May 28, 2021
Are We Headed for a Cashless Society?
From credit cards to cryptocurrencies, more and more of our experiences with money are based in numbers on a screen instead of exchanging notes and coins. While many find it cleaner and more convenient to pay digitally, there are lots of things to be wary of before we go completely cashless.
Putting Away the Cash
It’s no secret that COVID accelerated our preference for cashless transactions. Following concerns about the virus transmitting via bank notes, many stores began explicitly asking customers to use card over cash, with one in three Australian businesses going cashless altogether. And it wasn’t just health concerns pushing us towards digital currency. Online shopping and food delivery apps let us limit visits to shopping hubs during lockdowns, while the psychological shift of using more technology for work and school made people more comfortable using it for purchases, too. According to a MyState Bank survey, two thirds of Australians said they were using less cash because of COVID, and 67% of this group expected that they would continue their new spending preferences once the pandemic was over.
However, even before the pandemic, people were slowly moving away from cash. In 2019, the Reserve Bank found that over twelve years, Australians went from using cash for a little under 70% of transactions to about 25%. Debit and credit cards have become the dominant transaction method, with the rise of ‘tap and go’ technology making digital transactions faster. New smartphone technologies like Apple Pay and banking apps are also providing convenient alternatives to cash, while ‘buy now pay later’ services like Afterpay are becoming increasingly popular and encouraging more people to make payments digitally. Even cryptocurrencies like Bitcoin, although less common for everyday transactions, are becoming a more serious option for large payments (although they’re also terrible for the environment – you can read our breakdown of the currency here).
Buyer Beware: The Consequences of a Cashless Society
As much as going cashless can be convenient, getting rid of cash from society altogether would have serious consequences. Compared to the simplicity of handing notes directly to our favourite stores, digital currency always introduces a ‘middleman’, whether it’s a bank-owned card machine or a service like Afterpay. Stores have to pay fees to these services, and while larger corporations have been able to absorb this operating cost, smaller businesses are having to turn this charge onto consumers, whether through applying surcharges to purchases or just increasing their prices.
There’s also an added layer of security in having physical cash rather than relying entirely on machines. Technology is vulnerable to glitches – rather than being caught out when your bank has an outage, it can be good to have cash as a backup. Indeed, in the face of economic uncertainty at the start of lockdown, many wealthy Australians chose to withdraw large portions of their savings rather than relying on digital currency. Digital banking is also more vulnerable to security breaches and scams, which is a particular issue for older Australians. Without the real friendly faces supporting them in physical bank branches, older customers are more likely to fall victim to online or phone scammers.
And it’s not just the elderly who miss out in a cashless society – lots of vulnerable people are worse off when digital currencies are the only option available. Cash is often the most accessible currency for many people with disabilities, while many low-income earners rely on extra cash-in-hand work like babysitting, cleaning, and tutoring to support themselves. Buskers and charity collectors can also struggle to raise money when people are carrying less spare change to drop in their hats and collection buckets. Although alternative technologies are popping up to fill the gap, such as small ‘tap to donate’ machines or specialised tipping services like The Busking Project, people are more hesitant to trust these sorts of options compared to anonymously handing over a few coins. That’s especially true for unhoused people, who also often don’t have dependable enough internet access to rely on digital donations.
Allowing for Choice
Between mid-2017 and June 2020, 4,200 bank-owned ATMs were closed across Australia, as were 700 bank branches. With more people forgoing cash and doing their banking online, it becomes harder to keep the sites open. Similar closures at a more rapid rate occurred in Sweden when the country deliberately moved away from cash, but the backlash was so strong that the government had to step in to require banks to provide a minimum level of cash services.
The technical innovations of digital commerce are great for general convenience, but it’s important to leave our options open. Financial technology service FIS expects that cash will used for just 2.1% of transactions in Australia by 2024, but there are many reasons to ensure that this small percentage of non-digital transactions is protected, especially for society’s most vulnerable.