Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
Another deeply philosophical discussion with Adam Stokes about how we see the world.
What defines “Money” and how does the likes of Bitcoin stack up?
Prepare for some mind-stretching conversations about how we look at the world (and why people often ignore new concepts and ideas).
Bank of Ireland has caved in to public pressure following a public outcry over its plans to heavily restrict cash transactions in its branches, via Irish Independent.
The bank came in for sustained criticism after the Irish Independent revealed yesterday that it plans to restrict over-the-counter cash withdrawals to a minimum of €700 and cash lodgements to a minimum of €3,000 in an effort to push customers towards using ATMs and self-service machines.
However, after criticism from Finance Minister Michael Noonan, as well as groups representing consumers, farmers, older people, rural dwellers and bank workers, the bank conceded that what it called “vulnerable” customers could continue to get cash and make withdrawals of smaller amounts of money at branch counters.
The changes prompted fears of a renewed bout of bank branch closures and staff lay-offs in the wake of the bank’s move to severely restrict counter-based cash transactions.
Mr Noonan described the changes as “surprising and unnecessary”, adding that he expects the bank to “fully honour” its commitment to “vulnerable customers”.
Bank of Ireland said it would continue to allow older customers and those unfamiliar with technology to make cash transactions over the counter.
“Bank of Ireland would like to confirm that vulnerable customers, together with those elderly customers who are not comfortable using self-service channels or other technology solutions, will be assisted by branch staff to use the available in-branch services.”
However, other banks are now expected to follow the lead of Bank of Ireland by moving to set strict limits on over-the-counter cash handling.
It comes after around 200 bank branches were closed, mainly in rural areas, during the financial collapse, with at least 10,000 retail bank staff laid-off.
Banks including Bank of Scotland, Danske, ACC and Irish Nationwide have already closed, limiting banking options for customers.
Now there are concerns that the move by Bank of Ireland to effectively become a cashless bank will prompt more branch shut-downs and redundancies.
Deputy chairman of the Consumers Association Michael Kilcoyne said other banks were set to mirror Bank of Ireland and discourage customers from withdrawing and lodging cash over the counter.
This would make branches in rural areas less viable, he warned.
“The implications of the Bank of Ireland move are very severe. If it gets away with this it will get rid of more staff and close branches.
“This will be a further blow for rural Ireland,” he said.
Mr Kilcoyne predicted that AIB, Ulster Bank and Permanent TSB would make similar moves to curtail cash handling.
And banking union IBOA said it is seeking a meeting with Bank of Ireland boss Richie Boucher over concerns the changes would mean more job losses.
The Irish Farmers’ Association said the changes would cause great difficulty for some farmers who are not familiar with the bank’s online system.
Age Action accused the bank of ignoring the needs of older people by setting high limits on over-the-counter transactions.
Governor Lowe spoke at the Australian Payments Network Summit yesterday. He discussed the rise of electronic transactions, especially though the New Payments Platform, the high relative costs of international retail payments, and the need for, and potential of a Strong Digital Identity System. He also highlighted the decline in cash transactions which now accounts for just around a quarter of day-to-day payments.
A recurring theme across these summits has been the need to improve customer outcomes. I am very pleased to see that this focus has been continued at this year’s summit. The focus on customer outcomes aligns very closely with the focus of the Payments System Board. The Board wants to see a payments system that is innovative, dynamic, secure, competitive, and that serves the needs of all Australians.
Increasingly, this means that the payments system needs to support Australia’s digital economy. With the digital economy being an important key to Australia’s future economic prosperity, we need a payments system that is fit for purpose. We will only fully capitalise on the fantastic opportunities out there if we have a payments system that works for the digital economy. The positive news is that we have made some substantial progress in this direction over recent years and in some areas, Australia’s payments system is world class. However, in the fast-moving world of payments, things don’t stand still and there are some important areas we need to work on.
In my remarks today, I would like to do three things.
The first is to talk about some of the progress that has been made over recent years.
The second is to highlight a few areas where we would like to see more progress, particularly around payments and the digital economy.
And third, I will highlight some of the questions we will explore in next year’s review of retail payments regulation in Australia.
Over recent years there have been significant changes in the way that we make payments. We now have greater choice than ever before and payments are faster and more flexible than they used to be.
The launch of the New Payments Platform – the NPP – in early 2018 has been an important part of this journey. This new payments infrastructure allows consumers and businesses to make real-time, 24/7 payments with richer data and simple addressing using PayIDs.
After the NPP was launched, it got off to a slow start, but it is now hitting its stride. Monthly transaction values and volumes have both tripled over the past year (Graph 1). In November, the platform processed an average of 1.1 million payments each day, worth about $1.1 billion. The rate of take-up of fast retail payments in Australia is a little quicker than that in most other countries that have also introduced fast payments (Graph 2).
I expect that we will see a further pickup in usage once the CBA has delivered on core NPP functionality for all its customers. The slow implementation has been disappointing and we expect the required functionality to be available soon.
There are now 86 entities connected to the NPP, including 74 that are indirectly connected via a direct NPP participant. There are at least six non-ADI fintechs that are using the NPP’s capabilities to innovate and provide new services to customers. All up, approximately 66 million Australian bank accounts are now able to make and receive NPP payments.
Use of the PayID service has also been growing, with around 3.8 million PayIDs having been registered to date. If you have not already got a PayID, I encourage you to get one. I also encourage you to ask for other people’s PayIDs when making payments, as an alternative to asking for their BSB and account number. It is much easier and faster.
One specific example of where the NPP is bringing direct benefits to people is its use by the Australian Government, supported by the banking arm of the RBA, to make emergency payments. During the current bushfires, the government has been able to use the NPP to make immediate payments to people at a time when they are most in need, whether that be on the weekend or after their bank has shut for the night.
One other area of the payments system where we have seen significant change is the take-up of ‘tap-and-go’ payments. Around 80 per cent of point-of-sale transactions are now ‘tap-and-go’, which is a much higher share than in most other countries. This growth has been made possible by the acquirers rolling out new technology in their terminals and by the willingness of Australians to try something different. There has also been rapid take-up of mobile payments, including through wearable devices.
Progress has also been made on improving the safety of electronic payments, particularly in relation to fraud in card-not-present transactions. The rate of fraud is still too high, but it has come down recently (Graph 3). I would like to acknowledge the work that AusPayNet has done here to develop a new framework to tackle fraud. This framework strengthens the authentication requirements for certain types of transactions, including through the use of multi-factor authentication.[1] This will help reduce card-not-present fraud and support the continued growth in online commerce.
As our electronic payments system continues to improve, we are seeing a further shift away from cash and cheques. The RBA recently undertook the latest wave of our three-yearly consumer payments survey. We are still processing the results, but ahead of publishing them early next year, I thought I would show you the latest estimate on the use of cash (Graph 4). As expected, there has been a further trend decline in the use of cash, with cash now accounting for just around a quarter of day-to-day transactions, and most of these are for small-value payments. Given the other innovations that I just spoke about, I expect that this trend will continue.
The progress across these various fronts means that there is a positive story to be told about innovation in Australia’s payments system.
At the same time, though, there are still some significant gaps and areas in our payments system that need addressing and where progress would support the digital economy in Australia. I would like to talk about four of these.
The first of these is further industry work to realise the full potential of the NPP, including its data-rich capabilities.
The NPP infrastructure can help make electronic invoicing commonplace and help invoices be paid on time. It can also support significant improvement in business processes, as more data moves with the payment. Real-time settlement and posting of funds also enables some types of delivery-versus-payment, so that the seller can confirm receipt of funds and be confident in delivering goods or services to the buyer.
The layered architecture of the system was designed to promote competition and innovation in the development of new overlay services. Notwithstanding this, one of the consequences of the slower-than-promised rollout of the NPP by some of the major banks is that there has been less effort than expected on developing innovative functionality. Payment systems are networks, and participants need to know that others will be ready to receive payments and use the network. Some banks have been reluctant to commit time and funding to support the development of new functionality given that others have been slow to roll out their ‘day 1’ functionality. The slow rollout has also reduced the incentive for fintechs and others to develop new ideas. So we have not yet benefited from the full network effects.
The Payments System Board considered this issue as part of its industry consultation on NPP access and functionality, conducted with the ACCC earlier this year. As part of that review we recommended that NPPA – the industry-owned company formed to establish and operate the NPP – publish a roadmap and timeline for the additional functionality that it has agreed to develop. The inaugural roadmap was published in October and NPPA also introduced a ‘mandatory compliance framework’. Under this compliance framework, NPPA can designate core capabilities that NPP participants must support within a specified period of time, with penalties for non-compliance. This is a welcome development.
One important element of the roadmap is the development of a ‘mandated payments service’ to support recurring and ‘debit-like’ payments. This new service will allow account-holders to establish and manage standing authorisations (or consents) for payments to be initiated from their account by third parties. This will provide convenience, transparency and security for recurring or subscription-type payments and a range of other payments.
Another element of the roadmap that has the potential to promote the digital economy is the development of NPP message standards for payroll, tax, superannuation and e-invoicing payments. The standards will define the specific data elements that must be included with these payment types, which will support automation and straight-through processing. We would expect financial institutions to be competing with each other to enable their customers to make and receive these data-rich payments.
Less positively, there is still uncertainty about the future of the two remaining services that were expected to be part of the initial suite of Osko overlay services. These are the ‘request-to-pay’ and ‘payment with document’ services. We understand there are still challenges in securing committed project funding and priority from NPP participants to move ahead, even though BPAY has indicated it is ready to complete the rollout. The RBA strongly supports the development of these additional NPP capabilities, which are likely to deliver significant value for businesses and the broader community.
A second area where the Payments System Board would like to see further progress is the provision of portable digital identity services that allow Australians to securely prove who they are in the digital environment.
Today, our digital identity system is fragmented and siloed, which has resulted in a proliferation of identity credentials and passwords. This gives rise to security vulnerabilities and creates significant inconvenience and inefficiencies, which can undermine development of the digital economy. These generate compliance risks and other costs for financial institutions, so it is strongly in their interests to make progress here. It is fair to say that a number of other countries are well ahead of us in this area.
The Australian Payments Council has recognised the importance of this issue and has developed the ‘TrustID’ framework. The Government’s Digital Transformation Agency has also been working on a complementary framework (the Trusted Digital Identity Framework), which specifies how digital identity services will be used to access online government services. The challenge now is to build on these frameworks and develop a strong digital identity ecosystem in Australia with competing but interoperable digital identity services.
The rollout of open banking and the consumer data right should bring additional competition among financial services providers, and digital identity is likely to reduce the scope for identity fraud, while providing convenient authentication, as part of an open banking regime.
A strong digital identity system would also open up new areas of digital commerce and help reduce online payments fraud. It will also help build trust in a wide range of online interactions. Building this trust is increasingly important as people spend more of their time and money online. So we would like to see some concrete solutions developed and adopted here.
A third area where we would like to see more progress is on reducing the cost of cross-border payments.
For many people, the costs here are still too high and the payments are still too hard to make. It is important that we address this. It is an issue not just for Australians, but for our neighbours as well. I recently chaired a meeting of the Governors from the South Pacific central banks, where I heard first-hand about the problems caused by the high cost of cross-border payments.
Analysis by the World Bank indicates that the price of sending money from Australia has been consistently higher than the average price across the G20 countries (Graph 5). And a recent ACCC inquiry found that prices for cross-border retail payment services are opaque. Customers are not always aware of how the ‘retail’ exchange rate they are being quoted compares with the wholesale exchange rate they see on the news, or of the final amount that will be received in foreign currency.[2] There are also sometimes add-on fees.[3]
As part of the RBA’s monitoring of the marketplace, our staff recently conducted a form of online shadow shopping exercise, exploring the pricing of international money transfer services by both banks and some of the new non-bank digital money transfer operators (MTOs).
This exercise showed that there is a very wide range of prices across providers and highlighted the importance of shopping around.
The main results are summarised in this graph (Graph 6). In nearly every case, the major banks are more expensive than the digital MTOs. For the major banks, the average mark-up over the wholesale exchange rate is around 5½ per cent, versus about 1 per cent for the digital MTOs.
The graph illustrates why the cost of cross-border payments is such an issue for the South Pacific countries. These costs are noticeably higher than for payments to most other countries. This is a particular problem as many people in the South Pacific rely on receiving remittances from family and friends in Australia and New Zealand. In many cases, low-income people are paying very high fees and it is important that we address this where we can. As is evident from the graph, most digital MTOs do not service the smaller South Pacific economies, which limits customers’ choice of providers.
In part, the high costs – and slow speed – of international money transfers is the result of inefficiencies in the traditional correspondent banking process. It is understandable why some large tech firms operating across borders see an opportunity here. Where people are being served poorly by existing arrangements, new solutions are likely to emerge with new technologies. This represents a challenge to the traditional financial institutions to offer better service at a lower cost to their customers, while still meeting their AML/CTF requirements.
Central banks have a role to play here too, and there is an increased focus globally on what we can do to reduce the cost of cross-border payments. One example of this is the promotion of standardised and richer payment messaging globally through the adoption of the ISO20022 standard. The RBA is also working closely with the Reserve Bank of New Zealand, AUSTRAC and other South Pacific central banks to develop a regional framework to address the Know-Your-Customer concerns that have limited competition and kept prices high.
A fourth area where we would like to see more progress is improving the operational resilience of the electronic payments system.[4]
Disruptions to retail payments hurt both consumers and businesses. Given that many people now carry little or no cash, the reliability of electronic payment services has become critical to the smooth functioning of our economy.
We understand that, given the complexity of IT systems, some level of payments incidents and outages to services is inevitable. But it is apparent from the data we have that the frequency and duration of retail payments outages have risen sharply in recent years. In response, the RBA has begun working with APRA and the industry to enhance the data on retail payment service outages and to introduce a suitable disclosure framework for these data. These measures will provide greater transparency around the reliability of services and allow institutions to better benchmark their operational performance.
The third and final issue I would like to touch on is the Payments System Board’s review of retail payments regulation next year.
The review is intended to be wide-ranging and to cover all aspects of the retail payments landscape, not just the RBA’s existing cards regulation. As the first step in the process, we released an Issues Paper a couple of weeks ago and have asked for submissions by 31 January.[5] There will also be opportunities to meet with RBA staff conducting the review.
The review will cover a lot of ground, including hopefully some of the issues that I just mentioned. There are, though, a few other questions I would like to highlight.
The first is what can be done to reduce further the cost of electronic payments?
Both the Productivity Commission and the Black Economy Taskforce have called for us to examine this question. It is understandable why. As we move to a predominantly electronic world, the cost of electronic payments becomes a bigger issue. The Payments System Board’s regulation of interchange fees and the surcharging framework, as well as its efforts to promote competition and encourage least-cost routing, have all helped lower payment costs.
At issue is how we make further progress: what combination of regulation and market forces will best deliver this? Relevant questions here include: whether interchange fees should be lowered further; how best to ensure that merchants can choose the payment rails that give them the best value for money; and whether restrictions relating to no-surcharge rules should be applied to other arrangements, including the buy-now-pay-later schemes.
A second issue is what is the future of the cheque system?
Cheque use in Australia has been in sharp decline for some time. Over the past year, the number of cheques written has fallen by another 19 per cent and the value of cheques written has fallen by more than 30 per cent, as the real estate industry has continued to shift to electronic property settlements (Graph 7). At some point it will be appropriate to wind up the cheque system, and that point is getting closer. Before this happens, though, it is important that alternative payment methods are available for those who rely on cheques. Using the NPP infrastructure for new payment solutions is likely to help here.
Third, is there a case for some rationalisation of Australia’s three domestically focused payment schemes, namely BPAY, eftpos and NPPA? A number of industry participants have indicated to us that they face significant and sometimes conflicting investment demands from the three different entities. This raises the question of whether some consolidation or some form of coordination of investment priorities might be in the public interest.
Fourth, and finally, what are the implications for the regulatory framework of technology changes, new entrants and new business models?
The world of payments is moving quickly, with new technologies and new players offering solutions to longstanding problems. At the same time, expectations regarding security, resilience, functionality and privacy are continually rising. Meeting these expectations can be challenging, but doing so is critical to building and maintaining the trust that lies at the heart of effective payment systems. The entry of non-financial firms into the payments market also raises new regulatory issues. As part of the review, it would be good to hear how the regulatory system can best encourage a dynamic and innovative payments system in Australia that fully serves the needs of its customers.
As the country continues its inexorable march towards a cashless society, it’s important to remember the downsides. Via The Adviser.
Australia has been just a few years away from being a cashless society for a couple of decades now, but it will eventually get there. Legislation currently before the Senate aims to ban transactions over $10,000 in a bid to hinder the black economy. From there, it’s not difficult to imagine that the ubiquity of digital payment systems – and efforts the by government – will see hard cash disappear at some point in the future.
One of the supposed benefits of a cashless society is that it cuts down on crime, the logic being that if there’s less cash to steal, less cash is stolen. Laundering dirty money is also harder, as every transaction is logged in some form or another.
But a cashless society comes with a number of negatives that might well outweigh the positives.
“As payments move online, there would be an increased risk of crimes such as identity theft, account takeover, fraudulent transactions and data breaches, due to the higher volume of cashless transactions and more points of exposure for the average consumer,” Dr Richard Harmon, managing director of financial services at Cloudera, told Investor Daily.
“Hackers and other criminals now have new ways to get access to accounts and to potentially set up synthetic accounts to facilitate more sophisticated money laundering activities.”
And that’s just the risk posed by hackers. According to the UK’s access to cash report, a cashless society could heighten the risks of financial abuse. Elderly people, who might lack understanding of digital technology, would be particularly vulnerable. Couples with joint bank accounts are also at risk – money can be tracked and controlled by one person. These issues are already of great concern, but they’d be even worse in a cashless society.
That’s not to mention that digital systems rely on topnotch digital infrastructure, something that Australia doesn’t exactly have in spades. That infrastructure also has to be more or less impervious to cyber attacks, which may be carried out by state-sponsored actors with an interest in crippling a country’s entire financial system. In the face of that existential threat to the economy, a little bit of money laundering doesn’t seem so bad.
A cashless society could also make things worse for workers and the most vulnerable. It’s only a short jump from cashless to “cashier-less”, and a cashless society would have to deal with an explosion of unemployed low-skill individuals.
Meanwhile, those who lack access to banks – or prefer not to use them – are also at risk.
“Let me highlight that one of the concerns about becoming a cashless society – at least as we transition into this state – is the ability for the underbanked or unbanked to have sufficient access to function properly as they would within a cash-based system,” Dr Harmon said.
“This would be a key concern from a societal perspective.”
The idea of a cashless society is promising. But hidden in that promise are a number of caveats that any country – let alone Australia – would be foolish to ignore.
From The Conversation. We are used to being able to pay for things with legal tender.
Other than in special circumstances, refusing to accept cash can have legal consequences.
The Currency (Restrictions on the Use of Cash) Bill 2019 at present before the Senate seeks to make it an offence to use “too much cash” to pay your bills.
The intent is clearly stated in Section 4:
This Act places restrictions on the use of cash or cash-like products within the Australian economy. The Act imposes criminal offences if an entity makes or accepts cash payments in circumstances that breach the restrictions.
The proposed limit is A$10,000. Section 8 would make it an offence to make or accept cash payments of $10,000 occurring either as one-offs or in a linked sequence.
In parliament the minister said the $10,000 limit would not apply to person-to-person transactions, such as private sales of cars.
But these exceptions are not included in the the Bill. What is included is the phrase “specified by the rules”. Section 20 puts those rules in the minister’s hands. Future ministers may narrow exceptions and change rules.
It would remain legal to withdraw and hold more than $10,000. The stated intent of this Bill is to modify the use of cash, not the holding of cash.
All Australians will continue to be able to deposit and withdraw cash in excess of $10,000 into and from their accounts, and to store more than $10,000 of their money outside a bank.
What’s proposed would limit competition (Visa, Mastercard, and PayPal would face a lesser competitor, for example) and limit long-held rights.
Everyday behaviour at present protected by the law would be criminalised.
In some cases, and perhaps many, the onus of proof would be reversed, with an “evidential burden” imposed on cash-using defendants.
As stunning is the assignment of “vicarious criminal liability” in Section 16.
Each partner in a partnership, each committee member of an incorporated association and each trustee of a trust or superannuation fund might become individually culpable for their entity’s use of cash.
Oddly, “bodies corporate and bodies politic” are treated differently (Part 3), and the government itself cannot be prosecuted, an uneven application of the law which has attracted little attention.
In my submission to the Senate inquiry (Submission 146) I argue the provisions would, among other things:
Each point and many presented in other submissions need serious consideration, including in public Senate hearings.
The speech to parliament introducing the bill was built around the hardly-new observation that cash payments can be “anonymous and untraceable”.
The government’s Black Economy Taskforce produced no detailed analysis but recommended the ban as a means of fighting tax avoidance, to:
make it more difficult to under-report income or charge lower prices and not remit good and services tax.
The speech also asserted that “more crucially” the ban would fight organised crime syndicates, although organised crime was not mentioned in the part of the taskforce report that dealt with the problem the limit was meant to address.
Every pound note and then every dollar note issued by the Commonwealth Bank and then Reserve Bank of Australia bears this unconditional promise signed by the head of the bank and the head of the treasury:
This Australian note is legal tender throughout Australia and its territories.
The bank’s website suggests the promise is ongoing:
All previous issues of Australian banknotes retain their legal tender status.
Its note printing arm was mortified earlier this year at the apparently accidental omission of the last letter “i” from the word “responsibility” on the new more secure $50 note.
The Bill before the Senate contains many and much more serious errors.
Cash has been one of the few things we can absolutely rely on, whatever our status, situation or access to other payment means.
Removing (and dishonouring) that guarantee, while criminalising reliance on it, should not be done lightly in a mad rush to an arbitrary date.
Until now public debate about the proposal has been light, but concern is growing, even among quiet Australians.
Each Senator should ensure that last “i” in responsibility isn’t missing here either.
Author: Mark McGovern, Visiting Fellow, QUT Business School, Economics and Finance, Queensland University of Technology
We look at the latest media cover of the cash transaction limit, which is being reviewed in the Senate.
Shane Wright in the SMH today.
Our earlier post on the Victorian Branch vote to axe the ban.
The Victorian Liberal Party held their state council meeting in Ballarat where a motion was put forward calling on the Government to abandon their $10,000 cash transaction ban policy.
We discuss the implications of this move, with Steve Holland who is a member of the Victorian Liberal Party and who moved the motion at the State Council Meeting.
Afterpay breached money laundering law because of incorrect legal advice, according to an auditor. Via InvestorDaily.
The buy-now, pay-later giant was the subject of an AUSTRAC probe over allegations it breached the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF).
But an independent auditor contracted by Afterpay has discovered that the breaches occurred because of incorrect legal advice.
“In reaching these findings I have established that Afterpay’s compliance with its AML/CTF obligations was, from the outset and over time, based upon legal advice from top tier Australian law firms,” wrote Neil Jeans, an anti-money laundering consultant who conducted the audit.
“I am of the opinion this initial legal advice was incorrect.”
The unnamed law firms decided Afterpay was not providing loans to consumers but instead providing factoring services to merchants. This advice “did not reflect Afterpay’s business model” and led to the company focusing its AML/CTF controls upon merchants rather than consumers.
“Despite Afterpay having a compliance-focused culture, the consequences of being provided with incorrect legal advice has resulted in historic non-compliance with the AML/CTF Act and Rules,” Mr Jeans wrote in the report.
However, the audit noted that Afterpay’s transaction monitoring system is now “effective, efficient and intelligent” as a result of greater resource allocation.
Mr Jeans also decided that the nature of Afterpay’s service mitigates some money laundering and terrorism financing risks, and noted that the company’s AML/CTF compliance had “evolved and matured over time”.
Afterpay was quick to seize on the opportunities of the report in light of Westpac’s recent breaches of the same laws.
“Afterpay reaffirms that it has not identified any money laundering or terrorism financing activity via our systems to date,” the company said in a statement accompanying the report.
But the ball is now in AUSTRAC’s court. The regulator will consider the report and decide whether to take further action.
Afterpay has pledged to continue its co-operation with AUSTRAC.
I outline my submission made to the Senate Inquiry, which is open until next Friday 15th November 2019.
https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/CurrencyCashBill2019
Here is the full text of my submission.
Currency (Restrictions on the Use of Cash) Bill 2019
I have carefully reviewed the latest iteration of this legislation and am gratified that the Senate has chosen to review the proposals, which I strongly oppose.
Not only is the bill significantly eroding our civil liberties, but the conduct of Treasury needs to be called out by suggesting that 3,400 of the 3,500 submission they received during their brief 2 week exposure review submission period were part of a campaign “by the CEC, a political party”. While there was indeed a campaign to oppose the draft legislation, I have evidence that submissions were made by many concerned individuals and businesses with no links to the CEC. Indeed, my own submission, some of the contents I am using here again, is based on my own independent research and analysis. I have no financial or political association with said CEC. I believe Treasury tried to play down the considerable opposition which exists within the community. This bill is, in my view toxic.
Digital Finance Analytics is a boutique research and analysis firm specialising in the financial service sector. We undertake primary research through our surveys, as well as deep research from the global literature relating to financial services. We publish regularly via our online channels at Digital Finance Analytics[1] as well as preparing reports on a range of related subject matters for our clients, and we collaborate with a number of academics.
My objections are centred around the following points.
“There’s already a requirement to report transactions over $10,000. The problem is that those laws are not being implemented and enforced[2].”
In summary, my overriding concern is that Parliamentarians will only consider the narrow tax efficiency aspect of the Bill and vote it through without grasping the true intent and consequences. Civil liberties are being eroded, and the trap will be set to force households and businesses to transact within the banking system, thus facilitating experimental monetary policies, via the back door.
This Bill should not be allowed to pass.
[1] https://www.digitalfinanceanalytics.com/
[3] https://www.econstor.eu/handle/10419/162914
[4] https://voxeu.org/article/what-else-can-central-banks-do
It would be nice if the “facts” being thrown around in the debate over the Cashless Debit Card were peer-reviewed, or even just evidence-based. Via The Conversation.
Instead, there are anecdotes. And it’s these that are being used to justify the government’s decision to spend A$128.8 million over four years continuing the existing trial of the cashless debit card in five sites in Western Australia, Queensland and South Australia and extending it to Cape York and all of the Northern Territory.
The extension will lift the number of people on the card from 11,000 to 33,000. Most will be Indigenous people – its disproportionate targeting has already attracted the attention of the National Congress of Australia’s First Peoples and the Human Rights Commission.
The cashless card was recommended to Prime Minister Tony Abbott in a report from mining billionaire Andrew Forrest in 2014. He initially called it the “Healthy Welfare Card”.
It wasn’t a new idea. Some A$1 billion dollars had already been spent on income management programs in the past, many of which had failed to meet their stated objectives.
The biggest was the Basics Card introduced as part of the 2007 Northern Territory Emergency Response (the “Intervention”) which was only made possible through the suspension of the Racial Discrimination Act.
Research published by the Australian Research Council funded Life Course Centre of Excellence found its introduction was correlated with negative impacts on children, including reductions in birth weight and school attendance.
It points to several possible explanations, including increased stress on mothers, disrupted financial arrangements within households, and confusion about how to access funds.
The government has not addressed these serious issues. Instead, it now seeks to place those who have been left on the basics card for over ten years now, on to the cashless debit card.
The “Indue” Cashless Debit Card trials underway since 2016 direct 80% of each payment to the card (Forrest asked for 100%) where it can only be spent on things such as food, clothes, health items and hygiene products. Purchases of alcohol and withdrawals of cash are not permitted.
The trials are compulsorily for everyone living in the trial sites receiving a disability, parenting, carer, unemployment or youth allowance payment.
My own research in the East Kimberley found it makes those people’s lives harder.
Those targeted are a broad group needing support for a broad range of reasons, yet all are treated as if they have issues with alcohol or drugs or gambling.
Most of the people on it do indeed have a common problem: that is trying to survive on meagre payments in remote environments with a chronically low supply of jobs.
Of all the claims made for the card, the least believable is that it gets its users into jobs.
What it does do is limit access to cash needed for day to day-to-day living. It makes it hard to buy second-hand goods, transport and (at some outlets) food, and can make living more expensive.
For anyone actually struggling with addiction, it can’t substitute for treatment, a concern raised by medical specialists.
While the government says the trials have been community-led, in reality consultation has been limited to a small group of people not subject to the card.
When leaders in the East Kimberley who had agreed to the card withdrew their support, the government continued with the trial.
In addition to relaying on anecdotes, the government continues to cite a widely condemned report by Orima Research. Among others, the Australian National Audit Office found this report was inadequate to draw any conclusions from.
Profiting from the Cashless Debit Card has been Indue, a private company whose deputy chairman up until 2013 is now the present President of the National Party, Larry Anthony.
Indue’s involvement is helping to create a two tiered banking system in which most people have a choice of financial providers, but those subject to the card are restricted to one, which provides a very different product to the others.
Indue is also not a member of the Australian Banking Association, and so is not bound by the consumer protection provisions of its Banking Code of Practice.
The inquiry is due to report next week. Given the expensive and harmful consequences of the trial, it ought to find the extension is not justified. There are better ways to spend $128.8 million that would actually help vulnerable Australians.
Author: Elise Klein (OAM), Senior Lecturer in Development Studies, University of Melbourne