Australia could be cashless in three years: Finance expert Sarah Wells issues urgent warning after Commonwealth Bank, Westpac, NAB and ANZ embrace change
A financial expert has warned that Australia could become a cashless society in just three years, with thousands of people worse off as a result.
Those who could suffer in a cashless society include people in regional areas, those facing emergencies, Indigenous Australians, new immigrants, sex workers, the elderly and even children.
According to financial commentator Sarah Wells, young people will suffer because they will not learn the true value of money and will lose valuable social interactions if all transactions are digital.
“I believe it is better for children to use cash,” Ms Wells told Daily Mail Australia.
“Giving a kid $20 and taking him to a mall or to the movies teaches him to budget and make decisions through more careful thinking.
Financial commentator Sarah Wells (pictured) says we need to look past convenience hype in our rush to ditch cash
Young people, according to Ms Wells, will suffer because they will not learn the true value of money and will lose valuable social interactions if all transactions are digital
“There’s a responsibility in handing over money and such valuable social interaction. They learn to say ‘please’ and ‘thank you’ and look people in the eye.”
The use of banknotes and coins has declined sharply during the pandemic, partly due to fears that the virus could survive on real money and spread to people.
Recent data shows that Australians have never used less cash and are increasingly turning to digital payments.
“The share of personal cash transactions has halved in the three years to 2022, from 32 percent to 16 percent,” says the Reserve Bank of Australia in its recent Cash Use and Attitudes bulletin.
Banks have increasingly emphasized digital transactions, with Commonwealth Bank, Westpac, NAB and ANZ opening cashless branches.
In Australia, more than 1,600 bank branches permanently closed between June 2017 and July 2022, with a “disproportionate number” in regional communities being more severely affected, according to the Financial Services Union.
Westpac has embarked on a ‘co-location’ strategy whereby it is closing a number of separate locations of brands it owns, such as St George, and moving them to a Westpac branch.
While the remaining four major banks – Commonwealth, ANZ and NAB – have all opened cashless branches where customers are directed to ATMs for ‘daily banking’.
Ms Wells predicted Australia is on track to stop using physical money within three to five years.
She says we can slow the disappearance of cash from society by using it when it still makes sense to do so.
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Another less recognized reason for the decline in cash transactions is that a hugely profitable industry has emerged from the proliferation of online payments
The arguments for more and more transactions that take place online are usually convenience and security.
But cyber-attacks, scams, and frauds often undermine the security argument, not to mention gradually pruning people’s money away through petty fees for things that add up quickly, like subscriptions.
“Privacy and security concerns with electronic payment methods remained the top reason for needing cash,” the RBA noted.
Another less recognized reason for the decline in cash transactions is that a hugely profitable industry has sprung up from the rise in online payments, which is considered too big to fail.
Where no one could charge extra for cash transactions, intermediaries called payment service providers that sit between consumers and merchants make money by charging small fees.
The global payment services market was estimated to be worth $21.66 billion by 2022 and is expected to grow at more than 15 percent per year through 2030.
While Ms. Wells believes the move to a cashless society is inevitable, she said she is not in favor of such a major change happening so quickly.
If we add up a number of very different social and demographic groups, hundreds of thousands of Australians could be negatively affected.
“I think we need to stop thinking so much about ourselves and our own comfort and start thinking about others a little more,” she said.
While children can be affected, so will their grandparents.
Even though the over-65s use less cash, they remain the largest users of cash. Nearly one in five is classified as a ‘high cash user’.
New immigrants and undocumented workers often rely on cash, Ms. Wells says
One industry that has traditionally relied heavily on cash is the private sex work industry, often because clients do not want their transactions tracked
Lower-income people use more cash than high-income people, RBA figures show.
In terms of income, lower household income continued to be associated with increased cash use. For example, 17 percent of people in the first quartile of household income used a lot of cash.’
Ms Wells said regional Australians – including entrepreneurs – could be affected in a variety of ways by the disappearance of cash.
“The removal of cash and its availability will make life difficult if you have cell phone issues, or if you have issues with eftpos,” she said.
A report from RMIT University last December found that mobile data speeds in rural towns were on average 90 percent slower than those in urban areas.
People in rural areas are also more susceptible to natural disasters, which can damage communications and online infrastructure.
When the city of Lismore was flooded in 2022, electronic payment systems crashed, preventing people from 56,000 homes and businesses from purchasing food, fuel and water.
Five credit unions came together in May 2022 to fly in a helicopterload of cash so that locals could buy what they needed.
Indigenous Australians would be disproportionately affected for similar reasons.
While the percentage of all Indigenous peoples living in rural and remote areas is declining, nearly half still live in regional or remote areas.
Overall, Ms Wells believes that the loss of cash from circulation will make Australia a less friendly society.
People who rely on cash, including new immigrants, sex workers, and those without the identification needed to open bank accounts, will suffer.
‘This is a problem for vulnerable people, those who don’t fit into what we might think of ‘normal’ society. Of course there are ethical issues involved, but (unbanked people) are still people.”
Some people choose or think they have to transact privately, including those affected by domestic violence, she said.
“Every human being has the right to dignity and privacy, whether it’s a mother struggling to make ends meet, doing cleaning chores or looking out for money, or a sex worker.
“We’re not talking about huge tax evaders here, these are ordinary people.”