‘The cost of cash is real’: So who’s really paying to keep it alive?
National Australia Bank boss Andrew Irvine has a colourful way of describing the invisible cost of the notes and coins that many of us carry in our wallets every day.
“The cost of cash is real. Think about it, you’ve got two guys in an armoured car driving around, with guns ... a country that’s thousands of kilometres in size moving cash,” Irvine said at a recent Trans-Tasman Business Circle lunch.
“There are 20 or 30 depots in this country moving and sorting and doing all that stuff with cash and, physical cash including coins, and coins in barrels are heavy. None of that is visible to people, but that all costs money. So the question of course is who’s going to pay for that?”
Irvine believes the current signal that consumers receive – whereby paying by cash appears free, but digital payments often attract a surcharge – is “entirely back to front.”
“Cash isn’t free. But society thinks cash is free, and that’s something that is going to be problematic for the foreseeable future,” he said.
NAB’s Andrew Irvine, who is also chairman of the Australian Banking Association, speaking with ABA chief executive Anna Bligh.Credit: Dominic Lorrimer
The cost of distributing cash may seem an arcane topic, but it’s come into sharp focus lately, after last year’s financial bailout of struggling armoured truck business Armaguard, and the government’s plan to require essential businesses to accept cash payments.
The government wants this cash acceptance mandate to take effect at the start of 2026, but there’s debate about how it will work among retailers, who will play a key role in putting the policy into action.
The Business Council of Australia (BCA) and the country’s peak body for retailers are pushing for a one-year delay to the mandate, while complaining the policy in its current form could drive up costs while also raising security and other risks.
These sorts of arguments are to be expected, but they also underline Irvine’s point: keeping the cash system alive for the community will involve costs. As cash use continues to dwindle, policymakers and businesses are grappling with how these costs will be covered.
Why cash still matters
While cash use has dropped sharply, there is still a substantial group of people who depend on notes and coins in their financial lives.
The Reserve Bank estimates cash is only used in about 13 per cent of consumer payments, but there are around 1.5 million high cash users, who use it for more than 80 per cent of their in-person transactions.
When cash is accepted at fewer stores, it also hits some parts of society harder than others. Treasury says groups most likely to bear the brunt of lower cash acceptance are regional and remote areas, older people, and low-income households. Cash is also valued for privacy reasons, and because it’s not subject to telecommunications or technology outages (such as in natural disasters).
For all these reasons the government wants to make sure cash doesn’t go the way of cheques – which are being phased out from 2028. So, Treasurer Jim Chalmers announced in November that certain businesses, including medium and large retailers that sell groceries and fuel, would have to accept cash. The proposed mandate will not apply to small businesses with turnover under $10 million, except for outlets of larger franchises.
The proposal was quickly welcomed by the advocacy group for seniors, Council on the Ageing (COTA), which said cash remained vital for financial independence for many older Australians.
“As it has become harder and harder to pay with cash over the years, we’ve seen too many people left with no option to pay for goods that doesn’t see them hit them with additional charges,” COTA chief executive Patricia Sparrow said.
Armaguard’s woes last year highlighted the strain on the cash distribution system.Credit: Aresna Villanueva
But the response has been much less positive from the Australian Retail Association, which has warned of potential costs and pushed for a delay to the mandate.
In a submission to the federal Treasury, the ARA said it recognised the continued use of cash by some vulnerable members of the community, but it did not support the policy in its current form, raising a slew of objections.
It underlined the costs of maintaining the infrastructure for accepting cash payments – such as having extra security, maintaining safes, and secure transport – and warned these costs could ultimately be passed on to consumers.
The ARA also said concentrating cash transactions in certain locations could increase security risks, saying many businesses were already trying to use less cash in response to “increasing crime in store”.
Key details of the mandate are also still the subject of consultation.
How do you define an essential business? A Treasury discussion paper proposes clothing for children and infants be considered essential, for example, but not adult clothing.
The last truck carrying cash is going to cost a lot of money.
NAB chief executive Andrew Irvine
Would there be a maximum payment that businesses would need to accept in cash? This is what US states including Colorado, Illinois, Montana, Massachusetts, New Jersey, and New York have done.
Or would retailers only be required to accept cash at certain times of the day to limit the security risks? In Denmark, for example, physical stores aren’t allowed to refuse cash payments between 6.00am and 10.00pm
Retailers say the cash mandate shouldn’t mean customers also have a right to always receive change in cash.Credit: Justin McManus
Does the mandate mean customers also have a right to expect to receive change in cash?
You might assume that it would, but the ARA says requiring businesses to keep enough cash to give change or refunds in notes and coins could be tricky in circumstances when there are limited notes and coins on hand (such as in small communities).
And how long might the mandate remain in place?
Reserve Bank governor Michele Bullock recently predicted cash would be around for “probably another 10 years” – and business groups are pushing for future reviews into how long the mandate will stick around.
Ai Group chief executive Innes Willox says: “It would be useful to insert a grandfathering provision that would require government to go back, in say five years time, and look whether the mandate is still needed or should be adjusted in the future.”
The strain on cash infrastructure
As these details are ironed out, the bigger challenge for banks will be how to efficiently supply cash to the community, even as physical money gets used less and less.
The cash distribution system is already under strain, and that will only intensify as cash usage dries up further, spreading the cost of cash distribution across a dwindling number of cash transactions.
Some experts say it makes sense to rationalise the banks’ network of ATMs – something that’s been talked about for years – while there’s also a question of how the cost of cash gets passed on to consumers.
This is a sensitive issue, as underlined by the backlash Commonwealth Bank faced late last year after announcing it would move thousands of customers into an account that charges a $3 fee for taking out cash at a branch. Politicians slammed CBA forcing it to press pause on the move and instead consult affected customers on other options.
That backlash is likely to act as a warning for other banks. NAB’s Irvine, speaking last month, indicated that some sort of “pricing signal” that was more aligned to the real cost of cash could be useful, but also conceded this was “hard.”
Meanwhile, he said banks were planning for cash to remain part of the landscape for a “long period of time,” even if it comprises a falling share of payments. This means banks will need to look at how to provide cash in the least-costly way, Irvine said, while realising that as cash will continue being “smaller and smaller proportion of payments, it’s going to get more and more expensive.”
“The last truck carrying cash is going to cost a lot of money.”
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