Risks of Fraud Higher in Cashless Society: Advocacy Group Warns

An expedited transition towards digital currency usage could leave consumers worse off.

A picture shows a visual representation of the digital crypto-currency Bitcoin next to Visa cards, at the "Bitcoin Change" shop in the Israeli city of Tel Aviv on Feb. 6, 2018. Jack Guez/AFP via Getty Images

The spokesperson for advocacy group Cash Welcome, Jason Bryce, has warned Australians about the imminence of a cashless society, saying the erosion of physical currencies will undermine the freedoms of everyday individuals.

“Banks sit at the heart of our economic system and are now herding us into their privately owned cashless transaction systems that are unreliable,” Mr. Bryce told the Epoch Times.

“They harvest our data, we don’t know what’s going on with our information, whether it’s being used for our benefit or being used to sell us something. We don’t know who has our information. There’s not one Australian now who’s in total control of their personal identity.”

Mr. Bryce highlighted the increased vulnerability that Australians may be subjected to as a result of digital forms of currency. He also touched on the nationwide, en masse closure of bank branches.

“Fraud, scams—these are all at a record high and we’re all totally vulnerable. There’s a financial crime crisis going on at the moment and it’s all online. It’s no longer the situation that criminals prefer cash. Criminals prefer Bitcoin. Criminals prefer cryptocurrencies,” he said.

“Every day people have been left wondering how they can get hold of their pension or their pay when ATMs and bank branches are shutting down. Lots of people need cash everyday and every Australian needs cash at least occasionally. The cash system is essential national economic infrastructure.”

Increasing Fraudulent Dealings

Financial fraud is quickly becoming widespread in online marketplaces, particularly on cryptocurrency exchanges.

According to data from the Australian Financial Crimes Exchange (AFCX), approximately half of all proceeds from fraud across the nation are being laundered through crypto platforms.

The non-profit organisation found that throughout July alone, 47 percent of scam funds were sent to accounts associated with crypto exchanges.

According to estimates from the Australian Competition and Consumer Commission (ACCC), Australians lost over $3 billion (US$1.9 billion) to financial fraud in 2022. The commission also found that in 2022, Australians reported 3,910 crypto scam incidents, costing the average victim $56,600.

A number of Australia’s prominent commercial banks have recently taken action to mitigate financial crimes surrounding digital currencies.

In May, Westpac began trialling consumer protection initiatives, one of which was the implementation of a ban on customers attempting to transfer funds to and from Binance, the world’s largest crypto exchange.

In April, the Australian Securities and Investments Commission (ASIC) revoked Binance’s license to facilitate the sale of derivatives after it found the exchange had erroneously classified hundreds of retail customers as wholesale investors.

Binance was sued in March by the Commodity Futures Trading Commission (CFTC)—the U.S. commodity markets regulator—accusing the company of bypassing American law.

In May, the National Australia Bank (NAB) also blocked payments to some “high-risk” exchanges, claiming the measures will save customers from scams that swiftly funnel their money offshore.

“Digital exchanges have a legitimate role to play in the financial ecosystem. But since the rise of digital currency, we’ve noticed that scammers are increasingly using overseas exchanges,” Westpac Executive Scott Collary said in a statement.

“Often our customers only discover they’ve been scammed after the money has left the country, making recovery extremely difficult.”

Online activities surrounding cryptocurrencies can leave participants particularly susceptible to fraud for a number of reasons. Cryptocurrency transactions are generally irreversible, meaning that once a transaction is completed on a blockchain, it is virtually impossible to undo.

Transactions are also often pseudonymous, so users are typically associated with encrypted addresses rather than their personal information.

It is a relatively new technology that is decentralised, so there is a lack of legal regulation and precedent that encompasses it, as the space is one that government agencies have difficulty exerting control over.

An Increasingly Cashless Society

The usage of cash is becoming far less prevalent in Australian society. The Reserve Bank of Australia’s (RBA) 2022 Payments System Board Annual Report (pdf) found that in the 2021/22 financial year (FY), Australians made around 650 electronic transactions per person on average, compared to about 300 a decade earlier.

Approximately three-quarters of these transactions were made using debit and credit cards, the most common form of retail payment. About 75 percent of card payments in Australia were made with a debit card during the 2021/22 FY, compared with 62 percent a decade previously.

The COVID-19 pandemic has expedited the transition, with spending on debit cards around 40 percent higher in the first half of 2022 than in the second half of 2019.

The pandemic also reinforced the long-run trend of online retailers replacing brick-and-mortar shopping. Data from the Australian Bureau of Statistics found that in the June Quarter of 2022, over 10 percent of retail sales were conducted online as opposed to 7 percent at the end of 2019.

Mr. Bryce’s organisation Cash Welcome is an industry initiative to preserve cash as Australia’s primary means of exchange into the future.

According the to Australian Prudential Regulation Authority, over 400 bank branches and 700 ATMs closed over the 2023 financial year. These closures were found to have disproportionately affected low-income individuals and those living in rural or remote areas.

Federal Labor MP for Pearce in Western Australia warned the Parliament of the dangers of a cashless society, including risks to security, privacy, costs, and the impact on small businesses.

“Is this a future we really want or need? Instead, we should aim for a balanced approach, where our residents have access to their financial institutions and where cashless options co-exist with traditional forms of payment, to ensure that no one is left behind and that our society remains secure, private, and inclusive,” she said.