Embracing Payment Options Doesn’t Mean Giving Up On Cash

In recent weeks and months there have been reports released on Australia’s payments landscape. The majority of these have been looking into the impact of alternative payment methods and how they have been adopted in Australia, which, as has become more prevalent these days, has led to an attack on cash.

In a report this week by the Australian Payments Clearing Association, titled The Milestones Report, the impact of “transitioning payments to the digital economy” was looked at in greater detail. The press release accompanying the report begins by comparing cash to cheques as it states that “as with cheques, Australian consumers are increasingly giving up cash in favour of cards, mobiles and online solutions”. Given the statistics that follow, this seems an unfair comparison as it goes on to state that the number of cash payments has declined 5% since 2005. While it’s clear that the number of transactions will decrease as more payment options come to market, declaring the death of cash over a reduction of 5% across a period of almost ten years seems a step too far – and significantly different to cheques which experienced a decline of 12.5% in 2012 and 13.3% in 2013.

Somewhat contradictory to this latest report, only four months earlier, the Reserve Bank of Australia reported on the importance cash has to Australian’s generally and in the payments landscape. In their March quarter bulletin, the Reserve Bank gave an update on their “Next Generation Banknote Project” and detailed interesting statistics about cash both as a payment method and in regards to cash’s wider roles in monetary supply, policy and as a store of wealth. The report recognises strong growth in the use of electronic and digital payment methods but despite this states that “demand for cash continues to grow” and that “the number of banknotes on issue has grown at a rate of around 5% per annum over the past decade”. This not only recognises the demand for cash is strong but that people value the wider role it plays.

Another factor that has to be accounted for with cash is that its role as a form of payment may be more situational. The Bank’s Consumer Payments Use Study conducted in 2010 found that cash accounted for the greatest share of the number of consumer payments at 62% and that cash was used for 80% of transactions below $25. Further to this, cash was the primary means of payment for take-away stores, hotels, bars and small food stores where transactions are generally low in value, made in person and in an environment where alternative payment methods may be less efficient.

All payment methods to any individual consumer hold situational roles – times when they prefer to use that payment method over others – and new payment methods, their adoption and subsequent reports about them, doesn’t have to be an attack on cash. Rather, a more competitive payments landscape should be embraced as it provides consumers with greater convenience in those situations and greater choice generally.