The COVID-19 pandemic is speeding up deep-seated shifts in how people do their banking, with the use of cash, ATMs and bank branches all in sharp decline as digital and mobile payments come to the fore.
Cash-free shops are becoming increasingly common in the new age as retailers try to limit the possible spread of the coronavirus from banknotes.
Coronavirus is likely to accelerate the decline in cash usage.Credit: Tanya Lake
Even paying with a plastic debit or credit card can risk spreading the virus, if it involves using your finger to key in a personal identification number (PIN).
This month, banks and card companies doubled to $200 the amount you can pay with a contactless card, without entering a PIN, for a three-month period.
Some of these changes — such as cashless shops — may prove temporary. However, that is unlikely to be true for the broad shifts in how we do our banking, with experts and bankers believing customers' money habits are likely to change forever.
Payments consultancy The Initiatives Group says in a recent paper that use of cash and ATMs will fall into a "steep decline" as a result of the pandemic, as contactless and mobile payments rise.
The retail payments mix in the Australian economy will be altered forevermore
David David Ojerholm and Lance Blockley
"Depending upon the length of the crisis, many of these changes will become habitual and are likely to outlast the short-term impact of the virus. The retail payments mix in the Australian economy will be altered forevermore," authors David David Ojerholm and Lance Blockley say.
Despite the concerns about spreading the virus through cash, the Bank of International Settlements says the likelihood of catching COVID-19 by handling banknotes is "low." It says credit-card terminals could be riskier, given the virus survives longest on non-porus materials, such as plastic.
Even so, the perception of banknotes as high-risk will probably accelerate a move away from cash that was well and truly already underway.
A recent Reserve Bank of Australia survey of consumers shows cash accounted for just 27 per cent of all payments in 2019, down from 37 per cent in 2016, and 62 per cent in 2010.
Filling this gap has been cards – in particular debit cards. The RBA says card payments leapt from 31 per cent of the total in 2010 to 63 per cent last year.
"The majority of in-person payments are now initiated by tapping a card with contactless functionality on a terminal, and consumers are also using mobile phones and other devices to make ‘tap and go’ payments more often than they were three years ago," the RBA says.
Aside from using plastic cards, consumers are also able to make contactless payments on mobile phones – an option used at least once a week by almost one in five people under 40 – or watches and even jewellery, such as payment rings.
Ojerholm and Blockley say this trend towards paying on a mobile device will accelerate.
"Your phone may or may not be a great carrier of bacteria, but it is something you will touch anyway, so what’s the difference if you now use it for payments and avoid fiddling around with your wallet for a card," they say.
As digital banking takes off and cash use declines, this will also affect the number of bank branches and ATMs – both of which are already falling rapidly.
Banks are experiencing sharp declines in the number of people coming into branches because of social distancing rules and forced closures of small businesses who would ordinarily drop off their takings.
The big-four banks, also affected by staff shortages, have between them temporarily closed about 170 branches since the pandemic lockdown began.
As banks try to cut more costs, it would not be surprising if there is a wider re-think on the role of branches, resulting in more closures.
Despite these changes, older Australians, in particular, are typically big cash users and their needs must be considered.
A case in point is the tens of thousands of people who still bank with a passbook, and often depend on accessing a bank branch to withdraw their cash.
Krissie Jones, NAB's executive general manager of retail, says the bank is "really concerned" that passbook customers may be in self-isolation, and lacking an alternative way to bank, so it has contacted these people encouraging them to use digital banking.
"We've had examples of customers who have been passbook customers for 40 years, and have not really wanted to change their banking but realise that there is a need right now, and are taking out a card and learning how to go about using the NAB app," she says.