As global e-payments develop, more and more people choose paperless lifestyles. Electronic payment systems such as Twitter or payment treasures are widely available in China, and “out of the house without wallets” can be achieved. By contrast, the development of electronic payments in New Zealand appears to be lagging behind.
In recent days, local media 1news has started to explore the possibility of New Zealand becoming a “cash-free society”.
For centuries, cash has been “the way of the king”.
However, advances in digital technology mean that more and more people are choosing to pay using bank cards, smartphones or other online platforms, and cash is rapidly losing its meaning and attractiveness.
An economist predicted that Australia would achieve a “cash-free society” by 2025 at the earliest.
Will the same happen in New Zealand? What are the benefits and challenges of a shift to a “cash-free society”?
First, it is important to know how many people in New Zealand are still using cash.
According to the Reserve Bank statistics, just over 36 per cent of New Zealanders stated that they had not used cash at all within seven days;
However, the same statistics indicate that nearly 43 per cent of New Zealanders still pay for their daily supplies in cash;
However, those who like to use cash may find that there are fewer places in the future where they will be allowed to use it.
Cash is no longer allowed in some public transport systems and is increasingly prohibited in cafés and other places. An increasing number of retailers are also reluctant to allow customers to pay in cash.
According to the Reserve Bank, people now have less and less access to cash, and some cash or deposit points have been closed.
As a result, the Reserve Bank has been studying the future of New Zealand currency as digital payments become more common.
What's the future like?
Many people have become accustomed to paying using debit or credit cards, while more and more people are paying through smartphones using digital wallets.
The New Zealand monetary system may eventually have to change to accommodate this growing trend of digital payments.
One project currently being studied by the Reserve Bank is the Central Bank Digital Currency (CBDC).
The Reserve Bank indicated that it would be a new currency for people to use in their daily consumption.
Such a digital currency would have the same value as the in-kind currency and could be used as cash to cover various expenses.
The Reserve Bank indicated that such a digital currency would help to maintain trust in the currency and would be used with, rather than as a substitute for, cash.
While the digital currency has many advantages, it also poses a number of challenges, including ensuring that it is protected from cyberattacks.
That was why the Reserve Bank was currently working on a four-phase process to determine whether New Zealand should continue to use CBDC.
What are the benefits of a “cash-free society”?
For businesses, the risk of robbery is reduced if cash is not deposited in the place of business; in addition, businesses do not need to account for cash or to deposit money in their own bank, saving time.
For consumers, a “cash-free society” can also offer a great deal of convenience. More and more people go out with their wallets and choose to pay on their mobile phones when they need to pay.
What are the challenges facing a “cash-free society”?
First, digital payments are not as private as cash payments.
Digital payments are also vulnerable to technical failures or other problems, with the failure of small cell phone batteries resulting in the failure of digital wallets and the disruption of connectivity in an area due to a major natural disaster. For example, tropical cyclones hit parts of the North Island earlier this year.
Clients may also find their bank card transactions charged additional surcharges.
A “cash-free society” can also pose challenges for certain groups in society.
This includes older persons who may not be as skilled as they are, vulnerable groups who do not even have bank accounts, or people who simply feel that cash is more likely to keep consumption habits because of budgetary constraints.
Will New Zealand then transform into a “cash-free society”?
Neighbouring Australia may, but in New Zealand, this seems unlikely.
Ian Woolford, Head of the Monetary and Cash Sector of the Reserve Bank, stated that the maintenance of the cash system “is as much a need as a need for the future”.
In an interview published by the Reserve Bank in April, Woolford stated that both digital and entity central bank currencies were needed in society.
“Cash remains a vital requirement for a significant part of the population. Most still value cash as an option or as a back-up to payment.”
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