There are rumblings in the Australian financial sector...

It’s not the end of the mining boom, it’s not rising interest rates, and it’s not the rising price of coffee. It’s the exponential shift from cold hard cash into virtual electronic payments – better known as a move towards a cashless society. With advocates including Assistant Minister to the Treasurer Alex Hawke and Twitter founder Jack Dorsay, the movement is purported to save us billions of dollars, improve safety, and remove red tape. But, is a cashless society as inevitable as it seems? And what does this looming prospect mean for us?

Tap and go

Following the launch of Apple Pay for ANZ Customers back in May, Chief Executive Shayne Elliot reported a 20% rise in online credit card applications. Using 256-bit encryption and near field technology, the service allows you to store (and use) your credit cards on your phone – removing the need for a great deal of valuable wallet real estate.

Mobile payment in action. GIF: Agilitee

Systems like Apple Pay rely on wireless Near Field Communication (NFC) technology, enabling devices to ‘talk’ to each other without an internet so you can tap n’ go from your phone to an activated terminal. For those with Apple Pay compatible devices (iPhone 6s, 6 and SE, and Apple Watch), this means paying for a lattè is as simple as hovering your device close to a contact payment point at your local café. Android users may already be seasoned pros of virtual wallet technology as it has been available from Google Play and most major banks for some time (with varying features and accessibility).

Trends on paper

The last 18 months saw digital incumbents Apple Pay, Google Wallet, and PayPal Tap n’ Pay explode in popularity. Contrastingly, cash payments will make up only 40% of transactions in Australia this year compared to 70% in 2007, with analysts from Westpac predicting an entirely cashless Australia by 2022.

Biometric security can keep your spending secure. Image: Jojo Marion

Biometric security can keep your spending secure. Image: Jojo Marion

As a workable case study (and justification) for a cashless Oz, we can look to the small, sophisticated economy of Sweden as fertile testing ground. Back in 2012, six major Swedish banks came together to develop ‘Swish’, an app that allowed for instantaneous transfers of funds of any size to pay for literally anything. Fast forward four years later, and hard cash represents 2% of the Swedish economy, with digital accountability reducing the viable proceeds from both organized and petty crime.

So, what will Australia look like if this trend continues?

A cashless society

The benefits of removing cash from the daily equation are clear: most notably, the convenience and security of managing your finances from one central, portable place with reduced transaction and cash management costs. Digital money is largely traceable, making it more difficult for proponents of fraud, tax evasion, corruption and cyber crime to conceal their earnings.

Economist Peter Bofinger took to German news outlet Der Spiegel to argue that “The markets for undeclared work and drugs could be dried out.” Theoretically, even rates of violent theft should decline. Bjorn Ulvaeus, a foremost crusader for a cashless Sweden, challenges “anyone to come up with reasons to keep cash that outweigh the enormous benefits of getting rid of it.”

From data leaks to hackers and sheer human error, the security implications for a database storing millions of fingerprints and bank details gives opponents a lot of leverage. Back in 2012, Pirate Bay co-founder Gottfrid Svartholm Warg was able to penetrate the ‘impenetrable’ Swedish Nordic Bank mainframe , allowing him access to any user’s transaction history (including Government portfolios) for the two years that followed. Despite a prison sentence and subsequent tightening of security for the IT firms who represent major banks, the incident proved that, just like cash, no method of storing money is flawless. Goldfinger had to contaminate $261 billion of Fort Knox gold with a nuclear weapon as he couldn’t transport it. If a hacker successfully broke into the financial system, that amount could be moved in an instant.

The rise of mobile investment apps

The increasingly symbiotic relationship between financial markets and technological innovation allows consumers to dramatically change the way they manage investments. Robinhood, in Australia since 2015, is a stock brokerage app that allows Android users to place trades using their smartphones. By automating pre-internet processes that many brokerage companies still use, Robinhood is able to offer zero-commission trades for clients. In a market in which many trades can cost up to $10 to place, this can amount to significant savings for many investors.

Robinhood app

Image: Robinhood

Micro-investment app Acorns allows users to invest spare change by rounding-up purchases made with a credit or debit card to the nearest dollar. The difference is then invested into a portfolio in $5 increments, almost like a smart piggy bank. For entry-level and regular investors alike, the lure of mobile trading is proving to be a hit. Why contract a broker when an app can buy the same stock?

All observable trends point to paper money playing a smaller and smaller role in the very near future. Contactless payments have increased by 200% in the past 12 months, cash is obsolete in financially competitive markets, and services like Apple Pay and Square are gaining ground across the globe. And though issues of security concerns and shifting spending habits may slow progress, it’s likely that those coins you lost in the sofa will stay there for a while.

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Camilla Gulli

Editor

Camilla Gulli,
Editor

As Editor at Red Wire, Camilla is particularly passionate about diversity in tech, content marketing, social media, and disruptive platforms.

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