A cashless economy: is Australia ruled by lobbies?

Some call it a buzz – when an idea becomes suddenly popular, but no-one seems to know who started it or where it came from. While the perspective of ousting cash from national economies isn’t specific to Australia (Sweden is another country keenly pursuing a similar goal) it has certainly come far in a relatively short time. A 2013 cash survey conducted by the Reserve Bank of Australia (RBA) found that only 47% of transactions involved cash versus 70% just six years earlier in 2007. Last September one of the country’s Big Four banks, Westpac, predicted that by 2022 cash could be phased out completely. By forecasting the likely consequences of such an economic transformation, one can pinpoint the organisations that are pushing that agenda.

Earlier this year, data showed a 60% year-on-year increase in the volume of contactless payments. Australians’ readiness to use the Tap & Go feature of their smartphones and – more recently – their take up of Apple Pay and Google’s Android Pay contactless payments is understandable. Cash is expensive to manage, expensive to transport and expensive to renew. These costs are not shouldered by any one organisation: central banks design, produce and distribute the cash, but private banks manage it and transport it. It takes many months to design a bill, which usually features many security aspects, thus requiring highly qualified and expensive Research and development departments. The printing cannot be carried out in a standard factory, but requires extreme hi-tech equipment.

Private banks also shoulder some of the management costs. In 2010, ATM Insider wrote: “Last but not least in the list of maintaining currency availability are: transportation (getting money to automated teller machines [ATMs], branches and retailers and then depositing it back to the banks), detecting and separating authentic from counterfeit, destroying the unfit; physical handling by suppliers (packaging, etc.), theft, criminal use, underground cash-based economies (those last three directly influence the daily cost of retail goods) and so on.”

Cash is fiscally uncontrollable. Greece’s debt crisis has provided a perfect example of the risk induced by low fiscal control. Because the country had no cadastral mapping to define land ownership and many transactions were traditionally carried out in cash, Athens was unable to levy the taxes necessary to blend into the European Union (EU) and repay the loans it had received. Unlike all other transactions, which are all peer-to-peer (P2P), cash involves no third party such as a bank or a computer server. Fiscal services therefore lack the window to control operations and sanction whoever has evaded taxation.

Paying a price

With the slow demise of cash – both in Australia and the rest of the world – the fiscal base has gradually expanded, and fiscal services are hungry for more. In 2012, two years after Greece’s debt crisis first escalated, Business Insider reported that the country’s tobacco black market alone had grown to become worth more than the entire gross domestic product (GDP) of the Cayman Islands: “Sales of smuggled cigarettes have more than trebled in Greece, amounting to an estimated €3.5bn per year – or 15% of the legal market – as the worsening of the economic recession and repeated price hikes for tobacco products have frustrated smokers.”

Businesses should also largely benefit from the replacement of cash with online payment solutions. In theory, a cash payment can be perfectly anonymous (and therefore neutral on the marketing level): the seller only wants the payment made, regardless of who is making it. Because online payments require the setting up of accounts, marketing departments within companies are keen to obtain very large amounts of personal information on who their clients are. Many phone applications offer the simplifying alternative to painstakingly setting up an account of simply connecting through Facebook accounts. The more that clients resort to options like these and make their payments online, the more personal information on their customers will be accessed by businesses and used for further operations.

Law enforcement agencies are also impatient to see cash thrown out the window. Cash is problematic to the law on two different levels: it enables crime and also covers it up. Upstream of criminal activities, as the European Union’s (EU) law enforcement agency Europol has reported, the police and intelligence services know that many shady structures partially run on cash. Prostitution rings, terrorist organisations, money-laundering shell companies and the respective trafficking of drugs, stolen goods and humans are among the activities that rely on the anonymous payment method to operate.

Such organisations receive payments in cash – just as they make payments in cash – enabling them to remain below the fiscal radar. However, as the United Nations Interregional Crime and Justice Research Unit (UNICRI) has noted, when they are detected by the law, then investigators need to map out links between individuals in order to build their case. If all payments were made online, or through a bank, their investigation work would be greatly simplified.

Yet as Melbourne’s Herald Sun noted in a recent piece by its business editor, these benefits are accompanied by a substantial downside. Moreover, the absence of movement by leaders on the topic of cash suppression is significant in itself. When causes are championed by politicians, or by segments of the public, there is always one or several names associated with the proposed move. Yet in this case there are none. No-one in Australia is able to state who is in favour of killing cash – although publications such as the Australian Financial Review, which recently predicted that the country would be among the world’s first fully cashless society, have speculated on the issue. People just know, sometimes, that the question is in the air.

This indicates clearly who is tugging ropes and pushing the agenda: lobbies. When lobbies try to get their way, they always attempt to do so by pressuring politicians away from the cameras, and never sign their deeds. The banking lobby is trying to reduce its operating costs, the law enforcement lobby is trying to increase its investigative powers, the tax people want to expand their taxation base and businesses (with their various sub-lobbying departments) wish to access personal information from their customers. The question arises of how will the public react when they learn about this? Because they are the only ones not getting anything out of the trend.


Related reading