Cash was predicted to be dead in Australia as early as 2022, but there are plenty of reasons why it will be king for a while yet

Long live cash (Photo by Michael Dodge, Getty Images)

The unveiling of the new $20 note in Australia on Wednesday was a fairly humble affair.

There was the RBA governor Philip Lowe – whose signature features on every note in the country – handing over a freshly printed lobster to a fruit vendor in exchange for a few bananas. It was impossible to tell if the reaction to the rollout was muted or if it was just the video.

If there wasn’t any fanfare, perhaps there should have been. After all, the move is contrary to the expectation that the end for cash is nigh – and at the same time the government appears to be waging a war on it.

Prime Minister Scott Morrison and his government introduced legislation to parliament in September that could make it illegal for Australians to pay for purchases over $10,000 in cash. A senate committee is currently open to submissions from the community.

The task recommended by the Black Economy Taskforce, with those who support it claiming the bill’s purpose is to crack down on illegitimate activity, from tax evasion to money laundering. Why, after all, some may ask do we even pay with cash at all?

Tap and go has been around for years. New technology and payment companies are reducing the cost and time required to move money, and online shopping is forecast to explode. Why would anyone bother to fumble with loose change in such a consumer utopia?

Certainly, it appears that Australians are using cold hard cash less and less. In 2008, we used to go to the ATM 40 times per year on average, according to the RBA’s figures. A decade later, it was down to 25 times and declining. Over roughly the same period, the number of card transactions quintupled.

But despite predictions of us becoming cashless society by 2022, Australia is still flush with the stuff. In fact, the amount of cash in the Australian economy is near a 50-year per-capita high, according to the RBA, and its predominantly $50 and $100 bills that we’re clinging on to.

“For every Australian, there are currently around thirty $50 and fourteen $100 banknotes on issue,” Lowe explained at last year’s payment summit. “So there is an apparent paradox between the declining use of cash and the rising value of banknotes on issue.”

We’re hardly the exception in that regard. A UK review found almost one in five Britons would struggle to cope in an entirely cashless society. Even in Sweden, where just 2% of transactions are in cash, conceded in its own review that getting rid of it is a major risk to the most vulnerable people in its society, who are largely unbanked. The same concern goes for the elderly who perhaps aren’t as crash hot when it comes to online banking and its ilk as their grandchildren.

Meanwhile low-interest rates have become a feature of modern economies around the world. From Germany to Japan, the UK to the US, rates are low or going lower. When deposits are barely cents on the dollar, the financial difference between keeping cash in your wallet or in a savings account is negligible.

That, of course, isn’t the only reason. Some are reluctant to have their entire spending history documented by banks and governments. Certainly, not all of these are criminal.

Take, for instance, the example of Hong Kong. Many of its citizens are currently protesting the encroachment of the Chinese government on the administrative region. Reporter on the ground Mary Hui noted on Twitter the need for those protesters to buy train tickets with cash so as to avoid a potential backlash from authorities.

Of course, it’s not just civil unrest which increases demand for cash, but it is a good example of just one essential use case. Australia may have enjoyed the fruits of stable and democratic government for more than 100 years, but nonetheless, has its own motivations for having cash on hand.

A recent technical error in Australia saw ATMs and EFTPOS machines unable to accept payment or distribute cash, leaving thousands around the country unable to use their money. A strong reminder that cash doesn’t require electricity and internet to function.

These are all obstacles flashy cards and electronic payments will need to deal with to complete their climb to the top of the payment world. According to Lowe, these competing types will need to improve their reliability, functionality, and transaction cost. Already there are new entrants into the market which are adding the competition required to improve these. So too the further adoption of open banking and new payment technology.

However Lowe, despite believing cash will become a niche payment option over time, still thinks there’s a place for the humble banknote in this modern world.

“While it is difficult to predict the future, I expect that banknotes will remain part of our payments system for some time to come,” he said.

So there you have it. While we might all soon become outlaws if we dare use it at the 7-figure scale, the death of cash appears greatly exaggerated.

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