Australia is rushing to become a cashless society, but not everyone is ready to say goodbye to physical currency, and there are good reasons for that.
The Covid pandemic fueled a trend toward digital transactions that was already underway, with the use of digital wallet payments on smartphones and watches rising from $746 million in 2018 to more than $93 billion in 2022.
By the end of 2022, cash only accounted for 13 per cent of Australian consumer payments, compared to 70 per cent in 2007.
“The shift to a cashless society in Australia is not just a possibility, it is already underway,” said Angel Zhong, Associate Professor of Finance at RMIT.
While Dr. Zhong didn’t see banknotes disappearing completely, she believed they will be much rarer in everyday transactions.
“A functionally cashless society is where we enjoy the convenience of technology – we don’t have to walk out with a bunch of cash, we can use our phone and smartwatch to make payments,” he told Daily Mail Australia.
As more Australians embrace the trend, an increasing number of retailers are only accepting digital payments.
Major banks continue to close branches, reduce the number of ATMs and are even opening “cashless” branches, citing customer preference for online services.
However, electronics have their own risks and could seriously harm some sectors of the population.
These are the top 10 concerns of going cashless.
Angel Zhong, Associate Professor of Finance at RMIT, says legislation in Australia lags behind the evolution of electronic payments
1. It may leave out older Australians or other people who are not digitally connected
Dr Zhong said the biggest adopters of digital payments were Australians aged 18 to 29.
“Two-thirds of them use digital wallets,” he said.
However, many older Australians still prefer to pay in physical currency, with almost one in five classified as a “cash-heavy user”.
Dr Zhong said Australia needed to provide “better support for other age groups to adopt technology, better literacy around technology systems and financial assistance” for those struggling with the transition to digital payments.
Lower-income earners and new immigrants also tend to rely more on cash.
2. Depends on internet coverage and reliable connectivity
Rural areas with slow internet may encounter challenges for digital transactions.
However, a major Commonwealth Bank service outage in July demonstrated the vulnerability of digital finance even in urban areas.
Customers were paralyzed by the technical issue and were unable to access their accounts, transfer funds or use their cards to make purchases.
Dr Zhong said governments needed to support investment in infrastructure that would increase internet coverage and speeds to pave the way for the digital revolution.
3. Some areas of the monetary economy will be affected
Street-based charitable giving is declining because fewer people carry cash and those who beg or busk for a living face the same problem, according to 2020 research.
“While retailers and online merchants have benefited from cashless payment options, donation seekers are left empty-handed,” wrote Spencer M. Ross of the University of Massachusetts and Sommer Kapitan of the University of Technology. from Auckland.
“Aside from people carrying less cash, our research suggests that another important reason is that people simply don’t expect to see panhandlers or buskers with a magnetic machine, or a QR code, or a Venmo symbol on their signs.”
4. ‘Hidden’ fees
Digital transactions often carry a fee, which may not be obvious at the time of purchase.
Warwick Ponder, former executive director of corporate affairs and communications at eftpos Payments Australia, told Daily Mail Australia that Paywave devices often charged a late credit fee.
Ponder advised customers to avoid tapping as much as possible, as it could take a significant period of time before the deducted money posts to their account.
Banks also typically charge a higher fee for tap-and-go purchases than EFTPOS, and cash alone incurs no additional costs.
5. Hacking and scams
It is estimated that Australians lost more than $2 billion to online scams in 2021, but the true figure could be much higher because many incidents go unreported.
Major cybersecurity breaches at Optus and Medibank last year also highlighted the risk of online identity theft.
UNSW Cyber Security Institute director Nigel Phair told Daily Mail Australia the nation “has to do much better when it comes to cybercrime”.
‘The Australian Cyber Security Center said it received about 63,000 reports (of scams) last year, I estimate that’s about a fifth of the actual figure.
‘The ACCC had around $2 billion in reported losses from scams. I don’t think it’s even close to the right amount.
6. Lagging legislation
Regulation of electronic payments often lags behind technological and market innovations.
Currently, Google Pay and Apple Pay are not subject to the same rules as credit cards and EFTPOS transactions.
Treasurer Jim Chalmers is updating legislation to change this.
“That payment law is actually outdated,” Dr. Zhong said.
“We need to regulate to ensure we have an industry-wide standard to ensure the welfare and safety of consumers are protected.”
7. Loss of value of money and less social interaction.
Financial commentator Sarah Wells told Daily Mail Australia that children will not learn the true value of money and will miss out on crucial social interactions if all transactions become digital.
“I think it’s better for kids to use cash,” Mrs. Wells said.
‘Giving a child $20 and taking them to the mall or the movies helps them learn to budget and helps them make more thoughtful decisions.
“There is a responsibility in giving money and in such valuable social interaction: they learn to say ‘please’ and ‘thank you’ and to look people in the eye.”
8. Loss of independent purchasing power
Wells also warned that having “a cash-starved society” could be bad news for those whose finances are being controlled or denied by someone else.
Wells said young women fleeing domestic violence need to be taken into account when regulating digital payments.
Women in these circumstances risk being tracked by an abusive partner or being deprived of their finances.
“We need to ensure we do not compromise the safety, education and experience of minority groups and young minds in our efforts to legislate contemporary payment platforms,” he said.
Australia is rapidly becoming cashless and digital payments are being enthusiastically adopted, especially among younger consumers.
9. You can track your expenses
The loss of anonymity and privacy is a major concern for many who oppose a “cashless society.”
A change.org petition created by Elizabeth Hynton denouncing the “discrimination” faced by those who use cash has gathered more than 5,000 signatures.
“Cash is private,” the petition states.
“When you pay with a credit/debit card, the Government knows: what you spend your money on, how much you spend, where you spend your money and when the purchase was made, which is an invasion of privacy.”
Dr. Zhong agreed that the concerns were valid.
“(With) anything digital there is always a vulnerability that it will be tracked,” he said.
10. Loss of your freedom of choice.
This is perhaps the main concern of many who oppose the cashless society.
The change.org petition argues that cash should always be an option.
‘One of the characteristics of a free society is freedom of choice…not only what suits an organization, but also what suits the customer!’ the petition states.
“We can’t keep using COVID as an excuse forever.”
China presents a dystopian vision of how that control can be exercised, where people are subject to a social credit score that accumulates or subtracts points depending on how desirable the individual’s behavior is according to the government.
A poor social credit score can mean you are prevented from purchasing items such as plane or train tickets.
The Reserve Bank is currently examining the benefits of introducing a central bank digital currency (CBDC) in Australia, which would be a “programmable” currency like China’s.
Although the RBA has stated that such a currency could improve the “efficiency and resilience” of payments, it said it was not likely to be introduced any time soon.
“Given the many issues that still need to be resolved, any decision on a CBDC in Australia is likely to be a few years away,” the RBA said.
