Sunrise host Nat Barr has highlighted a major problem with the country becoming increasingly cashless, after the Reserve Bank boss warned that Australians may have to pay a fee to access coins and notes in the future.
During his speech on Wednesday, Barr suggested that a computer system glitch could effectively bring the country to a standstill if there is no actual cash circulating in the economy.
'The problem is, do we need cash for those 'just in case' moments like the Optus outage, when people couldn't pay for anything and pubs and small businesses had to close for a day because there was nothing else they could do' Barr said.
Phone and internet connections disappeared for millions of Australians on November 8 when the Optus system crashed across the country. Many small businesses complained that they could not accept payments because they were dependent on EFTPOS linked to the telco.
That outage, caused by a software upgrade error, took about 14 hours for services to be fully restored, but there have been others, with Telstra experiencing a similar problem in May and Westpac Bank going offline last week.
The Westpac outage in particular highlighted the vulnerabilities in the switch to digital money, as many customers wrongly believed a hack had occurred when they logged into their accounts and could not see their money.
Sunrise presenter Nat Barr pointed to recent network disruptions, such as the massive Optus outage in November, which could bring the economy to a standstill if there was no cash in circulation.
Public Services Minister Bill Shorten said physical cash was essential and hoped we would not see a world where 'you have to pay cash to use cash'.
Economist Evan Lucas said he was confident there would always be a place for hard currency in the economy as a failsafe, but the costs associated with logistically moving it were increasing and banks wanted to recoup some of that.
Customers and businesses already have to pay a fee to the major banks when a tap-and-go payment is made, mainly to use the infrastructure and systems that enable digital payments.
But Barr said the idea of paying for the “privilege” of using your own notes and coins because they are processed by the bank was difficult to grasp.
RBA Governor Michele Bullock told the Payments Network conference this week that Australians may soon have to pay for the privilege of holding their own hard-earned money
“I don't think this will end well for the Aussies if we have to pay to use our own money. Let's hope it doesn't.'
Her comments were sparked by RBA Governor Michele Bullock highlighting in a conference address this week that the share of consumer payments using cash has fallen from 70 per cent in 2007 to just 13 per cent last year.
Bullock said most Australians were swapping cash for digital money and this is putting pressure on the costs of running ATMs and physically moving notes and coins by both banks and businesses.
She warned that the cost of distributing cash could mean that customers will one day be charged for the privilege of using banknotes, as is now the case for credit card transactions.
“The problem with cash has always been that companies don't really understand the cost of cash in their business,” she told event moderator and former ABC news anchor Juanita Phillips.
“Right now they understand it a little better, but in the past they haven't really done that. They have not internalized the processing costs.”
Ms Bullock is referring to businesses needing to have the equipment in place to handle cash, such as cash registers and safes, security infrastructure or guards to keep it safe, and paying an employee to physically take it to a bank and deposit it.
She said cash has cost businesses, but “the challenge is there's really a big community and public image associated with it.
“If you try to charge people to use cash – they're willing to pay to get it out of an ATM – but if companies start charging people to use cash, I suspect there will be a very big response will come.'
But Ms. Bullock argued that consumers should ultimately pay to use cash to reflect the true cost of cash distribution.
“That said, it is also true that as economists you want people to be confronted with prices for using certain services that reflect the costs of those services,” she said.
“It's very difficult to actually enforce the payment of cash, but what will happen, and what is happening right now, is that the costs will eventually become embedded in the costs of the financial institutions that provide the services. '
Police and a sniffer dog patrol a Sydney street after shots were fired at a cash-in-transit vehicle
The number of ATMs and bank branches where people can withdraw cash has steadily declined, although Ms Bullock said the distances people had to travel to get cash “has changed little in recent years”.
“But this may not be the case in the future if the number of access points continues to decline,” she said at the AusPayNet Summit on Tuesday.
The RBA was keen to “maintain broad coverage of ATMs at reasonable prices, particularly in regional and remote areas” and was open to industry responses on ways the central bank's regulation could help, she said.
The economics of the distribution system, which includes companies that physically transfer banknotes, coins and credit cards from one place to another, is also under pressure.
The strained economics of this business model were one of the reasons why the consumer watchdog approved the merger of the two largest cash-in-transit companies, although Bullock said the sustainability of the model was still questionable.
Australia could consider alternative models such as a wholesale distribution scheme, she said.