Australians are using less cash than ever. We’ve stopped taking money out of ATMs. We’ve stopped using it to buy coffee.
And while other societies stubbornly cling to old-fashioned payment methods, we’ve taken up contactless tap-and-pay with great enthusiasm. And now, as COVID-19 has induced a fear of physical contact, that’s set to accelerate.
A long decline
When did so many Australians fall out of love with cash? The most recent survey of consumer payment behaviour from the Reserve Bank of Australia suggests it’s been a long time coming.
In 2007 cash accounted for 69% of transactions, cards 26%. The most recent survey, in 2019, found cash had fallen to 27% (down 10% from the 2016 survey), and cards were at 63%.
Despite the recent growth in things like Apple Pay, internet and phone banking account for just 3% of all payments.
The Commonwealth Bank said Australia is the sixth least cash-dependent society in the world and could be cashless by 2026. Other more ambitious estimates suggest that could happen in just two years.
It’s a trend across the Western world. Even in the United States where things like tap-and-pay are a rarity compared with Australia, three in 10 adults don’t use cash each week.
The virus makes it worse
But these changes in spending patterns will probably be locked in even further by the pandemic, with more shops urging customers to use cards or contactless payments, said Swinburne University of Technology Professor Steve Worthington.
“I think people will get used to not using cash and after the pandemic those habits will roll on,” he says. “Contactless, digital and other payments will increase.”
In early March the World Health Organisation was misreported as having recommended contactless payments over cash. It had, in fact, advised people to wash their hands after using banknotes.
Still, the decline of cash has been swift. Anecdotally, at least, many cafes and restaurants are accepting only cards. ATM withdrawals have declined by about a third since the start of the crisis and there’s been a 60% drop in ATM withdrawals in the UK.
But there are other ways the pandemic might have rewired our spending habits. In the early days when we were panic-buying toilet paper and pasta, others were doing the same with cash.
“When the whole pandemic kicked in there were a lot of large transactions where people took a lot of money out of the bank at a time,” Worthington says.
“During a crisis like this, people feel a bit insecure, so you’d rather have cash to hand.”
The Reserve Bank said some people were withdrawing millions, the kind of behaviour last seen during the height of the global financial crisis.
Less cash, but not quite cashless
Worthington isn’t convinced of a cash-free future.
“Cash will continue to decline, but it won’t be eradicated,” he says. “We might be a less cash society, but we won’t be a cashless society.”
That’s because for many of society’s most vulnerable people, a cash-free society can be incredibly exclusionary.
“People with disabilities, the elderly, people in rural communities with less access to technology, newly arrived migrants without a bank account, they’re all excluded,” Worthington says.
Sweden, the poster child for a cash-free world, is a case in point. There are fears it moved away from cash so fast that many who relied on it were left behind, and it’s now so tough to even find an ATM in Stockholm that the country recently passed a law forcing banks to offer cash.
And in the US, there’s a growing pushback against cashlessness at a local level: in January New York joined New Jersey, San Francisco and Philadelphia in passing a law stopping businesses from refusing cash.
Worthington said once the pandemic was over Australia should consider doing a similar thing. We still have our share of unbanked or underbanked people. And during a tough economic recovery it’s they who will suffer most without freedom to pay with cash.
Have you fallen out of love with cash? Let us know your thoughts on the future of cash by writing to letters@crikey.com.au. Please include your full name to be considered for publication in Crikey’s Your Say section.
People who don’t take cash don’t get my business (though I’ve made a few exceptions during covid)
During the fires here on the south coast, there were a number of days without power or mobile service or landline connections- so no possibility of any kind of electronic payment. It was impossible to pay for anything without cash, unless a surviving business was kind (and brave) enough to set up accounts. Does a cashless society promise no more natural disasters?
Going largely cashless is a response to the pandemic. But not all crises will be of this kind. If there was a large scale crisis relating to energy supply, or more likely a massive cyber attack, cash would be at a premium. You may not use it much, but it is a reserve against potential risks.
At a more conspiracy theory level the more cashless the society the more potential there is for a government to turn off access to funds for either selected people or the population at large. Think the limited amounts that could be withdrawn in some countries during the global economic crisis. The Chinese government with its social points system seems to be well on the way to creating non-people. I don’t think those non-performing members of the party’s ideal society will have access to banking – or other social resources.
The same caveat applies to cash though. At any time the government could legislate to change its validity – making $50 and $100 notes invalid after a certain date, for example. This sort of thing has been done in countries such as India, to crack down on black markets and organised crime.
The Indian note cancelling did not go so well in terms of social consequences. It might make others think twice. Ultimately though if you elect a government of bastards you can expect them to behave true to type. See example one: USA
If one has $10 note in pocket and purchases an item priced @ $10 or less (if negotiated).
If one has a card in pocket and purchases item priced @ $10 . . . your real cost is $10 plus transaction cost plus . . . monthly account charge.
Cash, generally speaking, has no ‘convenience’ cost . . . and is always in pocket regardless of whether electricity/scammers present or not??
But your cash started off as numbers in a bank account with a monthly fee. And cash has its own handling costs for retailers which cashless options don’t. Maybe they should start charging surcharges for cash payments?
Gave up cash three years ago. Now just carry my phone. Never had a significant issue. I agree the ‘backup system’ for power outages needs fixing. But that’s just a tech issue. And doable. As for cash, and it’s current setup, Australia needs to ditch the high value notes. $100 and $50 should go. They facilitate crime, tax avoidance and underground economic activity. We can live with $20s and lower, crims, tax avoiders and underground economy users find them problematic.
Cash payments can enable some small scale tax avoidance but that’s a pittance compared to what the big end of town gets away with on a daily basis via a bunch of mechanisms that have nothing to do with cash.
As the piece says…vulnerable people will always need cash, you’re fortunate not to be one of them .
If tax avoidance concerns you , focus on dealing with the worst excesses first and foremost ,then worry about the small fry .