Costs stack up as payments go digital, but some insist we’ll never go cashless

Carrying cash is fast becoming a relic of the past. While some argue it should be kept alive as a payment method, others think keeping it around will only prolong economic pain.

In December, Reserve Bank governor Michele Bullock warned that the collapse in the use of cash was putting strain on the entire payment system as the share of payments made with physical money shrank from 70 per cent in 2007 to 13 per cent last year, as consumers switched to digital payments.

The Reserve Bank, which is responsible for issuing banknotes, signalled this month that it would ensure Australians could continue to access cash.Credit: Erin Jonasson

Days later, Treasurer Jim Chalmers vowed to keep banknotes in circulation, saying it was an obligation to make sure those who wanted to access cash – especially in the regions – would be able to do so if they wanted. Even so, some of the country’s biggest banks are highlighting the growing cost to business – and banks – of cash payments.

In an interview with this masthead, NAB business banking executive Julie Rynski said she believed a cashless society is coming – and that while businesses were incurring fees for accepting card payments, it was mostly being passed on to consumers.

Rynski also said it was a way for some businesses to improve the efficiency of their operations. “If you think about their end of day, they don’t have to worry about counting their cash or going to the bank,” she said.

While stores holding less cash on site could deter criminals looking to rob a business, Rynski said it also sharpened the banks’ focus on cybersecurity as criminals followed the money into the digital realm.

From 2022 to 2023, the total value of cash in circulation fell to $1.1 billion, dropping for the first time since 1966 when Australia moved from pounds to dollars. At the same time, banks and other companies receive thousands of cyberattacks per minute from criminals looking to compromise data and penetrate the digital vault of businesses.

Cash has become increasingly difficult to access with companies removing ATMs or banks phasing out cash from their branches.

Convenience chain 7-Eleven, which has had ATMs across most of its stores in the past, said in December that it would phase out ATMs (but it will continue to offer cash across the counter). And this year, Macquarie Bank – which has three branches across Sydney, Melbourne and Brisbane – said customers would no longer be able to deposit cash, though would still be able to withdraw cash.

While some people still carry cash in their pockets its usage is on the decline, according to NAB chief executive Ross McEwan. “99 per cent of our transactions now are completely cashless, it’s all electronic,” he said. “Across the counter, it’s just dropped like a stone, it’s dropping at about 16 to 20 per cent a year and has been for the last five to six years.”

However, McEwan said there would always be a place for cash in society. “It’s not cashless – it’s less cash,” he said.

Proponents of cash argue that it plays an important role for vulnerable people including family violence survivors who may seek the anonymity that comes with cash payments or lack access to phones, debit cards or the internet.

The Reserve Bank, which not only oversees monetary policy but is also responsible for the nation’s payments system and issuing banknotes, signalled this month that it would ensure Australians could continue to access cash.

Bullock, the RBA governor, said that despite the decline in cash usage, it continued to be an important means of payment for some people and a precautionary store of wealth for others. It was also an important back-up method of payment during system outages or natural disasters, she said.

“The RBA places a high priority on the community continuing to have reasonable access to cash withdrawal and deposit services,” Bullock said.

While the distance people need to travel to access cash services hasn’t changed substantially in the past few years, the RBA governor said this may not be the case in future as the cost of providing cash services increased.

ANZ’s managing director of customer engagement, Katherine Bray, said that while there was continued cash dependency among small businesses in particular, the cost of moving cash around was becoming prohibitively expensive.

“As the cost of cash increases, and the volume very rapidly decreases, we will reach a sort of nexus on this,” she said.

In June, the Australian Competition and Consumer Commission gave the green light for the tie-up of two of the country’s biggest cash transporters – Armaguard and Prosegur – creating a near monopoly.

This came as the two companies said they were operating at a loss and the competition watchdog found the industry was in structural decline, raising the risk of a “rapid exit” by either of the two suppliers, which would reduce the availability of cash.

In late November, banks said they had been advised by Armaguard that its viability was being put at risk by the rapid decline in cash usage, prompting emergency talks between the banks, the Reserve Bank and the federal Treasury.

The banks say that if Armaguard exits the market, it could reduce the availability of cash to banks and other businesses.

Bray from ANZ said it was a polarising topic “because there’s so much of the community that’s so far past [cash], they’re not really sure why it’s a conversation, but for other smaller parts of the community, they feel like they are being left behind”.

Australia has rapidly taken up digital payments, but countries such as Sweden have taken a step further. In March, cash became no longer accepted as a means of payment in Sweden after the passage of a law that enabled merchants to make customers pay electronically.

While Bray thinks the natural run-off of cash in Australia appears to be some time down the track, she said there would probably be some form of intervention to bring cash to an end earlier as had been the case in other markets.

“I don’t think [cash] gets to run off naturally,” she said. “I would expect there to be interventions, as we’ve seen with cheques, and as we’ve seen in other geographies on cash, to expedite the process.”

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