The rapid progress of the cashless transition in Australia continues to make headlines as major banks shut down physical branches and digital payments skyrocket. In 2018, Australians made $746 million in digital payments, but that number soared to an impressive $93 billion in 2022. This shift towards digital banking is being driven by advancements in technology and the convenience it offers to both consumers and businesses.
One recent development in Australia’s cashless transition is the launch of an all-in-one mobile app called Business+. Developed by Sydney-based banking software company Constantinople, this app aims to provide Australia’s 2.4 million businesses with fewer than 10 employees with the country’s first end-to-end digital banking platform. Business+ offers a range of services including everyday transactions, savings accounts, loans, secured loans, credit cards, and asset finance. The app aims to simplify banking for small business owners, allowing them to sign up for an account in under 10 minutes.
Great Southern Bank, the customer-owned bank behind Business+, is confident that their app offers a comprehensive solution for small businesses, setting it apart from other neobanks that have struggled to stay afloat. CEO and Managing Director Paul Lewis stated that Business+ combines the best of the neobank proposition with their expertise in banking licensing and regulatory requirements. The app’s launch comes at a time when Great Southern Bank has recorded a significant increase in home loans issued to first-time buyers and growth in retail deposits.
The transition to a cashless society has been underway for several decades, but it has accelerated during the COVID-19 pandemic due to concerns about handling potentially infected cash. Banks have been heavily investing in software to handle digital transactions, with capital expenditure growing from $3.5 billion in 2005 to $28.5 billion in 2022. However, this transition is not without its risks.
Recent internet outages by various businesses offering internet and mobile services have highlighted the potential issues of relying solely on digital payments. These outages have affected electronic payment services, leading to lost sales opportunities and businesses requesting cash payments. Additionally, the move towards a cashless society can have negative impacts on marginalized groups and communities. The Access to Cash Review in the UK warned that leaving behind those who rely on cash can lead to increased risks of financial abuse, debt, and reduced community interaction.
Despite these challenges, Australia is transitioning to a cashless society faster than almost anywhere else. The use of digital wallet payments on smartphones and watches has increased significantly, from $746 million in 2018 to over $93 billion in 2022. Cash now only accounts for 13 percent of consumer payments in Australia, compared to 70 percent in 2007. This trend is in line with other countries like Sweden, where cash payments have declined sharply, and the UK, where cash still makes up a significant portion of transactions.
Interestingly, neighboring New Zealand has taken a different approach. Almost half of the population still uses cash for everyday purchases, and a majority of residents do not want a cashless society. To bridge the gap, the Reserve Bank of New Zealand is considering introducing a Central Bank Digital Currency (CBDC) as an alternative to banknotes and coins. CBDCs are being explored by numerous countries around the world as a way to provide a digital form of money that is accessible to all.
In response to the shift towards digital payments, the Australian government has expanded regulations to ensure the Reserve Bank of Australia can regulate new and emerging payment systems. However, digital wallet providers and Buy Now Pay Later service providers have expressed opposition to greater control, citing the need for regulatory certainty and minimal intervention.
As Australia continues its journey towards a cashless society, it is important to address the challenges and concerns that arise. While digital banking offers convenience and efficiency, it is crucial to consider the impact on marginalized groups and communities. Finding a balance between technological advancements and inclusivity will be key to ensuring a successful transition to a cashless future.
