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Opinion piece: The demise of cash and rise of digital banking

By P&N Bank General Manager, Anna Pearce

24 Feb2021

The move to a cashless society

COVID-19 has certainly tipped our world upside down in so many ways, with the term ‘new normal’ featuring across almost every aspect of our daily life. And a ‘new normal’ in terms of consumer banking has certainly been fast-tracked, with an increase in contactless payment methods and reduction in cash transactions due to COVID-19, on top of the ongoing take up of emerging digital banking and payment technologies that are helping to make consumers’ lives easier.

The recent introduction of the first phases of Open Banking in Australia will also eventually deliver a step change in the way Australians will be empowered to use their banking data to their benefit.

In the 12 months to December 2020, WA’s P&N Bank reported customer ATM cash withdrawals were down 13%, dipping to the lowest level in April at the peak of Western Australia’s COVID-19 lockdown. This is backed by the Reserve Bank of Australia’s recent national Retail Payments figures for the 12 months to October 2020 which reported a 25% decline in ATM withdrawals.

This downward trend in the use of cash evidences the steady change in consumer habits and the move to a cashless society that has been experienced over the past 15 years. While the decline was initially the result of a rise in technology and the introduction of more convenient digital banking platforms, the onset of COVID-19 has accelerated a further rapid reduction in the reliance on cash.

In order to maintain good hygiene and stop the spread of bacteria and viruses as a result of COVID-19, consumers and businesses alike have continued to fast track and embrace agile, contactless payment technology with some outlets now refusing to accept or use cash altogether – and as a stark example of the consumer need for contactless payments, even the local Bunnings sausage sizzle now accepts contactless payments. And we only expect the rate of uptake in digital payments and emerging technology to increase.

According to the Reserve Bank of Australia, cash payments have experienced a natural, steady decline since 2007. RBA data reports that in November 2019, 32 per cent of payments were in-person payments made in cash. Fast forward a year and the RFi Group reported a crash in the rate of cash usage to just 19 per cent of transactions in October 2020.

In the RBA’s June 2020 Trends in Payments, Clearing and Settlement Systems Report, it was noted that the average number of electronic transactions made by Australians was around 560, compared to 250 in 2010. They also estimated Australians made approximately 170 cash transactions per person on average in 2019, compared with 320 per person in 2007.

Cheques, on the other hand, were rarely used for consumer payments. Since the RBA began recording payment data in February 2002, the number of personal cheques drawn dropped from 14 million to 1.3 million in October 2019.

The rise of digital banking

COVID-19 aside, it’s been extremely encouraging to see the continued uptake of convenient new digital platforms by P&N customers.

P&N has experienced rapid growth in its digital channels in the past two years, with the percentage of new customers joining P&N online growing 171% from July 2019 to November 2020.

Our monthly mobile banking App usage increased 37% over two years from November 2018 to November 2020 and engagement with P&N’s New Payment Platforms (NPP), launched in February 2018 has also been strong, with a 55% increase in instant NPP transactions in the 12 months to December 2020.

These statistics demonstrate that our customers certainly value the ability to choose when and how they bank, while embracing the convenience that digital wallets, Osko and PayIDs (real time payments) and mobile banking app upgrades deliver to help complete their day-to-day transactions.

The strong trend to digital banking demonstrates that banks must continue to adapt and enhance their operations to ensure they remain relevant, while also continuing to meet the changing needs of customers. Banks will continually need to re-imagine the future of digital banking with a nimble and agile approach, to focus attention on how customers will want to interact with us and access their money in the future.

With all this change, we must remember it’s not just banks that are having to adapt the way they do things. It’s important we don’t forget those consumers who may not be ready for this ‘new normal’.

While many of us are excited about the possibilities and opportunities that come along with an increasingly changing digital banking landscape, there’s a group of consumers who are having to dive into a new world of digital transactions and banking, as some retailers remove the option for cash payments.

And it’s our job to be here to support them through this change. We must be there to guide them through the new banking world to help them see the opportunities, choice and control which will now be available to them.

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