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The COVID Inspired Cash-crash Amidst a Digital Payments Boom

The move to contact-less payments in a lock-down has perhaps sped up the demise of cash with Australia’s demand of coins halving in the last five years, according to the Royal Australian Mint. 

The Reserve Bank of Australia monthly retail data report for June revealed more than 70% of transactions were done via debit cards alone.  

Whilst the Australian Government’s suite of lock-down support measures provide a near-term budget challenge, the move to online payments does put further pressure on the cash economy as plastic trumps cash. 

The follow-on response as to who the beneficiaries of electronic payments would automatically assume that Australia’s banks would be in the proverbial box seat but the reality is one that belies the pressure the traditional banking system now faces.

Cash withdrawals from automatic teller machines have fallen by as much as 30% according to the Reserve Bank of Australia while earnings from merchant feeds are also under pressure from a slew of new and technically advanced smaller entrants. 

When coupled with the arrival of buy-now pay-later operators such as Afterpay and Zip, competition at the point of sale terminal has never been more hotly contested.

For small business operators, the challenge historically, of course, has been overcoming onerous merchant card fees that has added an unforeseen cost burden to many operators. 

In 2020, offering buy-now, pay-later is becoming standard and the major banks are also investing heavily in their own contact-less solutions in a bid to move away from the costly service provided by the likes of Visa and Mastercard. 

The move away from old currency reveals that cash is no longer king and the downward pressure from digital payment gateways is chipping away at the decade old bollards of onerous fees. 

Margins in any business observe two variables, in price and cost, that have become increasingly harder to change in the last decade.

It is the arrival of dearth of new ways to pay for everyday items and the competition that has fuelled the variety of options the customer now enjoys while the cost of offering a payment terminal is starting to work for the business owner.

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