publishing
Australia could become a near-cashless society as soon as 2025 with just a small amount of banknotes and coins still in use, according to one forecast.
Vlad Totia, payments analyst at GlobalData, says that while we use the term “cashless”, in reality it means the vast majority of transactions – perhaps 99% – will be made digitally.
“We are already almost there. Around 92% of all money worldwide is just digital. It's just code.”
Totia has ranked countries on how quickly they are going cashless and found Australia came in sixth, after Finland, Sweden, China, South Korea and the UK.
A factor in moving towards cashless societies is how technologically advanced an economy is and how much the population adopts new technology (although there are exceptions, such as Japan, which is very technologically advanced but where cash usage remains high).
Other factors include smartphone penetration, internet banking usage, how often people use credit cards and how many merchants accept non-cash payments. “You know you're moving towards a cashless society when you have the little food market in a little town somewhere that accepts contactless pay or mobile pay,” he says.
Lower cost and more portable point-of-sale technology and lower transaction fees have driven merchant acceptance over the past few years.
Totia expects Australia to go cashless – or almost totally cashless – sometime this decade, perhaps by 2025 or 2026.
“Australia has access to all of the free market options that you can get in order to pay, in order to have a bank account. Internet banking penetration is very high. Smartphone penetration is high, so it has all the marks to actually become cashless.”
Cash is anonymous
The reason why he expects Australia to lag some other countries is because of the slow rollout of the open banking regime, which he says will lead to new banks and more payment options.
Even so, cash usage has declined further. In a speech late last year, Reserve Bank of Australia Governor Philip Lowe revealed that the RBA’s upcoming three-yearly consumer payments survey will show that cash accounts for just a quarter of day-to-day transactions, and most of these are for small-value payments.
The RBA also expects cash to remain part of the payments system, but as a niche payment option.
Payments system academic Professor Steve Worthington of Swinburne University outlines three reasons that cash won’t completely disappear any time soon.
“First of all, cash is accepted nearly everywhere. Secondly, it's anonymous and that's very important to several people for a number of reasons. And thirdly, it's authentic. You can see it, you can touch it, it's durable, it's reassuring and it's useful – if not essential – in many situations,” he says.

“I can't see people moving away from using cash into the ultimate absence of cash. I think culturally, and in other countries as well, people sometimes like to have a feel of some cash on them and they're not really interested in the government knowing everything they do and spend their money on.”
Although with the recent onset of the Covid-19 pandemic, cash usage has dramatically changed the way we use cash.
New York bans cashless-only shops
 Australia’s shadow economy is driven by cash, to avoid detection for criminal activity, to minimise tax and to hide wealth to gain access to government payments such as the aged pension. Indeed, the RBA has pointed out that the value of banknotes relative to the economy is close to the highest it has been in fifty years. For every Australian there are currently around thirty $50 and fourteen $100 banknotes on issue.
Additionally, cash is a form of insurance in case the electronic payments system fails. “When it fails, it fails badly and people are left high and dry, unable to access money through an ATM,” says Worthington. “That's when cash becomes important.”
It’s a problem the RBA’s Lowe addressed last year, when he said: “Disruptions to retail payments hurt both consumers and businesses. Given that many people now carry little or no cash, the reliability of electronic payment services has become critical to the smooth functioning of our economy.”
There is also the social equity issue. A totally cashless economy is a form of financial exclusion for people without credit cards or smartphones, says Worthington.
In fact, in some parts of the world regulators are alive to the issue and there is a growing backlash against digital-only payments.
In January this year, New York City Council voted to ban cashless stores and restaurants, arguing that they discriminate against the unbanked.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY. Published by BPAY Pty Ltd.  BPAY payment products are offered by over 150 Financial Institutions. Contact your Financial Institution to see if it offers BPAY payment products and to get the terms and conditions. This is general advice – before using BPAY payment products please review the terms and conditions and consider whether BPAY payment products are appropriate for your personal circumstances.

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