For many centuries, cash has been king.
But advances in digital technology mean cash is fast losing its relevance and appeal, as more people choose to use their cards, smartphones or other online platforms to make payments.
Across the Tasman, one economist predicts Australia will be effectively cashless as early as 2025.
Could the same thing happen in New Zealand? And what would be the benefits and challenges of shifting to a cashless society?
How many New Zealanders still use cash?
Just over 36% of New Zealanders claim to have not used cash at all over a period of seven days, according to Reserve Bank statistics.
But the same statistics show nearly 43% of New Zealanders still use cash to pay for everyday items.
However, those who prefer to use cash could find fewer places allow them to do so in future.
Cash transactions are already out of the question on some public transport systems and increasingly in cafes and other hospitality spaces. More retailers also prefer not to be paid in cash.
The Reserve Bank says there is also reduced access to cash these days, with some of the places where people withdraw or deposit cash being closed.
So, with digital payments becoming more common, the Reserve Bank has been looking at the future of money in Aotearoa.
What might that future look like?
Many people already use debit or credit cards to make payments, while an increasing number of people also use digital wallet payments through their smartphones.
New Zealand’s monetary system may eventually have to change to accommodate this growing trend of digital payments.
One avenue the Reserve Bank is currently investigating is a central bank digital currency (CBDC).
It says this would be a new type of money for people to use for their day-to-day spending.
The digital currency would have the same value as physical money and would be used to pay for things in the same way as cash.
The Reserve Bank says this digital currency would help maintain trust in money and would be available alongside cash, rather than replacing it.
While there are many benefits to a digital currency, it could also throw up a few challenges, including making sure it’s safe from cyber attacks.
This is why the Reserve Bank is currently working through a four-stage process to see if New Zealand should proceed with a CBDC.
What are the benefits of a cashless society?
Going cash-free has several benefits for businesses.
It can reduce the risk of robbery if there’s no cash held on premises, and can also save time for businesses if they don’t need to count cash or physically go to a bank to deposit it.
It’s also convenient for tech-savvy consumers. More people are not even bothering to take their wallet with them when they head out, instead choosing to use their phones to make payments.
What are the challenges of a cashless society?
Digital payments don’t have the same privacy as cash payments, for a start.
Digital payments are also susceptible to technical glitches or other problems, ranging from as small as a dead phone battery, rendering your digital wallet useless, to a major natural disaster wiping out connectivity in a region. This was the case in parts of the North Island following Cyclone Gabrielle earlier this year, for example.
Customers might also find themselves stung with more surcharges for card transactions.
Going cashless could create challenges for certain groups in society, too.
This includes older people who may not be as tech-savvy, vulnerable people who don’t even have a bank account, or people who are simply on a tight budget and find cash is an easier way to keep their spending habits on track.
Will New Zealand ever become a cashless society?
While there might be noises in Australia about going cashless within the next few years, it’s looking less likely in New Zealand.
Maintaining a cash system “is both a current and future need”, according to Ian Woolford, the director of Money and Cash at the Reserve Bank.
In an interview the Reserve Bank released in April, Woolford said both digital and physical central bank money would be needed in society.
“We are one of the most ‘cashless’ societies in the world by many measures,” he said.
“But cash remains essential for a significant minority to live their lives and is still valued by most as both an option and backup to other means of payment.”
