The Relentless March towards a Cashless Society Continues Apace

The move towards a cashless society looks likely to ramp up considerably in the coming years.

Australians have abandoned cash at a faster clip over the past 12 months than in any year since the introduction of electronic cash payments in 1983.

Last month, a report from CommSec revealed that ATM transactions had plummeted to record lows. Withdrawals were down 6.4% in March, compared with a year earlier. That came hot on the heels of a record 7% drop in December 2015.

According to CommSec, ATM use has fallen annually for the last four years straight.

While this might appear as a case of technology abetting societal progress, it’s anything but. I’ll expand on that in a moment. But first, we need to point the finger at the mainstream media, questioning their role in obfuscating rational discussion on a subject of such importance.

The latest culprit to promote a cashless society is the supposedly unassuming ABC. Just this morning, the national public broadcaster published a piece that read less like impartial news, and more like an advertorial.

The piece centred on a café owner that had decided to forgo cash at his new establishment, opting for a cashless payment system instead. It reports (emphasis mine):

Allowing customers to only pay using bank cards and mobile phone apps is a cheaper and efficient way of doing business, the owner of a new café says. Pablo & Rusty’s Coffee Roasters owner Saxon Wright said his new cashless Brisbane CBD café, one of the first of its kind in Australia, was the way of the future.

Who can argue with that? What follows is a raft of quotes from Mr Wright, lionising the benefits of cashless payment systems. And if that’s not convincing enough for you, how about some expert opinion instead? The article goes on:

Queensland University of Technology business analyst Dr Edwina Luck said many people would find the cashless option more convenient.

             “A cashless society is just around the corner,” she said.

             “The benefits are time, safety, convenience, sustainability and cost saving.”

We might expect better from institutions like the ABC than blatant propaganda.

Either way, it gives us a good opportunity to provide a counterpoint to arguments spruiking cashless societies.

Now, it’s true that convenience has played a major part in the rise of cashless payment systems. But this is where the arguments over the merits of a cashless society fall flat.

No one is denying that electronic payments aren’t more convenient than cash. They are. I use them every day. And I genuinely believe that PayPass is brilliant. So much so that I refuse to shop at any outlet that insists on patrons using cash.

But the issue of a cashless society goes beyond convenience.

On the surface, vested interests, and their buddies in the media, are trying hard to assure you that convenience does, in fact, lie at the heart of this debate.

Yet beyond the veneer of convenience lies the real issue: interest rates.

‘Cashless society’: the Trojan horse for negative interest rates

Removing hard currencies from the monetary system will allow central banks, like the Reserve Bank of Australia, to speed up the implementation of negative interest rates (NIRP).

That’s not to say that cash alone prevents the rise of NIRP — it doesn’t, as evidenced by events in Europe and Japan. But it does restrict the extent to which central banks can lower rates into negative territory.

In any case, it’s enough to understand that NIRP and cash are like water and oil. They simply don’t go together.


Like most Australians, you probably have savings deposited at a bank. As you know, over time, those savings will accrue interest — the higher the rates of return, the more interest you’ll earn. Simple enough, right? Well, it used to be. Things have become slightly more complicated in the century since the creation of the world’s first central bank in 1913.

I discussed this very topic back in February. Here’s what I said at the time:

Since [1913], central banks have used their control of monetary policy to regulate the flow of capital across economies. These policies have evolved over time. They’ve become ever more aggressive in an attempt to ward off downturns.

 When rates eventually reached the point of no return, the banks raised the stakes. Instead of reining in credit once interest rates hit near zero, bankers got creative. This birthed negative interest rates.

 It should be treasonous that we live in a world where NIRP is a reality. Unfortunately, it’s not only legal, but central banks want to expand its use. And they see cash as the only barrier.

 NIRP is bad for you for a single reason. When rates go into negative territory, you’re essentially paying banks to hold your money. If you were faced with the prospect of paying banks to store money, would you? Probably not. You’d be far better off keeping your cash stashed under the bed.

 Now, it’s true that there’s a difference between central banks and commercial banks. As yet, no commercial bank charges customers to store their money with them. But central banks hold the levers of all capital in the system. Which means they influence how much banks can borrow, and lend. And it also affects the rate at which lenders charge borrowers for storing their money or taking out loans.

 In any case, the point remains. There’s a ripple effect when it comes to NIRP. Central banks don’t set the rates for your savings account, but they influence it by setting borrowing rates for commercial banks. But all bankers know that if interest rates went into the negative, people would start pulling their money out of banks.

 The solution to this ‘problem’ is the nothing short of eliminating cash altogether.

It is for these reasons — and no other — that the ABC is haplessly plugging a cashless society through promotional puff pieces masquerading as news.

Again, the benefits to businesses and consumers might, on the surface, look like a positive. But the underlying reason why the media is spruiking in favour of a cashless society is not because it’s convenient to you and me. It is because, in the long term, it’ll benefit commercial banks, which will exercise their control over central banks to benefit themselvesnot you.

Sure, you’ll still have ‘convenience’ to hang your hat on. But those very savings you draw from every time you swipe your card with PayPass…your money…that’ll diminish quicker than ever, because you’ll be paying banks to hold your money for you — not the other way around.

Electronic payment systems should be just one of several options available to us. The fact they’re being touted as the ‘only way to pay’ in the future should be a cause for concern. Without recourse to pay for goods using non-electronic means, we have no restraint on negative interest rates. It’ll allow banks to ride roughshod over the entire system at the expense of you, the consumer.

I suspect the question of ‘convenience’ won’t be so important then. Unfortunately, most people will only realise the nefarious plans behind the ‘cashless society’ once it’s too late.

Mat Spasic,

Contributor, Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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