Australia’s transition to cash-free
A cashless society might sound like something you’d hear about in a ‘Back to the Future’ movie, but the transition has already begun. So, what’s it all about? More importantly, how is it going to effect our Saturday sausage sizzle trips to Bunnings?
The movement toward a cash-free world is heavily backed by several powerful forces, including some governments and large financial companies. Significantly, this push has been accelerated by the recent COVID-19 pandemic, particularly in Australia. Though this shift may appear inevitable in the online age of tap-and-go purchases, some concerns remain as to how quickly this will occur or if it’s already becoming the norm.
With cash on the decline, some experts have predicted that Australia could become the Asia Pacific’s first cashless society by 2022-2026. The transition to a cashless society has both its advantages and disadvantages in theory, whilst also presenting many challenges on the way.
In their 2019 Consumer Payments Survey, the Reserve Bank noted that in just one decade cash had diminished to less than a quarter of transactions.
We’ve done some digging to map out what a cashless society might look like.
COVID-19: accelerating the shift to a cashless society
Reports have shown that cash transactions in Australia have dropped from 60% to 25% in just under a decade. In 2020, this decline in the use of cash has accelerated even more as a result of the COVID-19 pandemic. Australians, as well as citizens of many other countries, have been warned to limit contact with other people to stop the spread of the virus. To ensure this, people have been encouraged to use cashless payments such as debit/credit cards so as to avoid transmission of germs via banknotes and coins.
The impact of this shift towards contactless payments goes beyond a few signs at the supermarket. In fact, the Australian Banking Association announced that it would send out a record number of debit cards. For some, this would be the first debit card they’ve ever used. This mass mail-out was mainly aimed at elderly people who are more vulnerable to the effects of COVID-19.
Cashless society: Pros and cons at a glance
Depending on where you stand – and what you use cash for – you might love or loathe the idea of a cash-free Australia. However, with a cashless, or at least predominantly cashless, society likely to come into fruition before the decades’ end, it’s important to understand the effect this will have on money and banking as we know it. Let’s take a look at the pros and cons of transitioning to a cashless society:
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Pros of a cashless society
A lot of people have already made the switch to a predominantly cashless lifestyle. These people, as well as those with the technological ability to make the shift, will likely find it more convenient. Though added convenience is a ‘tick’ for a lot of people, it’s certainly not the only benefit. We’ve listed a few more below.
Prevents the spread of viruses
As we already know, the number of cash transactions being made in Australia is on a steady decline, in part due to the coronavirus pandemic. By moving to a cash-free society, the risk of transmitting germs through banknotes and coins is significantly minimised.
Lower crime rates
Carrying cash can make you an easy target for criminals. Once you have cash stolen from your wallet, it can be extremely hard to track that cash and prove that it’s yours. An American study found that crime in Missouri dropped by 9.8% when they switched from cash benefits to online banks transfers.
Tax evasion and money laundering becomes more difficult
Additionally, money laundering becomes far more difficult if the source of funds is always clearly identifiable. It’s harder to hide income and evade taxes when there’s a record of every payment.
Makes overseas currency exchange easier
When you travel abroad, exchanging your Aussie dollars for the local currency can be a pain. However, with cashless payments, you won’t need to worry about how much of the local currency you’ll need to exchange and withdraw. Instead, you can do it all on your mobile device – typically on your bank app.
Cons of a cashless society
Going completely cash-free is not everyone’s cuppa’ tea. In fact, in some ways, it can be perceived to be more problematic than beneficial. Here are some of the disadvantages of going completely cash-free:
Privacy sacrifices
Cash payments are typically more private than electronic payments, as a cash purchase doesn’t leave an electronic footprint. This privacy is something that people will have to sacrifice if Australia were to move to a cashless society in the near future. ME bank conducted a survey and found that 94% of people don’t trust their own banks. If these results are anything to go by, for a shift to a cashless society to work, the big financial organisations that handle people’s money will need to do better to gain the public’s trust.
Technical issues could leave you with no access to funds
We’re talking outages, glitches and mistakes made by your bank or financial institution. Issues like these could leave you with no access to funds for a short period of time. This could be especially problematic when you need to pay for an emergency like a medical bill or even for a common situation such as paying for a taxi.
Difficult for those not adjusted to online banking
Many Australians who are not computer-literate will most likely struggle to adjust to a cashless society. Not only that, but some Australians still don’t have a debit card and prefer to make purchases with cash.
What about small business or not for profit touchpoints like the sausage sizzle at our local Bunnings? Most card facilities have a fee attached to them so perhaps there’s just a slight bump in pricing required to cover the cost, ensuring charity efforts aren’t wiped out by transactional costs.
Financial institutions could introduce higher fees
If we are forced to only make cashless transactions, our banks and financial institutions may enforce higher fees. Similarly, if a single app becomes the standard option for all purchases, then the developers of this app could hike up the costs of using their service.
Countries that are close to cashless
Countries such as Sweden and Norway are considered the most cash-free countries in the world. If you take a stroll through the city of Stockholm, for example, you’ll notice that a lot of stores have signs out the front saying stating that they don’t accept cash. Instead, these places opt for cashless and digital payment methods such as debit/credit card, Apply Pay and some businesses even accept cryptocurrency. You may also have trouble finding an ATM if you venture outside of the major cities in these countries.
In China, payment platforms such as AliPay and WeChat Pay are accepted almost everywhere. Even small businesses and street vendors are starting to accept these payment platforms. Tourists travelling to China can now sign up to these platforms using a foreign card.
From cashless to walletless?
The Australian payment landscape has gone through considerable changes throughout the last decade. New technologies and innovations in this field are always popping up and further changing how we pay. In particular, contactless payments have laid a foundation for consumers increasingly looking to ditch their cards and wallets altogether. Below, we’ve provided some popular cashless payment platforms that are sweeping the country as we speak:
Buy now, pay later (BNPL)
The BNPL phenomenon has remarkably changed the payment landscape in Australia in a very short amount of time. Apps like Afterpay and Zip have become very popular among millennials and Gen Zers. Essentially, when you purchase an item through one of these apps, the BNPL provider will pay for the item upfront. The user will then need to repay the provider back through instalments.
Users need to be careful using these apps, as providers will typically charge fees for late or missed payments. Additionally, despite their rapid expansion and popularity, some of the BNPL providers have been torched for their service because vulnerable and inexperienced consumers could be accumulating mountains of debt.
Instant payment apps
Apps like Beem it and Splitwise allow you to send, receive and request money from other users. They’re designed as a solution for those awkward moments at the restaurant when you’re out with a group of friends and you’re trying to figure out how to split the bill.
These apps are very much designed for the social media generation. By simply searching for someone’s username, you can either pay or request money through the click of a button. The best part is that they’re free to use!
Take control of your money
Money and finances can get complicated, we know that! Oiyo is committed to empowering you to take control of your money and make smart financial decisions. So, whether you want to find the perfect personal loan, learn more about investing or get more financially informed in general, we’ve got a number of guides and interesting reads on our website.
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