By Freddy Pawle
Australia is making steady progress towards becoming a cashless society, but not everyone is ready to say goodbye to physical cash – and there are good reasons for that.
The Covid pandemic has fueled a trend toward digital transactions that was already underway: the use of digital wallet payments on smartphones and watches has skyrocketed from $746 million in 2018 to more than $93 billion in 2022.
By the end of 2022, cash accounted for just 13 percent of Australian consumer payments, compared with 70 percent in 2007.
“The shift to a cashless society in Australia is not just a possibility, it is already underway,” said RMIT Associate Professor of Finance Angel Zhong.
While Dr. Zhong doesn’t think banknotes will disappear completely, she believes they will become much rarer in everyday transactions.
“A functionally cashless society is where we enjoy the convenience of technology – we don’t have to go out with loads 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 now only accepting digital payments.
Major banks continue to close branches, reduce the number of ATMs and even open “cashless” branches, citing customers’ preference for online services.
However, switching to electronic technology has its own risks and could seriously harm some sections of the population.
Here are the top 10 concerns about going cashless.
Angel Zhong, associate professor of finance at RMIT, says legislation in Australia is lagging behind developments in electronic payments
1. It may leave out older Australians or others 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 and almost one in five are classed as “high cash users”.
Dr Zhong said Australia needed to provide “better support for other age groups to embrace technology, better literacy about technological systems, as well as financial assistance” for those struggling with the transition to digital payments.
People with lower incomes and new immigrants also tend to rely more on cash.
2. Depends on internet coverage and reliable connectivity.
Rural areas with slow internet may find digital transactions challenging.
However, a major Commonwealth Bank outage in July demonstrated the vulnerability of digital finance even in urban areas.
Customers were left paralyzed by the technical glitch and 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 boost internet coverage and speed to pave the way for the digital revolution.
3. Some areas of the monetary economy will suffer
Charitable donations on the street are declining as fewer people carry cash and those who beg or play music on the street for a living face the same problem, according to research conducted in 2020.
“While retailers and online merchants have benefited from cashless payment options, those seeking donations are left with an empty cup,” wrote Spencer M. Ross of the University of Massachusetts and Sommer Kapitan of Auckland University of Technology.
‘Apart from people carrying less cash, our research suggests another important reason is that people simply don’t expect to see panhandlers or buskers with a card-swiping machine, or a QR code or 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 manager of corporate affairs and communications at eftpos Payments Australia, told Daily Mail Australia that Paywave devices often charged a late credit fee.
Mr Ponder advised customers to avoid touching the phone as much as possible as it could take a significant period of time before the deducted money is posted to their account.
Banks also typically charge a higher fee for tap-and-go purchases than for EFTPOS, with only cash payment being free of charge.
5. Hacking and scams
Australians are estimated to have lost more than $2 billion to online scams in 2021, but the real figure could be much higher as many incidents go unreported.
Major cybersecurity breaches at Optus and Medibank last year also highlighted the risk of online identity theft.
Nigel Phair, director of UNSW’s Cyber Security Institute, told the Daily Mail Australia that the country “has to do a lot better when it comes to cybercrime”.
‘The Australian Cyber Security Centre said it had about 63,000 reports (of scams) last year, I think that’s about a fifth of the real figure.
‘The ACCC has suffered losses of $2 billion due to fraud, a figure that I do not consider even remotely appropriate.’
6. Delayed legislation
Electronic payments regulation 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 that we have an industry-wide standard that ensures the well-being and safety of consumers is 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,” Wells said.
‘Giving a child $20 and taking them to the mall or the movies helps them learn to budget and make more thoughtful decisions.
‘Giving money involves such valuable responsibility and social interaction: they learn to say ‘please’ and ‘thank you’ and to look people in the eye.’
8. Loss of independent purchasing power
Ms Wells also warned that having a “cash-strapped society” could be bad news for those whose finances are being controlled or denied by someone else.
Ms Wells said young women fleeing domestic violence needed to be taken into account when regulating digital payments.
Women in these circumstances risk being stalked by an abusive partner or being deprived of their finances.
“We must ensure that we do not compromise the safety, education and experience of minority groups and young minds in our efforts to regulate contemporary payment platforms,” he said.
Australia is rapidly moving away from cash and digital payments are being enthusiastically adopted, especially by 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 petition on change.org 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: it will be tracked,” he said.
10. Loss of your right to choose and your freedom of choice.
This is perhaps the main concern of many who oppose a cashless society.
The change.org petition argues that cash should always be an option.
“One of the hallmarks of a free society is freedom of choice… not just what is good for an organization, but also what is good for the customer,” the petition states.
“We can’t keep using COVID as an excuse forever.”
China presents a dystopian vision of how such control can be exerted, where individuals are subject to a social credit score that accumulates or loses points depending on how desirable the individual’s behavior is in the eyes of the government.
A poor social credit score can put you at a standstill when it comes to purchasing items such as plane or train tickets.
The Reserve Bank is currently examining the benefits of Australia introducing a central bank digital currency (CBDC), which would be a “programmable” currency like China’s.
While the RBA has said such a currency could improve the “efficiency and resilience” of payments, it said it was unlikely to be introduced in the near future.
“Given the numerous issues that remain to be resolved, any decision on a CBDC in Australia is likely to take some years to be made,” the RBA said.
