Reserve Bank of Australia governor Philip Lowe has painted a picture of a near-future society in which physical cash is a niche payment instrument reserved only for emergencies.
In remarks to the 2018 Australian Payments Summit, Lowe noted that with the rapid shift to digital payments and the arrival of the country's New Payments Platform a 'turning point has been reached. It is now easier than it has been to conceive of a world in which banknotes are used for relatively few payments."
For this to occur, however, there needs to be an increased focus on the reliability of electronic payments, Lowe said, warning that regulatory intervention may be necessary to ensure stability.
"The best illustration of the declining use of cash for transactions is the sharp decline in the number and value of cash withdrawals through ATMs," said Lowe. "Around the turn of decade, Australians went to an ATM, on average, around 40 times per year. Today, we go to an ATM around 25 times a year and the downward trend is likely to continue."
Alongside the decline of cash is a marked decrease in the use of paper-based cheques, which now account for just three payments per person per year.
"Given this trend is likely to continue, it will be appropriate at some point to wind up the cheque system, given the high fixed costs involved in operating the system," Lowe remarked. "We have not reached that point yet, but it may not be too far away. Before we do, it is important that alternative payment methods are available. Progress has been made on this front, but more is required."
With traditional payment instruments on the wane, Lowe discussed the possibility of the Reserve Bank of Australia issuing an electronic version of the Australian dollar, an eAUD.
"I spoke about this issue at this conference last year, concluding that we did not see a public policy case for moving in this direction at the time," he told tthe conference. "In particular, it is not clear that RBA-issued electronic banknotes would provide something that account-to-account transfers through the banking system do not, particularly with the emergence of the NPP. Another important consideration was the implications for financial stability. A year on, our views have not changed."
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