# RDP 2020-06: Consumer Payment Behaviour in Australia: Evidence from the 2019 Consumer Payments Survey 4. Cash

## 4.1 Cash Payments

The share of consumer payments made using cash has continued to fall, with cash accounting for 27 per cent of the number of consumer payments in 2019, compared to 37 per cent in 2016 (Figure 3). When measured by the value of consumer payments (rather than the number), the share of cash payments fell to 11 per cent, after being fairly stable at a little under 20 per cent in the previous two surveys. The decline in the relative use of cash in recent years largely reflects more frequent use of cards for in-person payments (as discussed below), though over a longer horizon it is also consistent with a higher share of payments being made online than they were a decade or so ago.

Whereas cash has historically been the preferred option for lower-value payments, consumers are increasingly switching to cards for these transactions. For example:

• Cards overtook cash as the most common way of making payments of $10 or less for the first time in the 2019 CPS. Cash accounted for 45 per cent of these payments in 2019, compared to 62 per cent in 2016. • The payment value at which cash is the most common means of payment has been falling over time. In 2019, this ‘threshold’ was just$4, whereas cash was the most frequently used payment method for payments up to $12 in 2016, and up to$41 in 2007 (Figure 4).

The shift away from cash for smaller transaction sizes reflects both changing consumer preferences and widespread merchant acceptance of electronic payment methods – particularly contactless cards – for even small payments (see below).[7] Among other things, this has led to a transition away from cash in sectors where cash has traditionally been used for a high share of transactions, such as smaller (non-supermarket) food retailers including cafés, pubs and takeaway food outlets (Figure 5). These businesses had a median transaction size of $12 in 2019, and the share of cash payments declined by nearly 20 percentage points relative to three years earlier. The ongoing decline in cash use was also evident across different demographic groups, with consumers of all ages, income groups and regions using cash less frequently than they did previously. There was a particularly pronounced shift away from cash for younger respondents: consumers aged under 40 made just under 15 per cent of their weekly payments in cash in 2019, compared with around 30 per cent three years earlier (and around 65 per cent in 2007) (Table 2). In contrast, cash was still the most common means of payment for consumers aged 65 and over. Respondents in this age group made around half of their payments in cash in both 2016 and 2019, although this was well below the cash share of nearly 80 per cent recorded by this age cohort in 2007. Table 2: Cash and Card Payments by Demographic Groups Per cent of number of payments by respondents in each group 2007 2010 2013 2016 2019 Cash Card Cash Card Cash Card Cash Card Cash Card Age (years) 18–29 67 29 58 33 44 47 31 58 13 77 30–39 61 33 54 37 40 47 28 59 14 75 40–49 68 27 57 35 47 43 36 53 22 67 50–64 72 24 66 28 48 41 42 48 34 58 65+ 78 18 73 21 60 33 51 40 52 41 Age-adjusted household income 1st quartile 72 22 67 24 49 39 44 44 30 60 2nd quartile 69 26 59 33 50 39 43 45 33 58 3rd quartile 70 25 59 34 49 41 38 51 27 63 4th quartile 63 32 59 34 43 49 32 58 21 70 Location Regional area 70 25 62 30 51 39 44 46 32 59 Capital city 69 27 61 32 46 44 34 55 25 65 Note: Excludes payments over$9,999, transfers (payments to family and friends) and automatic payments

Source: RBA calculations, based on data from Colmar Brunton, Ipsos and Roy Morgan Research

The 2019 CPS also showed that cash use had fallen notably among consumers in particular demographic groups that have historically used cash relatively frequently. For example, the share of payments made with cash by households in the lowest income quartile fell by 14 percentage points between 2016 and 2019, and the equivalent share for respondents who live in regional areas fell by 12 percentage points.[8] While the CPS indicated that people in these demographics still tended to use cash more often than respondents in higher-income groups or those who live in capital cities, previous Reserve Bank analysis suggests that these differences are likely to be more a reflection of factors other than income or location. Using logit regression analysis, Delaney et al (2020) find that CPS participants who lived in regional areas and had lower incomes tended to be older and use the internet less frequently; and it was age and internet use that had more explanatory power for cash use than location or income per se.[9]

Notwithstanding the trend decline in transactional use of cash in the economy, there are still some people who use cash for a significant share of their in-person payments. For example, around 15 per cent of CPS participants used cash for 80 per cent or more of their in-person transactions (Figure 6).[10] And the share of people using only cash for their transactions in the diary week was 10 per cent in 2019, down only slightly from around 12 per cent in both 2016 and 2013. Not surprisingly, the share of people not using cash at all in the diary week has increased since the previous survey – one-third of participants in 2019 did not record any cash payments, compared with 18 per cent in 2016. This is consistent both with consumers increasingly preferring to pay with cards and other electronic payment methods and with fewer barriers to making these payments at a range of merchants (e.g. widespread acceptance of contactless card payments). As discussed below, debit cards are displacing cash for more and more consumer payments, with an increasing share of people exclusively using debit cards for their in-person transactions: 21 per cent of respondents in 2019, compared to 7 per cent in 2016 (Figure 7).

The reasons for using cash differed significantly according to how frequently respondents used cash. In particular, high cash users tended to cite factors relating to a preference for using cash such as budgeting and preferring to use their own funds (Figure 8). In contrast, low cash users were more likely to cite merchant acceptance as a reason for using cash, which could suggest that they paid in cash mostly when other payment options were unavailable. Among all respondents, other reasons for using cash included because of card surcharges or discounts for paying in cash (11 per cent), or concerns around privacy and security (6 per cent).

Despite the ongoing reduction in the transactional use of cash, 78 per cent of respondents reported holding some cash in their wallet or purse, which was only a slightly lower share than in 2016 (80 per cent). Similarly, the median value of banknote holdings ($45) was around the same as it was in 2016. However, a notable development in recent surveys has been an increase in the proportion of respondents reporting that they did not hold any cash in their wallet, to 22 per cent in 2019 from 8 per cent in 2013 (Figure 9). Not surprisingly, demographic groups that tended to use cash more often to make payments also held more cash in their wallets. For example, the median value of banknotes held by people aged 18–29 was only$10, while the median value of banknotes held by people aged 65 and over was $120. Around 40 per cent of CPS respondents reported that they also held money outside of their wallets. Of those respondents who held cash outside their wallets, 40 per cent reported holding$100 or less, and only a small share (less than half of 1 per cent) reported holdings of over $5,000.[11] Aside from making everyday payments, the most common reason for holding cash – cited by over 40 per cent of respondents as their most important reason – was for precautionary purposes (i.e. to fund emergency transactions) (Figure 10). The role of cash as a precautionary store of wealth in times of uncertainty has been evident during the COVID-19 pandemic, where there was a significant increase in demand for high-denomination banknotes. Smaller proportions of respondents reported holding cash for cash gifts and because of concerns about payment system reliability (around 10 per cent each). ## 4.3 Cash Top-ups Around half of CPS respondents in 2019 (52 per cent) did not ‘top up’ their cash holdings during the diary week. Despite the continued decline in transactional use of cash, this share was little changed relative to three years earlier. The average weekly number of top-ups per person (0.8 per person) was also similar to 2016, but well below the average of 1.4 top-ups per person recorded in 2007 (Table 3). Since the CPS was introduced in 2007, Australian consumers have reduced the frequency with which they withdraw cash from ATMs, bank branches and via the ‘cash out’ option at the point of sale. In contrast, the frequency at which consumers receive additional cash from other sources – for example, cash wages and transfers from friends or family – has been broadly stable across the last few waves of the CPS. These transfers were generally of lower value than cash top-ups from ATMs or bank branches, suggesting that they are mainly transfers from family or friends (rather than wages, for example).[12] The most common way that consumers top up their cash holdings is at ATMs, which accounted for 42 per cent of the number of top-ups during the diary week. When respondents visited an ATM, the median amount withdrawn was$100, which was the same as in most previous waves of the CPS. This indicates that each withdrawal is lasting longer as consumers use cash less frequently for transactions.

Table 3: Cash Top-ups by Source
2007 2010 2013 2016 2019
Share of respondents making one or more top-ups (%) 86 72 76 45 48
Average number of cash top-ups per person per week 1.4 1.6 1.5 0.7 0.8
Via ATM 0.9 0.9 0.7 0.4 0.3
Via cash out at point of sale 0.3 0.4 0.4 0.1 0.1
Via over the counter at a branch(a) 0.1 0.1 0.1 0.0 0.0
Via other source 0.1 0.2 0.3 0.2 0.3
Median value of top-ups (\$) 100 100 60 100 80
Via ATM 100 100 80 100 100
Via cash out at point of sale 50 50 50 50 50
Via over the counter at a branch 250 385 100 200 300
Via other source 85 45 50 50 50
Share of top-ups attracting a fee (%) na 23 15 7 14

Note: (a) Rounds to 0 in 2016 and 2019

Source: RBA calculations, based on data from Colmar Brunton, Ipsos and Roy Morgan Research

More timely data on ATM withdrawals are available from the Reserve Bank's monthly Retail Payment Statistics (RPS), which also show that the number and value of ATM withdrawals has been declining for more than a decade (Figure 11).[13] These data also provide an indication of the significant impact of COVID-19 on transactional demand for cash – the number and value of ATM withdrawals fell by 49 per cent and 38 per cent respectively from February to April 2020 (before rebounding somewhat in May and June).[14]

## 4.4 Cash Access

Alongside declining transactional cash use and falling ATM withdrawals, the provision of cash access points such as ATMs and bank branches has fallen over recent years. For example, the number of ATMs in Australia declined by 15 per cent from its peak in late 2016 to March 2020 (to just under 28,000 machines).[15] In this context, the 2019 CPS asked participants about their perceptions of how convenient (or otherwise) it is for them to access cash withdrawal and deposit services.

Around 90 per cent of respondents who reported making cash withdrawals indicated that access to withdrawal services was convenient or very convenient (Figure 12). This is consistent with previous research that found that cash access, as measured by the distance to the nearest ATM, bank branch or Bank@Post post office, appeared to be good for the majority of Australians (Delaney, O'Hara and Finlay 2019). Consumers are also able to access cash via the ‘cash out’ functionality offered by many merchants, including supermarkets. A somewhat lower proportion of respondents (62 per cent) who make cash deposits indicated that access to deposit services was convenient or very convenient.[16] Of the respondents who used cash the most intensively for transactions (high cash users), 95 per cent of those who made withdrawals indicated that their access to cash withdrawal services was convenient. A smaller share of low cash users (85 per cent) reported that access to cash withdrawal services was convenient.[17]

While the majority of high cash users stated that their access to cash services is currently convenient, the economic incentives for the private sector to provide cash access points is likely to come under increasing pressure as the share of cash payments in the economy declines. Accordingly, an important issue is whether consumers have access to and familiarity with newer technologies necessary to use electronic payments. In this regard, the 2019 CPS indicated that access to the technology that underpins some newer electronic payment methods may be challenging for a significant share of high cash users. For example, around half of high cash users did not regularly access the internet, and a similar amount reported having no mobile internet access. In contrast, 95 per cent of low cash users regularly accessed the internet, and a similar share reported having mobile internet access.

To help gauge whether consumers might struggle to cope if cash became less-widely accepted and available as a means of payment, the latest CPS asked respondents about the extent to which they would be inconvenienced if shops stopped accepting cash and cash was no longer able to be withdrawn. The majority of respondents – 73 per cent – said that an absence of cash services would either have no impact on them or be at most a minor inconvenience. In contrast, 25 per cent of respondents said that the absence of cash services would be a major inconvenience or cause them genuine hardship. These respondents tended to be older, with nearly 40 per cent of respondents aged 65 and over indicating that it would be difficult for them if cash services were no longer available (Figure 13).

## Footnotes

See Box B of Delaney, McClure and Finlay (2020) for further discussion of merchant acceptance of cash and cards. [7]

Because of the overlap between age and income groups, the figures for income quartiles are adjusted for respondents' age. In this context, regional areas refers to people who live outside capital cities.[8]

See Table A1 in Delaney et al (2020) for results of a logit regression where the dependent variable is whether or not a transaction was made using cash, and the explanatory variables either relate to the individual making the transaction (e.g. their age), or the transaction itself (e.g. the value of the transaction). See also Davies et al (2016) and Meredith, Kenney and Hatzvi (2014) for previous discussions of the use of cash in Australia.[9]

These participants are referred to elsewhere in this paper a ‘high cash users’. Conversely, we refer to ‘low cash users’ as participants who used cash for less than 20 per cent of their in-person payments.[10]

It is likely that there is some under-reporting of cash holdings, since people who hold a large amount of cash may not be willing to disclose this in a survey. Finlay, Staib and Wakefield (2018) use several methods to investigate how banknotes are used in Australia, including using data from previous waves of the CPS. They estimate that more than half of Australian banknotes on issue are being stored by the public, either domestically or overseas.[11]

Cash top-ups from ‘other’ sources may be under-reported because people could be reluctant to report large cash receipts for privacy reasons.[12]

The RPS show that the value of ATM withdrawals has fallen at a slower pace than the number of withdrawals, indicating a rise in the average value of each withdrawal (Statistical table C4 ‘ATMS – Seasonally Adjusted Series’, available at <https://www.rba.gov.au/statistics/tables/xls/c04hist.xlsx>).[13]

The fall in ATM withdrawals was greater than the fall in card payments over this time; between February and April 2020 the number of credit card transactions fell by 28 per cent and the number of debit card transactions fell by 19 per cent.[14]

See the Australian Payments Network website for statistics on ATM terminals (https://www.auspaynet.com.au/resources/device-statistics#atm).[15]

A quarter of respondents stated that they did not make cash deposits. The lower share of participants reporting positive perceptions of access to cash deposit facilities could partly reflect the fact that there are fewer locations where cash deposits can be made – for example, many ATMs do not take cash deposits.[16]

See Delaney et al (2020) for further discussion of attitudes to cash.[17]