Cash rules everything: Why Aotearoa might not go cashless

Sunday, 18 August 2024

“I like cash, but it gets lost. It can deteriorate and you can lose track of it over time,” WATDA owner Riley Min says.

Walking down Ponsonby Rd on an average morning, I find no shortage of retailers happy to sell me coffee, a book or an outfit, unless I try to pay with cash.

The reaction is usually to cancel the eftpos transaction they instinctively set-up, and very few will actually turn me away even as more businesses switch to digital payments.

So does it pay to carry cash? My survey of random Ponsonby passers-by says, “sometimes”.

WATDA is one of many hospitality venues going “cashless”, which Min says works for staff and for business.

“We had mistakes in staff handing out the wrong change and similar things. After the pandemic, people are a bit cautious in handling money cash physically. So we decided to go cashless.”

But just a few metres away, Gently Loved Markets owner Donna Buchanan says the business wouldn’t be viable without cash.

“It's definitely imperative to our business,” Buchanan says.

“I run markets and can have from 20 to 50 stallholders - they all accept cash.”

“If it was cashless, it would probably alienate a lot of stallholders because not everyone wants to do a bank transfer,” she says.

Min however finds paying digitally is second-nature to most of his clientèle.

“I find most of people pull their card out straight away without even seeing the sign. I think people are getting used to the cashless system.”

As more retailers like Min go cash-free, Kiwis are toeing the line between preserving their paper and managing a growing demand for digitised payments. But post-pandemic data shows cash might still rule.

The Reserve Bank Te Pūtea Matua’s 2023 cash use survey showed 57.2% of respondents paid with cash for everyday use in 2023, down from 60.4% in 2021. But people who reported using cash more than seven times in the past seven days was up from 5.6% in 2021 to 8.3% in 2023.

Banking on digital

RBNZ is looking at ways to digitise cash but says there are no plans to phase it out, and has even rolled out a cash trials project to keep cash flowing.

ANZ data showed that fewer than 1% of of the bank’s transactions are now made in person.

“For every 1000 transactions, 974 are now digital, 20 are at an ATM, 4 are via our contact centre and 1 is made in-branch,” an ANZ spokesperson said.

“The decline in demand for in-branch services, a trend we’re also seeing nationally and across the globe, is behind most decisions to close branches or reduce their hours.”

Meanwhile Westpac data shows that national ATM transactions, including bill payments, deposits and withdrawals were down 28% from 2018 to 2023.

The cash paradox

RBNZ director of money and cash Ian Woolford says Kiwis are carrying more cash now than ever before with around $8.9billion in circulation, up from $7.9b in 2021.

The central bank is planning for a future where Kiwis have the option to use cash “for as long as they want to use it”, Woolford says.

After the pandemic, global economies saw a significant increase in the amount of cash which has stayed high, he says.

RBNZ’s research shows many Kiwis regard cash as the most dependable form of money, especially in times of natural disaster, technical failures and social and cultural exchanges like “koha, social clubs, raffles, and even the tooth fairy”.

“Cash provides choice, autonomy, and agency for all, and for some it is the only form of money they have or can use,” Woolford says.

RBNZ’s digital cash trial will be rolled out alongside normal cash and payment methods, he says.

He says the move gives an instant, safe, low-cost way payment option “without needing a bank account”.

“Plus, it will encourage competition and innovation in payments which is a good thing because New Zealanders have been missing out for years and people deserve better choices for instant payments.”

The central bank’s next steps are to continue developing design and policy requirements for digital cash, drawing up a cost and benefit analysis, and getting more of a gauge on public perceptions, Woolford says.

At the same RBNZ is preparing to run cash trials in rural New Zealand communities cash has become less accessible due to ever-closing bank branches and ATMs.

“New Zealanders, particularly in rural areas, still often rely on cash and value the certainty and convenience it provides, including when electronic options aren’t available,” he says.

Gayle Chambers, Grey Power NZ national president says, “We can’t be a cashless society. It wouldn’t make sense.”

There needs to be a plan in place to make sure frequent cash-users have a way to transition to a digitised system, Chambers says.

“Many people [aged] between 70 and 100 are very tech savvy but many are not. There needs to be acknowledgement for people who don’t have those skills.”

While online services are more efficient and do work for older Kiwis, she says issues like a mistrust of banks and a lack of access to technology and internet mean that cash will have to stick around for a while longer.

Financial harm

Eftpos-provider Worldine has also amped up its efforts to meet growing demand for digitised payments.

Worldline head of public affairs Julia Nicol says, “Cash always has a role”.

But she says there is a growing case for digitised payment with rising cases of financial scams and fraud.

“People will be safer in the long run if you have digital identity because we see a lot of scams. Moving to digital payments is not a bad thing, because it will reduce harm.”

She says that while payment companies do hold user data, they generally only look at whether a customer is over 18 and if they’re not a robot.

She said Worldline systems stood up against global transaction system failures last month: “2024 is online eftpos’ time to shine”.

Consumers bear the increasing costs for contactless transactions, Nicol said, as retailers are charging more than the Commerce Commission’s 0.7% debit card surcharge rate.

“Contactless payments have a surcharge at the point of sale, but online eftpos a bit cheaper. You’re less likely to be charged when you pay for something.”

International card schemes include the likes of processing charges, bank fees and terminal fees which she says are often passed onto a customer.

While the company specialises in digital payments, she says more consumers are interested in open banking and online eftpos, which are safer than cloud payments and accessible for people without Visa or Mastercard.

“We’re seeing record volumes through that. There’s been 50% growth from 2022 to 2023, which makes us think New Zealanders actually want different ways to pay,” Nicol says.

The payment method has been rolled out at 600 merchants, including PB Tech, Taco Bell, KFC and Auckland Council and is currently being used for dog registration and rates payments.