Digital delay? Why people still love cash and coins

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A newly designed $100 note will be released later this year, but is there any need given the shift to digital and contactless payments?

The future of money is digital or so the story goes. So why is the Reserve Bank of Australia launching a new series of banknotes, especially when electronic and contactless payments have overtaken cash in popularity?

“Given these questions, it might surprise you then to know that the demand for banknotes in Australia is still strong,” RBA Governor Philip Lowe said last year. “The stock of banknotes on issue, relative to the size of the economy, is close to the highest it has been in 50 years.”

New money, old uses

While the value of cash withdrawals at ATMs has fallen by a quarter over the past decade, the RBA estimates there is currently around $3000 worth of banknotes on issue for every Australian.

“I, for one, don’t have anywhere near that amount,” Lowe said – a sentiment many Australians will share.

About one-quarter of cash is used for legitimate day-to-day transactions while between half and three-quarters is held as a store of value in safes or under beds. Between 5 and 10% of banknotes are probably lost or accidentally destroyed while a further 4 to 8% are used in the shadow economy to hide transactions from the tax office or for illegal purchases.

While a new law is set to ban cash transactions over $10,000 in Australia in an effort to stamp out illegal or black-market transactions, it appears cash is not going anywhere soon.

A recent Deutsche Bank global survey found a third of people in developed countries still consider cash to be their favourite way to pay, while more than half believe cash will always be around.

The RBA’s new $100 note will be released into circulation in the second half of 2020 – the final redesigned Australian banknote that forms part of its Next Generation Banknote Program. The note contains new security features to fight counterfeiting, such as a flying owl and a reversing number 100.

Banknotes also provide accessibility for significant portions of the community who can be left out of the digital revolution.


Cash supports accessibility

A significant proportion of people still rely heavily on cash for their daily payment needs, according to the RBA’s review of retail payments regulation issues paper, which explores the role of cash in our society.

There is growing concern that cashless payments discriminate against ‘unbanked’ citizens or those excluded from the financial system, prompting US cities such as Philadelphia and New York to require all merchants to accept cash.

An estimated one billion people worldwide are without basic proof of their identity, while up to half the population lacks identification documents that authorities routinely accept, which often leaves them excluded from banking, insurance, and financial services, according to the Gates Foundation.

Even in wealthy countries like the US, an estimated 8.4 million households (or 6.5% of all households) were unbanked in 2017.

Indigenous Australians are around twice as likely as other Australians to suffer financial exclusion, although the big four banks have made changes to increase access to transaction accounts and appropriate credit, according to a report by the Banking Code Compliance Committee.

Cash can also play a crucial role enabling the lives of older Australians, people living in rural areas where digital access is patchy, recent immigrants who may not speak English, and people with disabilities.

All Next Generation banknotes also have tactile features, such as raised bumps on the edges, to help people who are blind or who have low vision to identify each denomination.

Cash serves many purposes but as the new banknotes find their way into circulation, Governor Lowe also has some advice.

“For those of you who still use banknotes for your spending, it would be good to see a bit more use and spending out there.”


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