“Who carries cash anymore?” is something you’ve probably heard said or said yourself more than a few times over the last 5-10 years. With Aussie cash payments steadily declining from 69% in 2007 to just 27% in 2019, it definitely seems like cash’s days are numbered – and this downward trajectory is now being sped up thanks to many retailers requesting contactless payments due to COVID-19. So if we’re not spending cash, how will we pay? By card, of course…or is there more to it than that?
In China, about 83 per cent of payments are made via mobile, mainly with QR codes, and it looks like QR code payments could be on the rise here too, with PayPal Australia launching QR code payments in May, and Coca Cola announcing this week customers can now use QR codes at over 2000 vending machines around the country – and pay with Bitcoin, no less.
But QR codes are far from the only option. Smartphone apps like Venmo in the US, Tikkie in The Netherlands and Vipps in Norway are all hugely popular, and make it oh-so-simple to transfer money to anyone you’d like, whether it’s splitting the bill with friends at a restaurant, or paying for a pastry at a local market. Although payment apps haven’t really taken off here in Australia yet, PayID is pretty similar – and pretty handy, too.
So we’ll use our phones and our cards (and our wearables), but who are the winners and losers of a society moving away from cash?
The losers are, of course, money launderers, drug dealers, people trying to hide income from the taxman and people who prefer cash for whatever reason…and that’s about it.
The winners include businesses that don’t have to worry about the security concerns of holding lots of cash, the banks (it’s hard to rob a cashless bank, but one poor Swedish soul tried in 2013) and customers who also benefit from the traceability and security of digital payments. But the biggest winners are surely the digital payments platforms – and the real question is, especially for in-store transactions, what value do they really provide?
Last weekend at the Prahran Market, one of the greengrocers was having problems with their EFTPOS terminals, meaning customers couldn’t pay via card. The solution? Simply send the money straight to their bank account using your banking app on your phone. Slower and clumsier than paying by card, granted, but really not too bad – and, crucially, no merchant fees. So why can’t we just send our payment straight to the seller all the time? Why are third-parties like Mastercard and Visa even necessary? Convenience, of course, but surely it’s an industry ripe for disruption.
If retailers were able to minimise merchant fees, or eliminate them altogether, that could mean billions saved every year. In fact, according to a recent Australian Financial Review article, retailers are being slugged up to $550 million in tap and go fees alone. But with cards on the up and cash on the way out (and COVID-19 expediting its departure), it’s not looking like merchant fees will be going away any time soon.
Naturally, cash won’t disappear completely for a while yet either, but that day will probably come eventually. When that day should arrive is anyone’s guess, but the question of when Aussie retailers will find a way to innovate their way to lower or no merchant fees is far more interesting – whether it’s via smartphone apps or something else entirely.