Could we be living in a cashless society?
In 2015, Australia passed an important milestone. You probably didn’t even notice. But it’s something that, if the trend continues, could dramatically change the way you live.
Westpac reported that 53% of payments made in Australia were cashless. It is estimated that Australia will be cash-free as early as 2022.i
The Royal Australian Mint says there’s been a significant decline in demand for circulating coins. The Mint produced 20% fewer coins overall in the most recent year on record. The five cent coin was the least loved, with demand dropping roughly 35%.ii
If a world without cash seems inconceivable, you only need to look north to see what’s happened. In Sweden, they’re fast moving towards digital transactions only.iii In 2015, only 2% of payments (by value) were in cash. It’s legal to not accept cash at a store. The government is happy to promote its cashless society mandate.iv They explain that "even children pay with cards", and that vendors prefer not to handle cash for security and bookkeeping reasons.
Wondering what’s making people shift away from cash? It’s not just credit cards. There are a range of increasingly popular alternatives, including:
- Bitcoin: this ‘cryptocurrency’ is a type of digital currency that uses encryption techniques to generate, regulate, verify and transfer funds. There’s no central bank or controlling administrator, but transactions using bitcoin are recorded in a public distributed ledger called the ‘blockchain’.
- Mobile payments: people can make payments with their mobile phone, and the charges are added to their phone bill.
- Facebook and mobile phone P2P payments: mobile banking app users can generate a special code that the recipient can then ‘claim’ to get their money.
- Online payment gateways like PayPal, SecurePay, Stripe, and more.
What are people worried about?
Some people are worried about privacy. When transactions are carried out digitally, there’s always a record. And in an age of highly publicised data breaches (hacking), the risk is that you could be publicly outed for purchases that you have a right to keep to yourself.
It can also be a lot easier to spend money when you’re not handing over physical cash. We all know the feeling of credit cards being ‘free money’ – a debt that you can worry about another day. But lots of studies show that we spend more, buy different things, and don’t care about the stuff we buy.v
On the other hand, going cash-free would also eliminate a lot of security hassles. Individuals wouldn’t have to worry about physically losing their money, as cards are easily cancelled or codes reset. Big retailers wouldn’t have to worry about holdups or stealing from the till. And those big bank vaults could get a lot smaller. Think about it: in 20 years, kids might be bewildered by old-school heist movies.
Why Australia will keep cash
It’s not likely that Australia will follow the lead set by Sweden. There are just too many practicalities in the way. For example, we don’t have reliable nationwide infrastructure (*cough* NBN *cough*) to ensure transactions can be made at all times, without downtime. Some survey results also suggest that people prefer to use cash to avoid card surcharges, and other practical reasons.vi
For now, non-cash money and transaction technologies are convenient alternatives. They give you a bit of flexibility when you want to order something online, stress less about security, or even when you’ve just forgotten to draw cash. And who doesn’t do that once in a while?!
i. Westpac Media Release: 'Australian smartphone users predict the nation will be cash free by 2022'
ii. Royal Australian Mint Annual Report (PDF)
iii. Nathan Heller, 'Imagining a cashless world' The New Yorker, 10 October 2016
iv. Official Swedish Government website, 'Sweden - The First Cashless Society?'
v. Dr Utpal Dholakia, 'Does It Matter Whether You Pay With Cash Or A Credit Card?' Psychology Today, 11 July 2016
vi. Meredith, Kenney, Hatzvi, 'Cash Use in Australia' (PDF) Reserve Bank of Australia bulletin, June quarter 2014
Thanks to TAL for this article.Please note, this information has been prepared by Australian Financial Risk Management Pty Ltd (AFRM) ABN 21 001 696 868. AFRM hold an Australian Financial Services License (AFSL) 237186. The information is for general purposes only and has been prepared without taking account of your objectives, financial situation or needs. AFRM recommends that you seek professional advice before acting on any information contained herein.