The Move Towards a Cashless Society

Business
Technology

The Move Towards a Cashless Society

By Adrian Tan

12/12/20

With the pandemic in full swing, Australia’s economy has seen noticeable impacts. A topic which has emerged is whether Australia will transition towards a cashless economy. Many businesses have taken precautionary measures such as minimising cash payments as a means to reduce the spread of the virus. While there are benefits to both cash and cashless payments, interesting implications have arisen due to this economic trend. 


If you’re like the majority, it’s likely that you can pay for most expenses using your phone or card. After all, the benefits of this system are clear: cashless payments tend to be quicker, more secure and convenient to consumers. Who wants to be that person that holds everyone else up at the checkout as they count their money? Along with these benefits, online services such as Afterpay and Zip enable consumers to access goods and services with a ‘buy now pay later’ model. 


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In regard to cashless payments, this is favourable for the government as it ensures individuals and businesses pay their fair share of tax. After all, those online payments have left a paper trail, allowing the government to use data matching protocols “to ensure that people and businesses comply with their tax obligations”, which directly addresses money laundering and tax evasion. It was just last year when laws were proposed to ban cash payments greater than $10,000 with the consequence of fines and possible prison sentences. By limiting the transaction value of cash payments, an individual’s right and freedom to protect their private wealth becomes under threat.


Despite the increase in card and online payments (driven by social distancing measures), a large share of consumers still intensively use cash. These consumers are likely to be older, have lower household incomes and live in remote areas. As a result, the move to a cashless society has the implication of exacerbating societal divisions as this demographic loses access to a traditional payment option.



Due to this conflicting sentiment, there is no guarantee card payments can be universally accepted by everyone. Reasons for this can be seen in the failure of underlying technologies which facilitate these types of payments. It was only last month Commonwealth Bank experienced an outage in their web banking services, leaving the majority of its customers unable to access their funds.


These technical issues invoke further uncertainty around the security of financial institutions as data breach and personal identity theft concerns arise. Services Australia recently apologised to their customers as the data of 180,000 users was leaked in a cyber-attack. Possible information that was stolen included personal identification, records and even credit card details. While there remains autonomy in owning physical cash, many lack trust in these financial institutions to manage and hold funds on their behalf. A 2019 Report conducted by the University of Melbourne indicated that “almost 1 in 3 Austalians are dissatisfied with their financial institution.”


Furthermore, the move towards alternative sources of cash payments such as cryptocurrency (crypto) also invokes conversation upon the legitimacy of these avante-garde systems. Despite the speculation and trading involved in these investments, crypto has been used to fuel a digital economy including (but not restricted to) black market goods (silk road) and unregulated gambling (Satoshi Dice). The confidential nature of these decentralised currencies ensures there is no middleman such as government authority who overlook the operation of such systems. Despite these features of heightened confidentiality, the widespread use of crypto remains heavily uncertain due to its volatile nature.


At first glance, it may be easy to assume the pandemic has caused the demand for cash to go down instead of up. Some feared the possibility of handling infected banknotes leading governments around the world to disinfect and quarantine the physical currency. Others did the complete opposite as they felt the need to hold ‘precautionary funds’. During the early stages of the pandemic this year, many banks experienced an increase in ‘over-the-counter’ withdrawals. This type of market activity indicates uncertainty as people are unsure of what to do in times of stress.

This opposing dynamic between the government and society indicates cash is dirty both in a literal and figurative sense. While many continue to use digital payments, there exist pockets of the economy who seek to obtain their ill-gotten gains through a means of cold hard cash. Crises such as the pandemic remind us of how society adapts to satisfy personal needs and wants. At least, for the near future, we can be certain that cash can never stay clean forever and will continue to circulate in the economy alongside digital payments. 



References

 

Bungard, M., 2020. Commonwealth Bank Apologises For Network Outage. [online] The Sydney Morning Herald. Available at: <https://www.smh.com.au/national/commonwealth-bank-services-down-temporarily-20200814-p55ly8.html> [Accessed 10 September 2020].


Bungard, M., 2020. Service NSW Cyber Attack: Data Of 186,000 Customers Leaked. [online] The Sydney Morning Herald. Available at: <https://www.smh.com.au/national/nsw/data-of-186-000-customers-leaked-in-service-nsw-cyber-attack-20200907-p55t7g.html> [Accessed 10 September 2020].


Ato.gov.au. 2020. Data Matching Protocols. [online] Available at: <https://www.ato.gov.au/General/Gen/Data-matching-protocols/> [Accessed 10 September 2020].

 

Delaney, L., McClure, N. and Finlay, R., 2020. Cash Use In Australia: Results From The 2019 Consumer Payments Survey. [online] Available at: <https://www.rba.gov.au/publications/bulletin/2020/jun/pdf/cash-use-in-australia-results-from-the-2019-consumer-payments-survey.pdf> [Accessed 10 September 2020].

 

Khadem, N., 2020. 'Buy Now, Pay Later' Stars Like Afterpay, Zip Don't Need Regulation, Senate Inquiry Into Fintech Says. [online] ABC News. Available at: <https://www.abc.net.au/news/2020-09-03/buy-now-pay-later-regulation-fintech-senate-inquiry/12614068> [Accessed 10 September 2020].


Khadem, N., 2020. Paying More Than $10,000 In Cash Could Make You A Criminal Under Proposed Law. [online] ABC News. Available at: <https://www.abc.net.au/news/2019-08-20/transacting-$10,000-or-more-in-cash-could-make-you-a-criminal/11429230> [Accessed 10 September 2020].


Reserve Bank of Australia, 2020. Financial Stability Review. [online] p.11. Available at: <https://www.rba.gov.au/publications/fsr/2020/apr/pdf/financial-stability-review-2020-04.pdf> [Accessed 10 September 2020].


The Economist. 2020. Why Cash Has Been Piling Up During The Pandemic. [online] Available at: <https://www.economist.com/graphic-detail/2020/08/13/why-cash-has-been-piling-up-during-the-pandemic> [Accessed 10 September 2020].


Breidbach, C, Culnane, C, Godwin, A, Murawski, C & Sear, C, How Australians feel about their finances and financial service providers 2019, the University of Melbourne, Melbourne, 2019. 


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