Despite the increased use of electronic payments around the world, there is “scant evidence” of a shift away from cash, according to the latest quarterly review from the Bank for International Settlements — the “central bank of central banks”.
“In most advanced countries, cheques have disappeared or are dying a slow death,” BIS researchers said. “Credit or debit cards are now accepted by all but a few merchants. New electronic payment services are emerging around the world and are increasingly instant, ubiquitous and available around the clock.
“Many types of payment usually done with cash are going electronic. In Denmark, for example, church collection boxes and street performers now accept mobile payments.
“In China, fast food can be bought using ‘smile to pay’ facial recognition technology. In the US, college students pay for pizza and beers using apps that broadcast the purchases to their social media friends.”
On the face of it, BIS said, the evidence points to a shift away from notes and coins — but the data so far say otherwise, with both cash in circulation and card payments on the increase.
Between 2007 and 2016, cash in circulation increased from 7 per cent to 9 per cent of GDP, while debit and credit card payments rose from 13 per cent to 25 per cent of GDP between 2000 and 2016.
“As the appetite for cash remains unabated, few societies are close to ‘cashless’ or even ‘less-cash’,” the researchers said. “In fact, demand for cash has risen in most advanced economies since the start of the GFC.”
Hong Kong and Japan saw the biggest increases in cash circulation. Only Russia and Sweden showed evidence of substitution between cards and cash, while cash in circulation fell 5 per cent in China — where mobile payment systems like AliPay and WeChat have exploded in popularity.
BIS attributed the demand to people wanting to hold cash as a store of value rather than for payment needs, partly due to lower interest rates since the GFC. They based this finding on the rising demand for higher-denomination banknotes, which are mostly held as a store of value.
“Banknotes sewn into a mattress are likely held for store-of-value purposes but it is harder to tell whether a banknote in a wallet is held for one or the other motive,” they said.
The Turnbull Government has been investigating ways to claw back unpaid tax lost to the so-called “black economy”, which it estimates could be as large as $25 billion.
A Treasury taskforce last year proposed a number of solutions, including an “economy-wide” limit on cash payments, the use of consumer penalties for failing to get a receipt when paying in cash, and the use of biometric data such as “fingerprints, palm prints, iris and facial structure” to monitor the black economy.
The Black Economy Taskforce also floated “additional policy ideas” including expiry dates and “tracking technology” for banknotes, a ban on encrypted messaging phones and apps, and “scraping” internet traffic to identify “suspicious patterns of online activity”.
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