By Shane Wright
Technological advances and COVID-19 have upended the way Australians use their money, with cash on its way to joining rum bottles, shells and the holey dollar.
A study of our use of money shows just 13 per cent of payments for goods and services in Australia last year were made with cash. It also found that much of the cash we do have is under the mattress as people becoming increasingly worried about cyber-thieves stealing their savings.
More than 75 per cent of payments are made by card.Credit: Shutterstock
Every few years, the Reserve Bank carries out a nationwide survey of Australians’ payment habits. In 2007, it showed 70 per cent of all payments were made with cash, 15 per cent with debit cards and another 11 per cent with credit cards.
By last year, however, cards accounted for more than three-quarters of all payments, with debit cards used in 51 per cent of cases. BPAY accounted for 2 per cent, internet or phone banking 3 per cent and PayPal 2 per cent.
Cheques, which were used 1 per cent of the time in 2007, had fallen to just 0.1 per cent. Last week, Treasurer Jim Chalmers announced the cheque system would be phased out by the end of this decade due to its high costs and diminishing usage.
Reserve Bank researchers Thuong Nguyen and Benjamin Watson said the drop in the use of cash had been driven by technology and COVID-19.
“Card payments now offer convenient contactless payments that speed up transactions; they have reduced the need for consumers to top up cash, have wide merchant acceptance facilitated by new payment providers, and have allowed for innovation in the payments space (such as storing cards in mobile wallets),” they found.
“The pandemic accelerated the shift away from cash as consumers complied with social distancing requirements by making more payments remotely and because of hygiene concerns with handling cash.”
Even the way we use cards to pay for a coffee or muffin is changing. In 2007, cards were inserted into EFTPOS machines. Last year, 95 per cent of in-person card transactions were completed with a tap on a machine.
Mobile phones are increasingly used for these types of payments. In its pre-COVID survey, the RBA found just 8 per cent of contactless payments were with a mobile device. It has now reached a third.
Mobile payment systems were used by almost two-thirds of Australians under the age of 30. While younger Australians are more likely not to use cash, older people are rapidly catching up.
In 2007, about 55 per cent of people over the age of 65 were considered “high cash users”, or those who handed over notes for at least 80 per cent of transactions. By last year, this had fallen to just 18 per cent.
While our use of cash has nose-dived, the amount of cash in circulation is near record levels. There are 18 $100 notes for every Australian in the country compared to around 14 in 2016.
During COVID-19, Australians hoarded their cash. The value of $50 and $100 notes in circulation soared by 27 per cent between the start of the pandemic and December last year.
The most likely transactions to see cash used is for plumbing, hairdressing and babysitting, while the biggest falls have been for transport payments such as parking, public transport and taxis.
Separate research by Reserve Bank experts Jack Mulqueeney and Tanya Livermore found almost 30 per cent of Australians no longer carried cash of any denomination on their person. They now outnumber the proportion of people who hold more than $100.
More than 60 per cent of people don’t hold cash, either in a wallet or at home in a jam tin. Among those who have cash, about half have between $100 and $1000, while a small proportion have more.
“This is nonetheless likely to be an underestimate, as people who hold a large amount of cash may not be willing to disclose this in a survey or may not be captured by the sample,” Mulqueeney and Livermore said.
The pair also found that among people who still used cash, privacy concerns were a major factor.
“There was a notable increase in the share of respondents citing privacy and security concerns as their most important reason for using cash in the 2022 survey, perhaps reflecting high-profile cyber incidents in the past few years,” they said.
Reserve Bank staff wash bank notes damaged during the 2022 floods, so they can be counted before being destroyed.Credit: Reserve Bank of Australia
Hiding cash at home does come with risks. The 2022 floods through northern NSW and southern Queensland resulted in a huge increase in claims on the Reserve Bank for the replacement of damaged notes.
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