Researchers at the Reserve Bank of Australia (RBA) have released their latest review of how Australian’s pay for goods and services. The survey, taken every 3 years, shows that Australians now use debit and credit cards to pay for things more often than cash. 52% of payments made during the survey period in 2016 were done with cards compared to 37% using cash. This compared to 43% of payments made using cards in 2013.
Higher income earners and people under the age of 50 were more likely to use cards than cash, but all groups still used cash more frequently for payments under $10.
Australia’s reduction in cash use mirrors that of other countries in the world but it still lags behind the US and Sweden in particular where over 80% of payments are cashless.
Much of the growth in card use has been fuelled by the use of contactless, tap and pay transactions that make up over 60% of all card payments.
What is also interesting about the survey is that mobile payments made up only 2% of contactless card payments. The lack of enthusiasm for using mobile payments is in part because of the intransigence of some of the Australian banks in supporting systems like ApplePay. However, when asked, 90% of respondents said they would not make mobile payments because they either “didn’t like the idea” or were “satisfied with current methods”. Only 10% said they planned to use mobile payments.
For companies like Apple, it shows how far it will need to go to educate the public in the advantages of using their phones for payments.
Businesses applying surcharges to card use was not a significant factor in payments. Charges were only applied to 2.6% of all in-person card payments. However, it was a reason cited for using cash instead of a card, especially amongst low cash users.
For high cash users, the principle reason given for preferring cash was that it made it easier to manage a budget and was a direct use of the user’s own funds.
At the current rate of change in payments, it would take another 10 to 15 years before Australia reached the level of card use of a country like Sweden. Technologies that might accelerate this move, like the New Payments Platform will still take some years to make an impact.
This is perhaps not surprising if you consider what factors are involved in the decision to use a particular technology. These factors include how useful the technology is perceived to be by a user. In terms of using mobile payments rather than cash, a person may consider how secure the system is and how easy it is to use. Another major factor is what is called the “subjective norm”, basically what others that make up a person’s social circle actually think and do.
Although there are many benefits to a cashless society, many of these benefits are realised by people and organisations other than the actual user. What hasn’t happened in Australia is a concerted effort to pass some of these benefits, as incentives, down to the people whose behaviour needs to change. Banks for example take the profits from charges to merchants rather than realise the benefits of an overall move to electronic payments. Merchants pass these charges on to customers directly as surcharges rather than build them into their prices. From an end-user perspective, there is simply not enough benefits for many people to make the switch from cash. From an older person’s perspective, cash is still the subjective norm.
The dynamics of the adoption of technologies is complicated but generally it is rare that new technologies completely disrupt an existing way of doing something, despite all of the media and hype to the contrary. The “gig economy” of businesses like Uber and AirBnB has influenced, but not replaced, regular taxi companies or hotels.
Australia may be heading towards being cashless at some point, but that point will not be any time soon.
Authors: David Glance, Director of UWA Centre for Software Practice, University of Western Australia