BY FREDDY PAWLE
Australia is striving to become a cashless society. However, not everyone is ready to say goodbye to physical money. There are good reasons for this.
The Covid pandemic has accelerated a trend toward digital transactions that was already underway, with the use of digital wallet payments on smartphones and watches increasing from $746 million in 2018 to over $93 billion in 2022.
By the end of 2022, only 13 percent of consumer payments in Australia were made in cash, compared to 70 percent in 2007.
“The transition 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 does not expect banknotes to disappear completely, she does expect them to become increasingly rare in everyday transactions.
“In a society where there is virtually no cash, we enjoy the convenience of technology. We don’t have to carry a mountain of cash around, but can use our phones and smartwatches to make payments,” she told Daily Mail Australia.
As more Australians embrace this trend, more and more retailers are accepting digital-only payments.
Major banks continue to close branches, limit the number of ATMs and even open ‘cashless’ branches as customers prefer online services.
However, the transition to electronic internet also entails risks and can have adverse consequences for certain population groups.
These are the 10 biggest concerns about switching to cashless payments.
Angel Zhong, associate professor of finance at RMIT, says Australia’s legislation is lagging behind developments in electronic payments
1. It may leave out older Australians or others who are not digitally connected
According to Dr Zhong, Australians aged 18 to 29 are the most keen on digital payments.
“Two-thirds of them use digital wallets,” she said.
Yet many older Australians still prefer to pay with physical cash, with almost one in five people classed as a ‘heavy cash user’.
According to Dr Zhong, Australia needs to “provide better support for other age groups to embrace technology, increase knowledge of technology systems and provide financial assistance” to people who are struggling to transition to digital payments.
Lower income earners and new migrants also tend to rely more on cash.
2. It depends on internet coverage and reliable connectivity
Rural areas with slow internet may find digital transactions difficult.
However, a major outage at the Commonwealth Bank in July showed how vulnerable digital finance is, even in urban areas.
Customers were paralyzed by the technical glitch and were unable to access their accounts, transfer money or use their cards to make purchases.
According to Dr. Zhong, governments must support investments in infrastructure that increase internet coverage and speed to pave the way for the digital revolution.
3. Some areas of the cash economy will suffer
A 2020 study found that street charity donations are declining as fewer people carry cash. People who beg or work on the streets are also facing the same problem.
“While retailers and online merchants have taken advantage of cashless payment options, those looking for a donation are left with an empty cup,” wrote Spencer M. Ross of the University of Massachusetts and Sommer Kapitan of the Auckland University of Technology.
“Our research suggests that not only are people carrying less cash, but they simply don’t expect to see panhandlers or street musicians with a card reader, or a QR code or Venmo symbol on their signs.”
4. ‘Hidden’ costs
Digital transactions often involve costs that are not always clear 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 charge a fee for delayed payments.
Mr Ponder advises customers to withdraw as little as possible, as it can take a long time for the debited amount to appear in their account.
Banks generally charge higher fees for tap-and-go purchases than for EFTPOS. Only cash is free of charge.
5. Hacking and fraud
It is estimated that Australians lost more than $2 billion to online scams in 2021. However, the actual figure could be much higher as many incidents go unreported.
The major cybersecurity breaches at Optus and Medibank last year also highlighted the risk of identity theft online.
Nigel Phair, director of the UNSW Institute for Cyber-Security, told Daily Mail Australia the country “needs to do a much better job when it comes to cybercrime”.
According to the Australian Cyber-Security Centre, they received about 63,000 reports (of scams) last year. I would estimate that to be about a fifth of the actual number.
‘The ACCC had about $2 billion in reported losses from fraud. I don’t think that’s nearly the right figure.’
6. Lagging legislation
The regulation of electronic payments often lags behind technological and market innovations.
Google Pay and Apple Pay are currently not subject to the same rules as credit card and EFTPOS transactions.
Finance Minister Jim Chalmers is updating legislation to change this.
“That payment law is actually outdated,” said Dr. Zhong.
“We need to put rules in place to ensure we have an industry-wide standard so that consumer welfare and safety is protected.”
7. The loss of the value of money and less social interaction
Financial commentator Sarah Wells told Daily Mail Australia that children are not being taught the true value of money and are missing out on important social interactions as all transactions become digital.
“I think it’s better for kids to use cash,” Wells said.
“If you give a child $20 and take him or her to the mall or the movies, he or she will learn how to budget and think more carefully about the decisions he or she has to make.
“There’s a responsibility in giving money and that kind of valuable social interaction — they learn to say ‘please’ and ‘thank you’ and look people in the eye.”
8. Loss of independent purchasing power
Ms Wells also warned that a “money-hungry society” could be bad news for people whose finances are controlled or taken away from someone else.
Ms Wells said regulating digital payments should take into account young women fleeing domestic abuse.
Women in these circumstances are at risk of being monitored by their partners or being cut off from 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 modern payment platforms,” she said.
Australia is rapidly moving to cashless payments, with digital payments being enthusiastically embraced, especially by younger consumers
9. Your expenses can be tracked
The loss of anonymity and privacy is a major concern for many opponents of a ‘cashless society’.
Elizabeth Hynton has set up a petition on change.org protesting the ‘discrimination’ faced by people who use cash. The petition has gathered over 5,000 signatures.
“Cash is private,” the petition states.
‘If 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 you made the purchase. That is an invasion of privacy.’
Dr. Zhong agreed that the concerns were valid.
“With anything digital, there’s always a vulnerability that gets found,” she said.
10. Loss of your and your freedom of choice
This is perhaps the biggest concern of many who oppose a cashless society.
The petition on change.org argues that cash should always be an option.
“One of the hallmarks of a free society is the freedom of choice…not just what suits an organization, but also what suits the customer!” the petition reads.
“We can’t keep using COVID as an excuse forever.”
China presents a dystopian vision of how such control could be exercised, with people subject to a social credit score that accumulates or deducts points depending on how desirable the individual’s behavior is to the government.
A bad social credit score can mean you can’t make purchases, such as plane or train tickets.
The Reserve Bank is currently investigating the merits of introducing a central bank digital currency (CBDC) in Australia. It would be a ‘programmable’ currency, like China’s.
While the RBA has stated that such a currency could improve the “efficiency and resilience” of payments, the bank said it is unlikely to be introduced anytime soon.
“Given the many issues that remain to be resolved, it is likely to be years before a decision is made on a CBDC in Australia,” the RBA said.
