Australia is heading towards becoming a cashless society, with cash expected to make up just 10 per cent of all transactions by 2025.
A major Australian bank has canned over-the-counter cash transactions in some branch locations, in a move towards a cashless society. ANZ said it decided to scrap in-branch transactions as demand had halved in the past four years. WATCH THE VIDEO ABOVE: major bank scraps in-branch transactions.
Australia's transition to a truly cashless society is well underway. Experts say it will happen within five to eight years. Others, such as Professor Richard Holden from the UNSW Business School, say it could happen within three years.
The Internet is awash with predictions on when Australia will become a cashless society. Payment firm FIS predicts the nation could go 98 per cent cashless by 2024, while the Commonwealth Bank anticipates it might happen in 2026. However, cash experienced an unexpected revival during the COVID-19 pandemic.
One of Australia's biggest banks has confirmed that some of its branches will no longer allow customers to withdraw money over the counter. ANZ bank is stripping back some of its services, with certain branches in Victoria no longer carrying physical cash.
This suggests that $4–8 billion, or roughly 5–10 per cent of all banknotes on issue, have been lost, destroyed, forgotten about, or are sitting in numismatic collections.
The case of the disappearing ATMs
In June of 2017 there were 13,814 bank-owned ATMs across the nation, but by June of 2022, there were just 6412 — a decline of 53 per cent. A recent report by the Reserve Bank of Australia (RBA) showed 99 per cent of Australians lived within 15 kilometres of an ATM, as of June 2022.
From paper to polymer banknotes
We have been issuing banknotes for over 300 years and make sure the banknotes we all use are of high quality. While the future demand for cash is uncertain, it is unlikely that cash will die out any time soon.
Norway has the one of the lowest physical cash rates in the world, with only 3-5% of point of sale transactions paid for by cash. In 2021, Norway's central bank announcedthat it was exploring digital currency options to help facilitate the switch to a cash-free society.
Why Eliminate Cash? Cash can play a role in criminal activities such as money laundering and allow for tax evasion. Digital transactions or electronic money create an audit trail for law enforcement and financial institutions and can aid governments in economic policymaking.
Norway, Finland and New Zealand are the three countries closest to becoming cashless societies, followed by Hong Kong, Sweden, Denmark, Switzerland, the UK, Singapore and the Netherlands, according to research published by Merchant Machine.
Paying with cash in Australia
In general, most establishments in Australia accept cards. However, carrying some cash is a good idea in case you stumble across a place that doesn't. Either exchange US dollars at a bank or make an ATM cash withdrawal.
While it's perfectly OK to keep some cash at home, storing a large amount of funds in your house has two significant disadvantages: The money can be lost or stolen. Hiding cash under the mattress, behind a picture frame or anywhere in your house always carries the risk of it being misplaced, damaged or stolen.
Ultimately, the bank could end up running out of money to cover withdrawal requests – hence the term bank run. When a bank run occurs, banks may resort to desperate measures. For example, a bank might liquidate their loans and sell assets ultra-cheap to cover its obligations.
Under the FCS, deposits are protected up to $250,000 for each account holder at each licenced bank, building society or credit unionincorporated in Australia.
The Bank's Consumer Payments Survey (CPS) showed that the share of total retail payments made in cash fell from 69 per cent in 2007 to 27 per cent in 2019 (Caddy, Delaney and Fisher 2020).
Identity theft and compromised personal information are potential dangers in a cashless economy, but privacy might be compromised in other ways too. When you pay digitally, you always leave a digital footprint, and this footprint is easily monitored by financial institutions.
Assessing the reasons why Japanese consumers prefer cash, Statista notes its security and reliability are highly valued. Over 55 percent of respondents cited concerns over personal information leakage as being a major drawback of cashless options.
The high rate of internet usage, a supportive regulatory framework and the government's push for a cashless society – with COVID-19 as the impetus to introduce the digital yuan to replace physical bank notes – all contributed to the success of mobile payments in China.
Though a cashless society may eventually come, it isn't in a huge hurry. The most important step for CFIs right now is to cater to all of the transaction types that their customer demographics prefer in order to provide well-rounded services that address the needs of all customers in the meantime.
There are three types of digital currency: cryptocurrency, stablecoins and CBDCs. Cryptocurrency is a form of decentralized digital currency that isn't pegged to any fiat currency. It uses cryptography to manage its ledger systems, and the market determines its value.
If you're carrying cash, there's no way to track where it went or who might be spending it, making it risky to carry money around. However, cashless payment methods allow you and the proper authorities to quickly track, dispute and freeze fraudulent transactions or stop them from even occurring.
Australia is heading towards becoming a cashless society, with cash expected to make up just 10 per cent of all transactions by 2025. The prediction comes from market consultant Lance Blockley, who says the pandemic has sped up the shift to cashless payments.
According to the Finance Sector Union, bank branch closures are reaching “crisis point” with the big four closing more than 550 bank branches across Australia since January 2020. The Australian Prudential Regulation Authority said 575 regional banks closed between mid-2017 and mid-2021.
Volt, also an online-only bank, shut down in June last year and returned all deposits to customers. At the time of shutting down, Xinja had around $250 million in deposits and Volt had around $100 million in deposits.