What’s next for paper money?
How many times in the past week have you actually had to pull out your wallet to pay for something? And out of those times, did you actually go to use cash?
It seems not that long ago the question of “how would you like to pay for that?” had, at most, three possible answers. Now there’s a plethora of ways for people to pay that don’t involve counting out and unfolding notes or scrambling around for coins.
Futurists and tech providers have long predicted the demise of physical tender, driven in part by technological advances, legislative reform and transparency requirements, smart business strategies and the rise of online shopping.
But it’s safe to say that none of them predicted COVID-19 – a pandemic that would sweep the world at such a pace and provide an overwhelming reason to limit physical interactions and the handing over of physical money.
So, what is the future of cash? Will it survive a global pandemic? Or is it destined to go the way of cheques, money orders and good old-fashioned bartering of goods, just with a much quicker demise?
2020 to date
Within the first month of the pandemic hitting Australian shores, there was a “definite shift” in the way Australians were using money.
In April, creditcard.com.au’s founder Roland Bleyer said Australia isn’t new to the idea of choosing cards over cash, but as coronavirus continued to assert an influence over what consumers could and couldn’t do, he observed how “Aussies are being encouraged to use contactless more than ever as a way to slow the spread”.
“Merchants [are] moving away from cash – and the germs it may carry – declaring their preference for card payments instead,” he had outlined at the time.
And he’s not the only one to comment on just how quickly the adoption of digital has taken place.
Despite the global health crisis beginning mere months ago, “Australians are increasingly receptive to mobile and online banking compared with at the start of the pandemic”, according to J.D. Power Australia’s head of banking and payments intelligence Bronwyn Gill.
As social distancing has become the norm, she has observed “an increase in first time mobile and online users, and greater frequency of use” of digital services.
A new survey from J.D. Power has revealed debit cards are now the most favoured payment method for in-store purchases, used by 58 per cent of Australians in the week of the survey. Credit cards were close behind, with 40 per cent usage.
Newer payment types are also gaining traction, with 21 per cent of Australians using a mobile phone or smartwatch for in-store purchases and 16 per cent choosing to pay using a buy now, pay later instalment service, such as Humm, Zip Pay or Afterpay.
But social distancing isn’t the only reason consumer attitudes to digital payment methods – and by extension, digital services – are evolving.
Lengthy call centre wait times are another key reason for the shift, with straight-forward tools providing customers an ability to move money at the press of a button, without the need for a third-party actor.
The shift is even observable in banking, with Ms Gill stating it is “not surprising that bank customers are increasingly turning to digital channels to undertake their banking”.
She’s putting the onus of this on the banks, who she believes “need to empower customers through communication and support that boosts customer knowledge of digital tools available”.
“It’s an important time for banks to check in on the relative merits of their digital capabilities, with customers placing more importance on this when choosing a bank,” Ms Gill adds.
A decade in the making
Banks are aware of this need to adapt - non-major institution Bankwest reported an observable drop in overall cash withdrawals occurred overnight as the pandemic began to wreak havoc on the day-to-day activity of Australians.
Figures from the end of March to the end of April saw activity levels down around 35 per cent compared with pre-pandemic behaviour, with the bank predicting that coronavirus “could accelerate the decline in the use of physical money”.
But according to Bankwest chief customer officer Paul Vivian, the “rapid decline” and consumer responses merely “reinforce trends we’ve seen for more than a decade”.
Australians were already altering their attitude to cash pre-2020, the bank has expressed, with Mr Vivian even conceding “cash might become a niche payment method”.
A new survey from Capterra has taken a closer look at the impact of changing habits around cash, and whether or not COVID-19 has increased Australia’s readiness towards a hypothetical cashless society. The results reveal 55 per cent of Australians are comfortable with such a concept.
Not only that, but an overwhelming majority (97 per cent of respondents) plan to use a mobile wallet in the future.
2020 and beyond
For Capterra content analyst Anna Hammond, the results from the survey are telling.
“Social distancing measures have certainly driven consumers and businesses closer towards a more cashless future in Australia,” she says.
She attributes the drastic shift to health reasons, noting that “as stores, restaurants, bars and cafes began to reopen their doors, we saw them take steps towards creating safer environments for their customers”.
Aside from the obvious health reasons, many Australian businesses already had a penchant for digital payment methods prior to the pandemic.
It’s a view held by both Mr Bleyer and Mr Vivian.
“The decline in cash use could potentially accelerate because of this pandemic, not just due to consumers’ preferences, but as merchants continue to make it easier to pay without cash,” Mr Vivian says.
Not only does it reduce the risk of petty theft at the cash register, as Mr Bleyer flags, oftentimes digital payments are easier, faster and can also be done remotely, enabling transactions that otherwise would not have been possible.
It also helps businesses satisfy more stringent standards of record-keeping as required by the Australian Taxation Office.
A $10,000 question
It would be amiss to not point out that at the time of writing, the Currency (Restrictions on the Use of Cash) Bill 2019 is before the Senate, which will see the outlawing of large cash payments between ABN entities if passed into law.
While initially anticipated for approval late last year, it has been blasted by plenty of objections from MPs and the community at large, severely impinging on its journey through Parliament.
In essence, the effect of the legislation will put in place an economy-wide cash payment limit of $10,000.
According to federal Assistant Treasurer Michael Sukkar, the purpose of the new legislation is to target businesses that are under-reporting their income through “anonymous and untraceable large cash payments as well as aid in fighting organised crime syndicates”.
The legislation has been a long time in the works, so the ramifications of what is effectively a “cap” on cash-driven business transactions shouldn’t come as any surprise to companies who have, for a while now, been advised to keep accurate and transparent records of their dealings.
“The government is sending a strong message to the community, and to criminal syndicates, more importantly, that [use] cash to avoid obligations and potentially engage in criminal activity that requires a sufficient level of deterrence,” Mr Sukkar says.
Despite the apprehensions around the new laws, which would see cash payments capped at $10,000, it shouldn’t be a serious problem for everyday Australians, nor is it supposed to impinge on the ability of businesses to carry out their day-to-day operations, either.
In a bid to quell such concerns, shadow assistant treasurer Stephen Jones even moved an amendment to the bill so that it would include the stipulation that it “recognises the importance of cash for conducting transactions around Australia”.
For consumers, their decisions around the use of cash are more likely to be impacted by their day-to-day activities and ease of use rather than legalities.
But still, the Treasury has been at pains to point out that the new laws won’t place restrictions on the giving or receiving of cash gifts between family members, nor will it require people to store money over the threshold in a bank if they do not wish to do so.
The digital divide
That same J.D. Power survey cited earlier that revealed Australians were rapidly increasing their use of digital payment methods also highlighted the emergence of a strange dichotomy.
Despite many stores discouraging or refusing cash payment to protect staff from the spread of COVID-19, 36 per cent of Australians who were surveyed had still used cash in a store at least once in the week prior.
While there’s an abundance of benefits cited by fans of digital payment methods as to why cash should go the way of dinosaurs, many commentators have expressed concern around the accessibility of digital payment methods for less privileged sectors of the population.
Capterra’s cashless society survey also discovered that lower-income Australians are less likely to use mobile payment methods, despite an overwhelming trend towards digital payments that suggested otherwise.
“Many demographics – particularly older generations and lower earners – require more time to adapt to the concept of a completely cashless society,” Capterra’s Ms Hammond is quick to acknowledge.
It’s why, she argues, businesses that are considering switching to digital payment processing “should ensure they’re choosing software that offers in-store cash payments, too”.
That stance is also shared by Bankwest and, by extension, Mr Vivian.
According to the chief customer officer, cash is “an incredibly stable and an important system for those members of society who are less tech-savvy or more vulnerable”.
As well as being a common option for low-value transactions, he emphasises one feature of physical tender that digital payments cannot yet emulate: cash does not rely on the internet or power to be transacted.
It’s just one of the reasons he believes “it’s hard to see physical money disappearing from Australia any time soon”.
“While cash’s heyday is certainly a thing of the past and COVID-19 has rapidly moved us further from those times, many people will likely carry it in their wallets for some time yet,” Mr Vivian concludes.