Cashless society looming within three years

Australians are ditching cash at the fastest rate in history as contactless payments and the boom of buy-now-pay-later methods threaten to radically reduce the use of physical money.

This doesn’t mean cash will only be used for two per cent of all transactions, but rather that the value of these cash purchases will pale in comparison to those made with other methods such as credit or debit cards.

The report also predicted that within two years, digital wallets (such as apps that allow customers to use their smartphone or smart device to pay) will overtake credit and debit cards to become the leading e-commerce payment method by 2024.

Currently debit cards are most used payment method at the registers comprising 41 per cent of all transactions, followed by credit cards (35 per cent), digital wallets (11 per cent), cash (seven per cent) and buy-now-pay-later (four per cent).

In Australia buy-now-pay-later services such as Afterpay are predicted to account for 14 per cent of all e-commerce purchases by 2025, up from its current 11 per cent.

The steep decline in the use of cash comes as many Australians change their purchasing behaviour during the COVID-19 pandemic to avoid contact where possible.

Analysis by the Australian Banking Association found that ATM withdrawals – perhaps the largest indicator of general cash use – decreased by 20 per cent in the year to August 2021.

“COVID-19 accelerated trends in our society and changed the way we live our lives. Working from home will forever be more prominent within the workforce, we have steered away from using cash and as a result are seeing an increase in card and technology payments and the existing trend of doing banking online instead of in a branch has only continued,” said ABA chief executive Anna Bligh.

“As we have seen more people go away from using branches, it’s no surprise to see banks invest in areas where customers prefer to bank, such as in their online platforms and apps.

“Interestingly, one major Australian bank reported digital banking is now the primary channel for its customers aged between 16 and 69, with digital interactions up 10 per cent since 2019. This same bank reported a steady branch usage drop of 32 per cent since January 2019.”

ABA data shows that one in ten Australians regularly leave home without taking their wallet, and more than one in three Australians use digital wallets on their smartphones at least weekly.

As cash use declines, so too does the use of physical bank branches.

Some 72 per cent of Australians reported that in the month leading up to September 2021 they did not visit the branch of their main bank.