Australians have increasingly embraced digital ‘tap-and-go’ payments in recent years as new research shows physical cash is set to vanish from circulation within a decade.
Independent payments market expert Lance Blockley estimated that by 2025 traditional cash would make up less than 4 per cent of total retail purchases across the country.
His research forecast that online shopping would continue to increase its retail market share and the preference for debit and credit cards at physical points-of-sale instead of carrying cash would remain strong.
Young consumers have embraced tap-and-go payments as society increasingly goes ‘cashless’ (stock image)
Mr Blockley, who is the managing director of consulting firm The Initiatives Group, said in a submission to the ACCC that banknotes across all uses, not just retail, would be at 10.2 per cent in 2025 down from 24.2 per cent in 2019, reports The Sydney Morning Herald.
The Covid-19 pandemic accelerated a transition that was already happening with shoppers switching to contactless payments and online shopping in far greater numbers, he said.
Reserve Bank data shows that from 2009 to 2019, which coincided with the introduction of tap-and-go RFID chips in cards, total payments in cash in Australia dropped by about half.
Mr Blockley also noted credit cards, while still used by older consumers, have been overtaken as the most popular digital payment method by debit cards, which provide quick and simple access to money already in an account.
He suggested this could be a combination of their ease of use, lower fees, and consumers increasingly wary of getting into debt.
Banknotes would be used in less than 4 per cent of all retail transactions in Australia by 2025 new research forecasts
Millennial Martina Berlotti, 24, from Bondi Junction in Sydney’s east, told the newspaper she only ever used cash when people gave it to her to settle a small debt – like a restaurant bill.
Rhiannon Feely, 21, from Zetland agreed saying using her phone to pay was far ‘easier’ than carrying around cash.
But Dylan Silcock, 32, from Tempe said he was tossing up going back to banknotes after making the ‘convenient’ digital switch.
‘I’m considering moving back to cash because of the transaction fees and I don’t like the record of my transactions being recorded as well… It’s also much easier to budget using cash,’ he said.
A Brisbane mum recently shared a simple explanation of why banknotes were superior to digital payments on social media where it went viral.
Fiona Edmunds showed that physical money would retain its value no matter how many times it is used.
However whenever you use a bank card, some of the money will invariably be eaten away by fees, which the shop owners are forced to pay.
A Brisbane mother-of-three shared an elegantly simple explanation of why cash is superior to paying by card
‘I have a $50 banknote in my pocket and I go to a restaurant and pay for dinner with it,’ Ms Edmunds said in the post that more than 19,000 people have shared.
‘The restaurant owner then uses the bill to pay for their laundry. The laundry owner then uses the bill to pay the barber,’ she continued.
‘After an unlimited number of payments it will still remain a $50 value which has fulfilled its purpose to everyone who used it for payment.’
‘BUT if I come to a restaurant and pay digitally via card, the bank fees for my payment charged to the seller could be up to 3 per cent or $1.50.’
Ms Edmunds said a similar percentage is imposed on every other transaction using that original $50 if the holder pays via tap-and-go.
‘Payments made by the laundry shop owner, the barber and so on. Therefore after 30 transactions the initial $50 will exist at only $5 and the remaining $45 has become property of the bank.’
While this is a simplified example and fees vary wildly between banks, the principal is sound.
With each subsequent purchase, banks and credit card companies take a small cut from the original $50 until with enough transactions, eventually it becomes theirs.
‘Use it or lose it folks… cash is king,’ Ms Edmunds said.
