The use of cash in Australia has been under attack from a variety of sources for decades, but analysis by the Australian Payments Clearing Association (APCA) into how the use of cash has evolved indicates that cash use has reached a "tipping point".
ACPA’s survey on the evolution of cash interviewed 2000 people to get an accurate and balanced view of the use of cash in Australia between September 2011 and September 2013.
ATM withdrawals have been in decline since 2008, just as contactless card payments became more popular. Even though there has been more financial transactions, the use of cash has fallen.
The study by ACPA, titled ‘The Evolution of Cash’ and published in July 2014 found that card based payments are likely to displace the use of cash further in the period 2013 to 2018.
In total, cash’s share of payment transactions has declined from 73% in 2005 to 59% in 2013. The study estimates that by 2018, cash will be used for just 43% of transactions.
Cash withdrawals peaked in Jan 2009 at around $600 a month and have now fallen by 14% to around $525 a month mainly due to the increase in card payments, according to the ACPA research.
Cash will never completely disappear because it will remain in use by some segments of society and to fund the illicit economy.
According to Retail Finance Intelligence (RFI) estimates, on page 7 of the study on where cash is physically located and being used, out of a total of AUS$60 billion, 10% or $6 billion is being used for illicit activities in the black economy.
The acceleration from cash to electronic payments is partly due to dominant international card payment firms such as VISA, MasterCard and eftpos (not international) being used widely. These systems offer speed, security, efficiency and convenience.
Contactless payments are proving to be a success in Australia, where use of the product has been reported by RFI in its 2013 payments report as the highest in the world.
Cash will be displaced by electronic, contactless and mobile payments. The historical trend of migrating from cash to cards will continue. The study estimates that in total, between 2013 and 2018, $56 billion of cash transactions will disappear.
Currently, RFI estimates in the study that out of total annual payments of AUS$15,100 billion, cash was used for AUS$8,909 billion in 2013, representing 59% of the total. By 2018, this will fall to 43%, cash’s share will be AUS$7,397 billion out of a total of AUS$17,202 billion.
Other forms of payment that will be used instead of cash will include mobile point of sale for small merchants, contactless scheme cards, mobile payments, contactless eftpos, real time payments (non-mobile) and mass transit e-ticket.
The rise of online shopping will further increase the decline in the use of cash because you can't use cash to pay for products purchased online.
The use of mobile phones for making payments as NFC based payments becoming more established will also eat into cash’s market share. The survey indicates that 20% of people will be likely or very likely to use them if they were available.
The research notes that 'Australia is positioned ahead of most countries in this trend’ because Australia has a very highly carded population, where over 50 million payment cards circulate amongst 23 million people.
Overall, consumers indicated a move away from cash to electronic payments, particularly to credit and debit cards. Cash and cheques are the only payment types to decline in the period surveyed with regular cash use down from 90% of consumers saying they use it regularly for payments in 2011 to 70% in 2013.
In that time there has been an increase in the number and range of contactless cards and acceptance terminals, which has accelerated the move to electronic payments away from cash.
However most consumers agree that there will always be a place for cash. Cash will continue to be used for small value transactions and as a "store value" with people keeping it as a safety net.
Henceforth, the use of cash will decline slower as the “harder to attack” areas of cash usage (older generation, black economy and illicit activities) are likely to remain resistant to electronic payments.
Therefore we anticipate that there will be cash in the system for years to come.
This article represents the views and opions of the author and do not necessarily reflect the opinions of BPAY.
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