Australia as a Cashless Society

Australia's fintech growth means we are much closer to a cashless society that most think. With a sophisticated electronic payments infrastructure, Australia has among one of the highest penetration of cashless payment systems in the world.

My Prada Saffiano wallet that I love so dearly hasn’t seen the light of day since 2017. Despite the thought that went into choosing it two years ago and the AU $980 I splurged on it, it’s safe to say I probably won’t get much value from it. What I find I’m getting more use out of, however, is my compact wallet - a miniature wallet meets cardholder with a spot for cash. It’s tiny, just a bit bigger than my business card and that’s all the room in my bag that I want it to, and more importantly, need it to take.

My near cashless existence.

This leads onto my near cashless existence. No, I’m not broke but most of my transactions either occur online or via my credit card. While I’m a pay pass girl, I haven’t quite entered the tap and pay world where I use my phone to tap for purchases, but I’m sure I’ll get there eventually. I do, however, reserve a spot for cash, given my local markets and some local merchants and cafes are cash only or require a minimum spend before I can use my credit card. I also own a coin purse which resides in the glove box of my SUV for paid parking, although that is turning out to be less and less necessary with the City of Melbourne catering for parking payments via mobile.

But, despite all the conveniences that technology brings into the world of payments and my swift uptake of it, I must admit I still like the idea of cash, but it’s more nostalgic than anything else. Like that serendipitous feeling of finding a $20 note in a coat or handbag that you haven’t worn from two seasons ago. And who doesn’t have a fond memory of finding money when they were a kid. I know I've had plenty of those. What about the coin jar or the days of the piggy bank. Yes, I know it's all very yesteryear, but a nice sentiment at that.

Australia is heading to a cashless society sooner than we think.

Despite my sweet spot for cash, Australia is heading to a cashless society, and sooner than we may think. In November 2018, the Reserve Bank of Australia announced that cash will become a niche payment reserved for emergencies and cheques will be phased out altogether. In the meantime, Treasury says it’s considering tougher penalties on the cash economy to counter black market activity.

A turning point has been reached.

"It looks like a turning point has been reached. It is now easier than it has been to conceive of a world in which banknotes are used for relatively few payments; that cash becomes a niche payment instrument,” Reserve Bank of Australia governor, Philip Lowe, told the Australian Payments Summit recently held in Sydney.

According to the RBA, Australians now make on average nearly 500 electronic payments a year, which is up from around 100 per year in 2010. Cheque use has declined, from 45 per person per year in the mid 90s to three per person in 2018. ATM transactions have also dwindled from 45 times a year in 2010, to now 25, while contactless payments have quadrupled.

Australia is the sixth highest users of electronic payments globally.

Australia has quite a sophisticated electronic payments infrastructure with among one of the highest penetration of cashless payment systems in the world. We are are already the sixth highest users of electronic payments globally. The rise of contactless credit cards, smartphone wallets like Samsung Pay, Android and Apple Pay, QR codes and buy now pay later services available, provides consumers with so many options to pay for a transaction without rummaging through their wallets.

And, this is reflected in fashion design elements of 2018 as well. Fashion designers are focusing on micro-sized things, such as the compact wallet, while big labels like Topshop, Fendi and Zara have revealed that 2018’s biggest trend was the micro-bag. It’s a shift that comes from carrying less cash (and cards for that matter) - no more bulky wallet. Even pockets in clothes today - these seem to be designed and marketed to be used as more as hand pockets than pockets for things - that’s a thing of the past.

Australia is pretty advanced when you think how far we’ve come in the cashless payments world. Sydney commuters, for example, can board a train using their bank card, $4 meat pies are bought at the school canteen on debit and $3 tap-and-go Wiggles rides exist in suburban shopping centres. Charities have also introduced cashless payments for donations, otherwise they’d probably miss out as loose change has quickly becoming a thing of the past. Children’s cancer charity Camp Quality, for instance, introduced tap-and-go donations at its Christmas pageant for the first time in 2018 to cater to our fintech growth.

An estimated $6 billion goes missing each year in Australia through the black economy.

A cashless society would certainly benefit the government, which reports an estimated $6 billion goes missing each year in Australia through the black economy, most of it through cash, which would otherwise generate revenues from tax. There is also the instant increase in cash flow from consumers to business across the economy that would come from digital payments. I could honestly go into countless of benefits, from the a sustainability point of view with less plastic and chemicals used to produce bank notes, to a reduction in paper usage from paperwork including invoices and receipts being electronic. While this all certainly has merit, a cashless society in the near future won't benefit us all.

With 37% of household spending in Australia still done using cash in 2018 compared to 69% a decade ago, there is clearly still a need for cash in society and there could be some big problems with moving towards a more pure digital payment future especially within the three year mark as some industry analysts have speculated.

Let’s take a look a Sweden as a prime example, a country winning the race in becoming the first completely cashless society in the world. There are growing concerns in Sweden over its ambitious goal to embrace digital payments, and the speed of that as well. This has posed a problem for the country’s elderly and vulnerable groups (like the homeless), which although a minority in Sweden, have led to them feeling more and more excluded in society.

Understandably, the uptake of technology and digital payments has been somewhat slower among the older generations, and this will be no different in Australia. As such, Sweden has begun a major review of a cash-free economy, with a report expected to be revealed soon.

You know that old saying… “Money makes the world go ‘round”. Then there’s the other one “Love makes the world go ‘round.” Whichever one you believe in, I think today it’s fair to say “The internet makes the world go ‘round” where people are increasingly finding love and accessing money.

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