As more Australians use digital payments instead of cash, the Reserve Bank of Australia (RBA) emphasised the importance of keeping access to cash available, although users might have to cover the costs.
Cash payments have decreased, dropping from 70 percent in 2007 to 13 percent in 2022.
ATMs are still the go-to for getting cash, but their usage has decreased along with the closure of ATMs and bank branches.
Despite this decline, RBA Governor Michelle Bullock said cash is still a crucial form of payment.
“And it’s widely held for precautionary or store-of-wealth purposes,” she said during a speech in Sydney about modernising Australia’s payment system.
She added cash is essential as a backup payment method in case of system outages or natural disasters when electronic payments are unavailable.
The RBA discussed supporting the cash distribution system’s sustainability following the merger of the two largest cash transport companies, Linfox Armaguard and Prosegur, approved by the Australian Competition and Consumer Commission (ACCC) earlier this year.
“These discussions are ongoing, and industry, regulators, and government will need to continue to work together to put in place sustainable arrangements for cash distribution,” Ms. Bullock said.
She added some countries have taken steps to ensure people can still use cash and made efforts to strengthen how cash is distributed in large quantities.
She noted a model some countries considered, where several organisations create a single group responsible for wholesale cash distribution.
“Utility models aim to share fixed costs among the participants and achieve efficiencies, though cooperative arrangements can also be challenging to implement … it may be worth exploring the merits of a cooperative model in Australia,” she explained.
She noted implementing a system where people must pay to use cash in Australia would be challenging.
“I suspect there will be a very big backlash. It’s also true that, as economists, you want people to face the prices of using particular services that reflect the cost of those services. So, at the moment, I think we’re probably in a position where it’s very difficult to actually enforce payment for cash,” she said.
“But what’s going to happen, and what does happen at the moment, is that the costs end up being embedded in the costs of the financial institutions that are providing the services.”
She said for buy-now-pay-later (BNPL) services, merchants should be allowed to charge extra fees, just like they can for card payments, considering BNPL services can be expensive.
“The right to surcharge for payment methods provides an important incentive for payment schemes to keep their fees low,” she said, noting formal regulation may be required to allow this.
Further, the RBA might require big banks and payment providers to encourage merchants to use the least-cost routing (LCR) option.
LCR allows merchants to choose how to process contactless debit card transactions rather than using the default pathway set by their bank or payment service provider.
Merchants could handle payments through the EFTPOS system, which usually has lower transaction fees than the competing Visa and Mastercard payment systems.
Ms. Bullock said 54 percent of banks’ merchant customers are currently enabled and active in LCR.
“I don’t think we can expect 100 per cent, but somewhere in the 80s might be nice,” she said.
Optus Disruption Prompts Reminder: Cash is King
The recent Optus service disruption served as a reminder for many to have some cash readily available.The telco giant’s 14-hour outage affected over 10 million Australians and prevented emergency services and businesses from calling or taking card payments on Nov. 9.
Government Services Minister Bill Shorten said, “Cash is king,” adding, “Cash is back because of Optus.”
“Just 10 million people inconvenienced, people can’t get to see the doctor, triple zero, they couldn’t ring triple zero. It’s sort of threw us back into the dark ages. It’s unbelievable,” he said.
At the same time, Cash Welcome, a grassroots campaign advocating the right to use and access cash, urged an “immediate pause” on the closure of bank branches and ATMs.
“Stop closing cash access points. EFTPOS, internet, and power can all fail and can’t be relied upon. Stop food shops going cashless. Let us choose how to pay for our essentials.”
Cash Welcome also expressed concerns about BNPL Services leading some young people into financial hardship.
There are 9.1 million active BNPL accounts in Australia, and 21 percent of BNPL users incur late fees.
Among them, 20 percent have sacrificed essentials like meals, 15 percent have taken out another loan to settle BNPL debts. Further, over 70 percent of users who pay their BNPL bills with a credit card are paying interest on their credit card debt.
NAB Executive Forecasts Cashless Trend in 5 Years
Still, National Australia Bank (NAB) Cashflow Solutions Executive Mark Raymer believes most Australian businesses will go cashless within five years, with small businesses likely to lead the way.“I believe it'll be similar to when Tap and Go was rolled out a few years back—it started out piecemeal with smaller players then gained momentum rapidly when major fast food chains and supermarkets got on board,” he said.
He said the upside for businesses is potentially significant, with fewer cash payments meaning speedier service during busy periods, less time spent counting and banking notes and coins, and reduced security concerns.
Monica O'Shea contributed to this report.
