Tap-and-go payments using your phone or smartwatch could soon be the only way you pay for anything as Australia accelerates towards becoming a completely cashless society.

Finance experts predict the country is just three years away from eliminating cash transactions as the government unveils new legislation to regulate digital payments.

However, the transition doesn't come without controversy.

Proponents argue going cashless increases convenience, makes transactions more traceable for security, and reduces banking costs.

But critics counter that it compromises privacy, excludes groups like seniors and other vulnerable groups, and loses the psychological benefits of paying with physical cash.

Australia could go cashless within three years as the government moves to regulate digital wallets. Credit: Pexels.

In Australia, the shift from cash rapidly sped up during the COVID-19 pandemic, when hygiene concerns made people favour contactless tap-and-go payments over exchanging banknotes.

RBA figures show that in 2019, cash was used in 32 per cent of in-person transactions. But by 2021, this plummeted to just 16 per cent of transactions, an enormous drop in only two years.

Meanwhile, mobile wallet usage skyrocketed almost overnight through applications like Apple Pay and Google Pay.

Now, a quarter of non-cash payments happen via mobile wallets.

This is transforming the way Australians pay. A case in point—gone are the days of rummaging through your wallet or purse for the right card. For more and more Aussies, a simple tap of a phone or smartwatch pays for your morning cuppa in seconds.

But consumer advocates caution that convenience comes at a cost. According to finance expert Nicole Pedersen-McKinnon, paying with a card or phone disconnects you from the 'pain' of parting with your money.

'There is a psychological phenomenon called coupling, which means linking your purchases with payment pain,' she explained, adding that this coupling is weaker when money is digitised rather than physical.

'Cash does this as the dollar detriment is immediate and in your face, so to speak.'

This means that ditching cash likely means higher consumer spending, less restraint, and more splurging, which spells trouble for vulnerable groups already struggling with money management.

Another question comes to mind when it comes to 'cashless' purchases: What if your phone runs out of battery while you're out? Or mobile networks crash from a cyber attack? No cash means no backup option.

These concerns arose after the Australian government announced legislation to regulate digital payments for the first time.

The new laws will give the Reserve Bank oversight of technology companies like Apple and Google and their digital wallet systems.

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According to finance expert Sarah Wells, the laws are the next step towards Australia eliminating cash completely within three years. She said the government’s recent move to tighten the grip on digital cash payments like Google Pay and Apple Pay is the ‘next step towards a cash-starved’ country.

However, Wells warned the government must consider privacy, security and accessibility for all groups in society, not just the tech-savvy.

'We need to make sure we are not compromising the safety, education and experience of minority groups and young minds in our endeavours to legislate contemporary payment platforms,' Wells said.

Human rights groups also fear invasive tracking of all purchases by tech giants, loss of financial anonymity, and exclusion of vulnerable community members without smartphones.

So, while a fully cashless future offers some benefits, the risks are real, too. Imagine the chaos if an outage brought the tap-and-go system crashing down across the country with no cash backup…

Key Takeaways

• According to finance expert Sarah Wells, Australia may become a cashless society within the next three years.
• New draft legislation would grant the Reserve Bank the power to regulate digital wallets like Google Pay and Apple Pay.
• There is a growing shift from cash to card and digital payments within Australia, with only 16 per cent of in-person transactions conducted in cash last year.
• Future changes in the payment landscape will see the Reserve Bank explore the case for new forms of digital currency while ensuring cash remains a viable option.

Perhaps digital payments could be Australia's future. But is it the future we want or need? Members, let us know your thoughts in the comments below!

 

[IAN3005]

Unfortunately, as became apparent a few weeks ago here in Melbourne, very few businesses have one of the old click clack machines. When internet banking went down for much of the day people were sent into a panic trying to locate a bank that actually handled cash
It is estimated that business reliant on electronic payments lost millions over the space of a few hours

I like it......

 

[PDG]

I wonder if we, the people will actually get a say regarding this ?
Perhaps another very costly and pointless referendum ? I doubt it, of course they will just bring it in, saying that "no one uses cash much these days, and that there is no need for bank branches as no one uses them", and of course that's because they have closed so many branches down, again without really asking the people who use the bank. There used to be 2 bank branches in my town both now closed plus there were at one stage at least 4 bank ATM's now there are none - unless you want to pay 2 dollars to get your own money out as there is only a ATM run by a non bank organization.

It's amazing how many things are brought into place without asking us the people what we think about it.
I am sure that if asked we would vote a resounding no to the abolition of cash.

 

[IAN3005]

I wonder if we, the people will actually get a say regarding this ?
Perhaps another very costly and pointless referendum ? I doubt it, of course they will just bring it in, saying that "no one uses cash much these days, and that there is no need for bank branches as no one uses them", and of course that's because they have closed so many branches down, again without really asking the people who use the bank. There used to be 2 bank branches in my town both now closed plus there were at one stage at least 4 bank ATM's now there are none - unless you want to pay 2 dollars to get your own money out as there is only a ATM run by a non bank organization.

It's amazing how many things are brought into place without asking us the people what we think about it.
I am sure that if asked we would vote a resounding no to the abolition of cash.

Get a say..... who are you kidding.... they are working towards a dystopian society.... and watch the profits next financial year..... they wouldn't think of asking.....