Businesses must adapt to the decline of the cash-based economy with more customers increasingly preferring electronic transactions to simple cash payments.
Similarly, cheque payments are also on a quick decline with their use dropping 13.3 per cent in 2013 as compared to 12.5 per cent in 2012. This represents a drop of 224 million cheques written to 194 million cheques written.
There is now about $60bn of cash issued in Australia, with 90 per cent of the value residing in banknotes. However, a variety of new payment methods have threatened the primacy of cash with one report now suggesting cash is at a vital “tipping point”.
According to new figures, the total number of estimated cash payments has declined five percent since 2005. This trend is forecast to accelerate with the number of cash payments expected to drop a further 20 per cent in the next few years.
What does this mean? As a share of total payment transactions, cash has declined from 73 per cent of transactions in 2005 to only 59 per cent in 2013. Again, this trend is expected to continue with cash estimated to make up only 43 per cent of all transactions by 2018.
The figures are contained in a new report titled “The Evolution of Cash: An Investigative Study” prepared for the Australian Payments Clearing Association by RFi Consulting.
The research suggests that between 2013 and 2018, a grand total of $56,551 million in “potential” cash transactions will have been displaced by electronic forms of payment. However, despite this trend, the number of banknotes on issue is expected to increase.
“We will always have a need for cash, but the take-out here is that cash won’t be the first or only choice for making any payment, regardless of what it’s for. Australians love their “tap and go” cards, and we are going to see lots of competition and innovation in mobile payments in the next few years. Consumers are going to find that cash is not their first choice anymore, even for convenience items like a coffee,” APCA chief executive Chris Hamilton said.
“Increasingly, they may also find that automated, super-convenient consumer services will accept a wide range of digital payments – but not cash.”
The decline in cash use appears to be supported by figures from the Reserve Bank of Australia showing that in February 2014 there were 57.3 million cash withdrawals from ATMs, down from 60.0 million in February 2013.
A separate Milestones report prepared by the APCA also shows that cheque payments have dropped 70 per cent in the ten years to 2013 although their values have remained resilient.