Digital payments: Is cash really still king?

We’ve all said it — 'Cash is king'. And, king or queen, most people would agree. Cash is still a popular store of value and medium of exchange even in ever more digital economies. Accepted in most transactions, it's liquid, and easily convertible into goods and services. It's even nice to look at, to touch and — you know it's true — to smell.

But reports show that Australia may have reached 'peak cash'. In 2022-23, the amount of cash in Australia declined for the first time since dollars and cents were introduced in 1966. So, what's going on? Is cash still king?

Data from the Reserve Bank’s 2022 Consumer Payments Survey [CPS] shows that at the end of FY 2022-23, the total value of Australian cash in circulation fell by almost $1.1 billion. Australians' payment preferences are fundamentally changing. They are using cash less often — only 13 per cent of payments were made using cash in 2022. That's half the share reported in 2019.

The 2022 CPS showed a clear shift to electronic payments. Three-quarters of Australian payments were made with cards [both debit and credit] in 2022 – an increase of 13 percentage points from 2019, and three times the share in 2007. Notably, the share of payments made with debit cards is now around half of all payments, and the increase in card use mirrors the decline in cash payments.

Cards are now used for most in-person payments, even for small amounts that we used to make with cash. Historically, payments of $10 or less were mostly made in cash. However, in 2022 more than 70 per cent of these payments were made using cards – up from around 50 per cent in 2019. Evidently, Aussie consumers love the convenience of digital payments enabled by cards — something that was borne out in the Treasurer's statement when releasing the Government's Strategic Plan for Payments in June 2023 that Australia is "taking to cashless and mobile payments faster than almost any other country."

The Digital Payments Paradox

When physical cash is exchanged for something — literally handed over — 'time to money' for the merchant is about as fast as it can get. Stand in front of merchant. Hand over the money. Get the thing. Even better — for the merchant — once it's in the till, the cash is ready to become the next customer's change, a refund, or a payment to a supplier.

It's fast, powerful and — importantly — free.

Yet as the economy has modernised and digitised, 'time-to-money' for merchants has slowed. Sure, electronic payments feel instant for consumers — tap, wait for the tick, grab and go. But for the merchant, those electronic dollars might as well wander away with the consumer. They trickle through system spaghetti of gateways and clips, approval layers, exchange points, verifications, complexity and cost before eventually landing in the merchant's bank account.

Digital payments bring a raft of benefits, of course. But accelerated time-to-money for merchants hasn't been one of them. Consumers clearly love the convenience and real-time feel of them. But a notionally simple, inexpensive digital journey from one bank account to another has been anything but. Until now.

A Digital-First Payments Paradigm

In an age where most things move at the speed of a click, the sluggishness and expense of digital payments to date have not felt very digital at all to merchants. Give me the speed and simplicity of cash might be the frustrated modern merchant's lament.

But we have entered a new age. Legacy digital payment entanglements are being bypassed by new payments infrastructure and real-time solutions that seamlessly connect the bank accounts of the parties transacting. This can enable smooth, secure and smart ways to make, take or collect data-rich payments at speed.

In this new paradigm of free-flowing funds, and rich data enabling account and identity verifications — and instant reconciliations — is it time for cash to relinquish its crown?

We think so.

The Transformative Potential of A2A Payments

Payments regulation in Australia is undergoing once-in-a-generation reform, and we are delighted to be contributing to some of the transformative discussions taking place. 

Zepto's account-to-account [A2A] payments infrastructure can transform bank accounts from passive storehouses of value into secure, dynamic, digital payment powerhouses.

Whether collecting, receiving or disbursing funds, you can reimagine your most important customer interaction — the moment of exchange — in ways you never thought possible. You can automate processes to iron out back-office wrinkles, reduce costs, fraud and dishonours, and make every payment do precisely what you want it to with accuracy and control.

If the bank account is the heart of a business, then a smooth payments flow is the life sustaining bloodstream.

Zepto's real-time A2A offerings include Enterprise PayID® solutions, NPP pay-outs and pay-ins, and PayTo® enabling businesses to collect payments directly from their customers’ bank accounts like a smart, always-on, real-time direct debit.

Find your payment flow-state with Zepto: A better way to pay.

PayID and PayTo are a registered trademarks of NPP Australia Limited.