Cash transactions officially dying in Australia but Reserve Bank warns of tap-and-go hacking risks

Cash transactions are dying out in Australia, with just 13 percent of purchases now made with notes or coins, making a cyber hack a real threat to everyday life.

Tap-and-go card and mobile payments and instant online transfers make up the remainder of all transactions, with the share of cash purchases having halved in just three years.

Ellis Connolly, the RBA’s head of payments policy, said resources were being deployed to protect the resilience of electronic payments – he mentioned the word “security” six times in a speech, but did not specifically refer to the threat of cyber sabotage.

“Australians rely more than ever on electronic payments, so our retail payment systems need to be secure and resilient,” he told The Australian Financial Review Banking Summit on Tuesday.

“Historically, the RBA has overseen the security of payment systems that process high-value payments for key financial market infrastructures, given their potential to spread stress throughout the financial system.

“The dominance of cards and the consumer shift to mobile devices raises a number of important issues within the RBA’s mandate.”

The Reserve Bank estimated that only 13 percent of transactions were in cash by the end of 2022, a halving in just three years since the start of the pandemic

The new payment platform was established in 2018, allowing Australians to make direct payments 24 hours a day.

Since then, cash purchases have become even less popular.

The Reserve Bank estimated that only 13 percent of transactions were in cash by the end of 2022, a halving in just three years since the start of the pandemic.

Contactless tap-and-go payments, where a customer used their mobile smartphone, made up a third of transactions, with younger consumers more likely to pay this way.

This is growing at the expense of the tap-and-go card method, which has dropped from more than 70 percent to just over 60 percent over the past three years, the RBA’s Consumer Payments Survey found.

Card transactions – including tap-and-go and ATM card insertion – still make up three-quarters of transactions.

Half of all transactions in Australia are done with a debit card and a quarter with a credit card.

As late as 2007, cash transactions made up two-thirds of payments in Australia.

Card transactions – including tap-and-go and machine insertion – still make up three quarters of transactions (stock image)

Tap-and-go contactless payments, where a customer used their mobile smartphone, made up a third of transactions, with younger consumers more likely to pay this way

“Fifteen years ago, almost all personal card transactions were made by inserting the card into a terminal and providing a signature or PIN for verification,” said Mr Connolly.

“Transactions today mainly consist of tapping a card or a mobile device where card data is securely stored.”

Australians were the world’s most prolific card payment users by 2021, with per capita increases ahead of South Korea, the US, the UK and Sweden.

Mr Connolly said the Reserve Bank was focused on lowering wholesale costs.

Consumers pay an average of 0.55 percent per transaction.

“Merchants who have the choice to recoup their payment costs through surcharges have put competitive pressure on the card networks and payment service providers to lower their fees,” he said.

“Yet the cost of card payments can still be significant for small businesses.”