How Australia’s rapid shift towards becoming a cashless society is making everybody worse off

BY FREDDY PAWLE

Australia is rushing to become a cashless society, but not everyone is willing to say goodbye to physical currency – and there are good reasons for that.

The Covid pandemic has fueled a trend towards digital transactions that was already underway, with the use of digital wallet payments on smartphones and watches rising from $746 million in 2018 to more than $93 billion in 2022.

At the end of 2022, cash only accounted for 13 percent of Australian consumer payments, down from 70 percent in 2007.

“The shift to a cashless society in Australia is not just a possibility, but is already well underway,” said Angel Zhong, Associate Professor of Finance at RMIT.

Although Dr. Zhong did not see banknotes disappear completely, she believed that they will become much rarer in daily transactions.

“In the functionally cashless society we enjoy the convenience of technology – we don’t have to go out with a lot of cash, we can use our phone and smartwatch to make payments,” she told Daily Mail Australia.

As more Australians embrace the trend, a growing number of retailers are only accepting digital payments.

Major banks continue to close branches, reduce the number of ATMs and even open ‘cashless’ branches, citing customers’ preference for online services.

However, the electronic switch comes with its own risks and could seriously disadvantage some parts of the population.

Here are the 10 biggest concerns when using cash.

1. Older Australians or others who are not digitally connected may be left out

Dr. Zhong said the strongest users of digital payments are Australians aged 18 to 29.

“Two-thirds of them use digital wallets,” she said.

However, many older Australians still preferred to pay in physical cash, with almost one in five classified as a ‘cash heavy user’.

Dr. Zhong said Australia needs to “provide better support for other age groups to embrace technology, better literacy about technology systems and financial assistance” for those struggling with the transition to digital payments.

Those with lower incomes and new migrants also tend to be more reliant on cash.

2. It depends on internet coverage and reliable connectivity

Rural areas with slow internet may find digital transactions difficult.

However, a major Commonwealth Bank outage in July has highlighted the fragility of digital finance, even in urban areas.

Customers were paralyzed by the technical glitch, unable to access their accounts, transfer money or use their cards to make purchases.

Dr. Zhong said governments must support infrastructure investments that will increase internet coverage and speeds to pave the way for the digital revolution.

3. Some parts of the monetary economy will suffer

The number of charity donations given on the street is declining as fewer people carry cash and those who beg or earn a living face the same problem, 2020 research found.

“While retailers and online sellers have taken advantage of cash-pay options, donation seekers continue to rattle around an empty cup,” wrote Spencer M. Ross of the University of Massachusetts and Sommer Kapitan of Auckland Technology University.

“In addition to people carrying less cash, our research suggests that another key reason is that people simply don’t expect to see beggars or buskers with a sweeper, or a QR code or Venmo symbol on their signs.”

4. ‘Hidden’ costs

Digital transactions often involve fees that may not be apparent at the time of purchase.

Warwick Ponder, the former executive manager of corporate affairs and communications at eftpos Payments Australia, told Daily Mail Australia that Paywave devices often charged a delayed credit fee.

Mr Ponder advised customers to avoid eavesdropping as much as possible as it can take a significant amount of time for the debited money to be recorded in their account.

Banks also typically charge higher fees for tap-and-go purchases than for EFTPOS, where cash-only does not incur any additional fees.

5. Hacking and scams

It is estimated that Australians lost more than $2 billion to online scams in 2021, but the actual figure could be much higher as many incidents go unreported.

Major cyber security breaches by Optus and Medibank last year have also highlighted the risk of identity theft online.

Nigel Phair, director of the UNSW Institute for Cyber-Security, told Daily Mail Australia the country “needs to do much better when it comes to cybercrime”.

‘The Australian Cyber-Security Center said they received about 63,000 reports (of scams) last year, I think that’s about a fifth of what the actual number is.

“The ACCC had approximately $2 billion in reported losses due to fraud. I don’t think that’s nearly the right amount.’

6. Lagging legislation

The regulation of electronic payments often lags behind technological and market innovations.

Google Pay and Apple Pay are currently not subject to the same rules as credit cards and EFTPOS transactions.

Treasurer Jim Chalmers is updating legislation to change this.

“That payment law is actually outdated,” Dr. Zhong said.

‘We need to regulate to ensure we have an industry-wide standard to ensure the welfare and safety of consumers are protected.’

7. Losing the value of money and less social interaction

Financial commentator Sarah Wells told Daily Mail Australia that children will not learn the true value of money and miss out on crucial social interactions if all transactions become digital.

“I believe it is better for children to use cash,” Ms Wells said.

“Giving a child twenty dollars and taking him to the mall or to the movies teaches him to budget and make decisions through more careful thinking.

‘There is 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.’

8. Loss of independent purchasing power

Ms Wells also warned that having a ‘cash-poor society’ could be bad news for those whose finances are controlled or denied by someone else.

Ms Wells said young women fleeing domestic violence should be taken into account when regulating digital payments.

Women in these circumstances are at risk of being pursued by an abusive partner or being cut off from their finances.

“We must ensure that we do not compromise the safety, education and experience of minority groups and young minds in our efforts to adopt modern-day payment platforms,” she said.

9. Your expenses can be tracked

The loss of anonymity and privacy is a major concern for many who oppose a ‘cashless society’.

A change.org petition created by Elizabeth Hynton, speaking out against the ‘discrimination’ faced by those who use cash, has collected more than 5,000 signatures.

“Cash is private,” the petition states.

‘If you pay with a credit/debit card, the government knows: what you spend your money on, how much you spend, what you spend your money on and when the purchase was made, which is an invasion of privacy.’

Dr. Zhong agreed that the concerns were valid.

“(With) anything digital, there is always a vulnerability that it will be tracked,” she said.

10. Loss of your freedom of choice

This is perhaps the biggest concern of many who oppose the cashless society.

The change.org petition states that cash should always be an option.

‘One of the characteristics of a free society is freedom of choice… not only what suits an organization, but also what suits the customer!’ the petition states.

“We can’t continue using COVID as an excuse forever.”

China presents a dystopian vision of how such control can be exercised, with people subject to a social credit score that awards or earns points depending on how desirable the individual’s behavior is according to the government.

A poor social credit score may mean you are unable to purchase items such as plane or train tickets.

The Reserve Bank is currently exploring the benefits of introducing a central bank digital currency (CBDC) in Australia, which would be a ‘programmable’ currency like China’s.

While the RBA has stated that such a currency could improve the “efficiency and resilience” of payments, it said it is unlikely to be introduced in the short term.

“Given the many issues that remain to be resolved, a decision on a CBDC in Australia is likely to take several years,” the RBA said.