Would your business survive in a cashless economy?
Monday, March 18, 2019/
There has been significant advancement in the way we transact goods and services. Now, as we shift further into the digital era, money is moving with the high tech times.
Addressing the Australian Payment Summit in November 2018, Reserve Bank governor Phillip Lowe suggested we’re at a turning point, with cash set to become “a niche payment instrument.”
It’s already well on the way
KPMG Payments Advisory partner Brett Watson says movements have already been made in other parts of the world towards a cashless economy.
“Numerous jurisdictions have paved the way towards cashless businesses,” Watson says. “Several Nordic countries, such as Sweden, Denmark and Norway, are well on the way, with many shops declining to accept cash payments.
“Other countries, such as China and India, have jumped from cash to mobile payments, with the rapid emergence of the middle class, and a strong focus on financial inclusion.”
University of New South Wales Professor of Economics Richard Holden has said Australia could become a cash-free society in just three years.
According to the RBA, Australia ranks as the sixth highest for users of electronic payments globally, with 37% of household spending now attributable to cash payments—compared to 69 per cent a decade ago.
“Cash usage is declining in Australia, evident by the decreasing number of cash withdrawals,” Watson says. “This is linked to the ease and availability of card transactions, with Australia having one of the highest adoption rates of contactless payments.”
Watson says cash will continue to play an important role in the economy for some time however, with a ‘less-cash’ society in the first instance supporting the transition.
“As the Government and economy moves towards digitisation and mobile/online payments, we must ensure that less technology savvy individuals or those without access to a bank account are not excluded from realising the societal benefits,” Watson says.
“It is therefore critical for cash to remain during this transition, with a push towards financial literacy coupled with digital literacy for the broader population.”
What needs to happen to make cashless work?
Aside from fears around “big brother” type surveillance of consumer activity, one of the main concerns in a digitised economy is capacity of supporting infrastructure.
“If more people and businesses are transacting in cashless methods, we need to ensure commensurate focus by the Government, RBA, regulators and the banking and payments industry to work collaboratively to continually enhance the resilience of payments systems and infrastructure, as outages will have a greater negative impact on confidence from both consumers and businesses,” Watson says .
In order to successfully transition to cashless, Watson says more competitively priced options for real-time payments are required, such as boundary-pushing technology emerging from overseas innovators and fintechs like Square and Mobeewave.
“Finally, we see regulators playing a shaping role, as evident by the RBA’s move to ban excessive merchant surcharging.”
The impact of a cashless economy
Depending on the industry, reducing the amount of cash exchange can benefit both consumers and businesses alike, according to KPMG.
In the first instance, there’s the reduced risk of theft (and in turn security costs), along with time taken to receive and reconcile payments.
“We see a world where ancillary features such as digital receipting and loyalty become part and parcel in how consumers and businesses interact with benefits for both,” Watson says.
While some small business owners have voiced concerns over excessive electronic transaction charges, owner and operator of Main Street Cafe in Warragul (Victoria), Chris Odrowaz sees only positive repercussions for the hospitality industry in a cashless economy.
Odrowaz says close to 80% of Main Street Cafe’s sales are already transacted via eftpos.
“It’s probably going to make everyone’s life easier. We work in a really fast paced environment, so if we can process transactions and get people’s orders out faster with things like Paypass, it works in our favour.
“I guess the only thing it will eliminate is the ability for people to trade tax free, which as a society will benefit everyone.”