Cash may soon lose its place as the most common payment type in Australia, as cards, mobiles and online payment solutions continue to rise in popularity. This is according to the latest Milestones Report, released by What's in store for the future of cash paymentsthe Australian Payments Clearing Association (APCA) in August 2014.
The APCA research shows that Australians are forgoing cash in favour of contactless and digital payments. This trend resulted in a 5 per cent decline in the number of cash transactions since 2005.
While this percentage may seem low, the drop has seen the proportion of cash payments related to the total number of transactions fall to a level almost equal to debit, charge and credit cards (47 and 43 per cent respectively).
Furthermore, APCA forecasts the decline in cash usage to accelerate over the next four years, with a further 20 per cent fall expected before reaching a plateau in 2018.
“As the Australian economy continues to grow, so does the total number of payments being made,” APCA Chief Executive Officer Chris Hamilton said.
“The fact that the number of cash payments is now decreasing means that this form of payment is not only missing out on this overall market growth but is being displaced from where it was previously used.”
Cheques also experienced a significant fall in popularity last year, decreasing by 13.3 per cent. This was markedly faster than the 12.5 per cent drop in 2012, indicating that the abandonment of cheques is occurring at an increasing rate. However, cheque value remained at a similar level to previous years, which shows that individuals are predominantly using this payment method for higher priced transactions.
Are we facing a cash extinction?
Cash has long been the most popular form of payments in Australia, with more than half of all transactions being completed with notes and coins. According to the APCA, the volume of cash in Australia is currently around $60 billion.
As technology develops and alternative payment solutions become faster and more convenient, it is unsurprising that carrying bulky wallets with insecure and easily lost cash is becoming less common.
While cash has been fighting the digital tide for some time now, APCA believes that the use of notes have coins has now reached a “tipping point”.
Now, even as Australian transaction numbers increase, cash payments are moving against the trend and falling in volume. The share of total cash payments declined from 73 per cent in 2005 to 59 per cent in 2013. The APCA forecasts that this movement will continue, until the proportion of transactions that involve cash falls below the majority share – reaching 43 per cent in 2018.
However, the use of cash should not fall far below this figure, according to APCA. With cash still dominating transactions under $20 (70 per cent market share), it seems unlikely that Australia will be able to give up the cash for good.
“We will always have a need for cash, but the take-out here is that cash won’t be the first or only choice for making any payment, regardless of what it’s for,” Mr Hamilton said.
“Australian consumers and businesses are adopting new electronic methods based on a variety of factors, including speed, convenience and security.”
What does this mean for your business?
There is an increasing need for businesses to offer alternatives to cash – such as direct debit solutions, online credit card payments and BPAY. Not only will this ensure your company can continue to attract and retain savvy consumers, but it can also provide a number of important benefits.The advantages of these multiple payments options include reduced administrative burden, more reliable payments and increased efficiency. Talk with one of our friendly payments consultants today for more information on how these payment solutions could help your business.