In The Grips Of A Cash Famine, By Design…

The 14th February is the closing date for submissions to the Treasury relating to the ongoing access to cash in Australia. I made a show on this called “Are We In The Midst Of A Cash Long Con?” and argued there that the Government many well be playing a long con with the community ahead of the upcoming election.

Remember that the Treasury paper setting up the request for submissions says Cash acceptance refers to the practice of businesses accepting cash as a form of payment for goods and services. Cash acceptance levels must remain sufficient to enable consumers, including those unable to use digital payment methods, to participate in the economy. The Albanese government has said it would mandate that businesses must accept cash when selling essential items like groceries and fuel from 2026.

And we have run extra questions through our SME survey which showed that over the past 3 years, the proportion of SME’s prepared to take cash payments has dropped to less than 60%. Despite this more than 75% would welcome a cash mandate, but again only with the caveat that first cash is readily available, and at low or no cost. There was also a higher level of support for cash in Regional and Rural areas compared with the large cities.

But this cash supply issue is complex, as reported by the AFR, and there is a critical upcoming date of July when the temporary arrangements with Armaguard, who moves cash around the country are up for review.

Actually this is one of the most compelling reasons to create a Government Bank, perhaps for full banking via the Australia Post network.

But of course this is beyond the election horizon of May, so Labour can say they are doing things, in response to the public pressure as encapsulated in the Regional Banking Inquiry. Access to physical cash is a human right which needs protecting, but of course the banks hate it. How the life blood of banking cash, became an expensive overhead is the shame here. But the Government con is a big part of the story.

Remember to make your submission by Valentines day.

http://www.martinnorth.com/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
In The Grips Of A Cash Famine, By Design…
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Are We In The Midst Of A Cash Long Con?

Last Tuesday on my live show, I discussed the current Treasury paper on Mandating Cash Acceptance in Australia. But today I want to take this further and I will outline my concern that the Government many well be playing a long con with the community ahead of the upcoming election.

The paper says Cash acceptance refers to the practice of businesses accepting cash as a form of payment for goods and services. Cash acceptance levels must remain sufficient to enable consumers, including those unable to use digital payment methods, to participate in the economy.

my suspicion, is this is more political than anything else. The Government knows cash availability is a BIG issue, and cannot be avoided, so this Treasury paper allows the issue to flow on beyond the next election. Meantime the neo-liberals, in the pockets on the big banks, still want to take our rights to use cash away, so on one hand they can appear to be taking the right for cash seriously, but can also continue to assume the banks they support them. It’s a classic yes Minister long con.

We can break that by making sure we provide responses to Treasury, along the lines, of first, there should be no carve out of essential services – which is difficult to try to define, and all businesses should still be required to accept legal tender in the form of cash. A simple antidote to the long con.

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Are We In The Midst Of A Cash Long Con?
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Households Could Save A Billion, Or More…

Given the current focus on the rise in the use of cash, it is worth remembering that each year Australian households are collectively charged somewhere between 1 billion dollars and 4 billion dollars in payment surcharges, which is a fee paid by customers, in addition to the price of a good or service, allowing merchants to pass on the cost of the customer’s chosen payment method. These days its mostly debit transactions which might also be triggered by electronic payments from phones and other devices, as well as debit and credit cards.

The RBA accelerated a review into merchant payment costs and surcharging, and has now released the 90 plus submissions received from interested parties and it is clearly creating a storm, with some calling for the banning of said surcharges and others arguing that banning surcharges would result in higher prices to consumers.

When surcharging was introduced 20 years ago, the RBA put Australia out of step with most of the rest of the world, where the practice is illegal. At the time the central bank’s intention was to use them as a price signal to customers that the more expensive payment methods at the time – credit cards – were a burden for the seller. I always believed this is a policy error.

They have been out maneuvered by banks and lately FinTechs who have introduced fixed pricing plans in an attempt to reduce payment fee complexity for business customers. These plans let a merchant pay the same cost irrespective of what card the customer uses. But this has resulted in more surcharging of debit cards, which is the fastest growing segment of the payments market, and which in theory should be the cheapest.

So, some firms are benefiting from the current system, especially larger firms. Second, there is little transparency and as transaction volumes rise, the costs on households rise too. Third, the original assumptions about unbundling and price signaling has proven incorrect, as technology has evolved faster than regulators ability to keep up. To me the benefits of removing surcharging altogether outweigh other options, but of course the question will be, will households at the end of the day, get the benefit. They certainly should, but big business are often in the way…

http://www.martinnorth.com/

Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Households Could Save A Billion, Or More…
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Don’t Believe The Bankers: More People Are Using Cash!

Contrary to the bankers claiming digital payments are replacing cash, yet more evidence is showing that use of cash is on the RISE! We look at data from New Zealand based on a recent survey as the Reserve Bank there announces pilots to make access to cash easier.

The trend of rising cash use was in fact confirmed recently by the RBA too, though their surveys are just not up to the New Zealand standard, and of course using cash more is also rising in the UK.

Not only is the ongoing use of cash a human right, a protection of freedom, and cheaper than other payment means, but it is also proving to assist households with their budgetting. Do not believe the bankers’ BS…

RBNZ Short: Why Access To Cash Is Essential For Social Cohesion Short: https://youtube.com/shorts/d32BqMmfwUc

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Don’t Believe The Bankers: More People Are Using Cash!
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The Fight For Cash Just Got Terminally Serious!

Despite cash being legal tender in Australia, surprisingly it is legal for businesses to refuse to accept it provided that they inform consumers of their stance before any “contract” for the supply of goods or services is entered into.

The war on cash has taken an interesting turn, with the RBA being questioned by the Senate Inquiry into Regional Bank Branch closures, and claiming the use of cash had fallen, but frankly on thin and filtered evidence; while Armaguard, Australia’s only cash-in-transit business is facing the prospect of collapsing due to the claimed declining use of cash. The RBA, which regulates the payments industry and is responsible for printing money is also involved in the crisis talks.

And a social media campaign, led by the Cash is King Facebook group is calling on Aussies to withdraw and use cash next Tuesday, April 2, in protest against the shift to digital payments. The protest is aimed at showing Australia’s banks and retailers that there is still a demand for the use of cash in society. That is, if you can still find an ATM.

So, action on Tuesday to grab some cash could be an important step on the road to saving cash for All Australians who want to use it, despite pressure from the Government who is responding to huge pressure from the commercial banks. This in turn puts massive pressure on the current Senate review, who is scheduled to hold one more community hearing on Bribie Island on the 16th April. Will the committee who has laid bare the issues of branch closures and removal of cash come good or hook their final report like the earlier Royal Commission Inquiry into Financial Services, which exposed major issues through their hearings, only to turn to water in their final report and recommendations, which allowed the banks to behave business as usual. This time all eyes will be on the Senate.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Fight For Cash Just Got Terminally Serious!
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Payments And Banking In Australia [Podcast]

I discuss an important book written by Nikesh Lalchandani, which covers the history of banking and payments in Australia, and the digital evolution currently underway.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Payments And Banking In Australia [Podcast]
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Cashless Or Clueless?

Today I want to consider the social impact of going digital, and the problems associated with financial stability in a disaggregated digital payments world.

More evidence I think that banning cash is clueless.

https://www.bis.org/publ/bppdf/bispap107.pdf

https://www.bis.org/review/r200123c.pdf

https://www.theguardian.com/us-news/2020/jan/24/new-york-city-ban-cashless-businesses-discrimination

https://www.rba.gov.au/publications/annual-reports/psb/2019/trends-in-payments-clearing-and-settlement-systems.html

International Money Transfers – Yet Another Big Bank Rip-Off! [Podcast]

We look at the latest ACCC report.

https://www.accc.gov.au/publications/foreign-currency-conversion-services-inquiry-final-report

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
International Money Transfers - Yet Another Big Bank Rip-Off! [Podcast]
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ABA Backs Cash Payments Limit

The ABA Australia’s banks have today backed the Federal Government’s move to limit cash payments to $10,000 to tackle the ‘black economy’, however have highlighted the need for any reform to be implemented carefully.

This year’s budget included a new limit on cash payments to $10,000 to clamp down on the ‘black economy’, one of the recommendations of the black economy taskforce appointed by Minister O’Dwyer.

In its submission released today the banking industry outlines its broad support for the change, however have highlighted areas of concern.

Key points of interest to the banking industry are:

  • The need for a realistic implementation timeframe to help customers and businesses who are heavily reliant on cash payments so they can adapt to the changing environment
  • Ensuring the cash limit does not apply to transfers between financial institutions which are critical to ensuring cash is distributed quickly and easily throughout the economy
  • The change applies to payments only and not withdrawals of over $10,000

CEO of the Australian Banking Association Anna Bligh said that the industry was fully supportive of the Federal Government’s efforts to tackle the ‘black economy’.

“Limiting cash payments to $10,000 is an important change to make sure business and individuals pay their fair share of tax and operate within the law,” Ms Bligh said.

“Banks are on the ground regularly talking with local business, so they know the importance of getting this policy right.

“It’s important that local shop owners, manufacturers and others are given enough time to adapt to this policy which for many of them will be a big change to the way they do business.

“It’s also important that banks can continue to serve the economy by quickly distributing cash where needed therefore it’s important an exception is clearly made when it comes to this policy,” she said.

Sleepwalking Into A Cashless Economy

In Australia, our household surveys also show significant appetite for digital payments, especially via mobile devices, and more than half of households here have not used cash for any transaction in the past month. And its rising. The drive to cashless seems unstoppable.

Yet I got caught out yesterday by the NAB systems failure, which saw their payments and internet banking services wiped out thanks to a power failure in Melbourne. My local garage has a NAB terminal and was unable to process EFTPOS payments. Luckily they had the paper based backup, which took credit cards, for later processing. Then at the local café I could not use person to person digital payments from my mobile – they were only taking cash, so I went to an ATM to find that was not working. Luckily I scraped up the spare cash I had pay for my coffee. An object lesson in frustration, and for some businesses, a loss of business, which granted NAB said they would consider compensating.

And this in the week where Telstra’s whole internet and phone system went down (without an explanation this time – at least they did not blame a lightning strike like the previous episode). And of course CBA’s payment systems had gone down previously.

Reflecting on all this, I am pulled in two directions. I am a fan of a digital migration towards a cashless society, yet it also shows there are potential risks which need to be explored further. In fact, consumers, who prefer digital, might be sleepwalking into future disaster. Time to think harder about the risks of going cashless.

And we are not alone. In some Scandinavian countries, the rush towards a cashless society is also hitting some turbulence. Take Sweden for example. It is one of the most cash-free societies in the world. The proportion of cash payments in the retail sector fell from about 40% in 2010 to about 15% in 2016. Two-thirds of consumers say they completely manage without cash; just as many say they mostly use cards even for payments under $20. More than half the nation’s bank branches no longer take or issue cash. Many stores greet the shopper with notices that they no longer accept hard currency. As a result, the total value of cash payments in the economy has fallen to less than 2% of GDP.

“In the not-too-distant future, Sweden may become a society in which cash is no longer generally accepted,” the Swedish central bank said recently. And in February, the bank warned that Sweden could soon face a situation where all payments were controlled by private sector banks. The Riksbank governor called for new legislation to secure public control over the payments system, arguing that being able to make and receive payments is a “collective good” like defence, the courts, or public statistics.

These comments have brought other concerns about a cash-free society into the mainstream. To put it bluntly, when you have a fully digital system you have no weapon to defend yourself if someone turns it off.

And in addition, no system based on technology is invulnerable to glitches and fraud. In the past year two Swedish banks had problems with card payments and by Bank ID, the digital authorisation system that allows people to identify themselves for payment purposes using their phones.  And in addition every transaction can be tracked and recorded, remember Facebook?

Now, the banks recognise that digital payments can be vulnerable, just like cash but argues that they are no more vulnerable than any other method of payment. And they say, it is being driven by the customer preference for convenient payment alternatives.

A recent opinion poll said almost seven out of 10 Swedes wanted to keep the option to use cash, while just 25% wanted a completely cashless society.

So I think it’s time to reconsider the implications of digital payments, not least because payments can be tracked, digital networks appear vulnerable and with ATMs disappearing, it will be harder to get cash when needed.

Perhaps cash is king, after all.