cash

Mobile Payments

Australia, South Africa and mobile payments

When it comes to consumer payments, the future is obviously mobile. But the "how" of mobile payments turns out to be rather complicated. I recently had the opportunity to participate in the Annual Conference of the Payments Association of South Africa. Systemic comparison is one key benefit of such an experience. Here we have two resource-driven economies of roughly similar size, similarly large physical distances but markedly different population demographics. The retail payments systems are diverging, rather than converging. This highlights the obvious point that payment systems are shaped by people's habits, not by economics. Consider, for example, some simple comparisons between bank account ownership and mobile phone ownership. According to the World Bank, Australia is one of the most heavily banked populations on earth, with a 99% banking rate in 2012 - that is, 99 out of 100 Australians over the age of 15 had a bank account in 2012. South Africa, by contrast, has a 54% banking rate, and therefore a large community that is still cash-based. Now let's look at mobile phones: the "phoned" rate in Australia is a healthy 106%; in South Africa, 135%. Yes, every person in South Africa has a mobile phone subscription, and every third person has two. If you suspect the interaction of these two comparison pairs leads to different payment evolutions, you would be right.
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Payment System Health

A health plan for the payment system

Recent data shows Australian non-cash activity overtaking cash transactions for the first time. These days almost every economic act other than a small consumer purchase requires an electronic transfer of value through the payment system by card, direct credit, direct debit, BPAY or some other method. This means that the payment system has become to the economy what your arteries and veins are to you – critical for economic health. One might think, then, that keeping the payment system “fit” (that is, secure, efficient and competitive) would be the subject of a well-developed “health plan”. Curiously, in many countries this has not been the case.
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ATM statistics – are we slipping back into our old ways?

The introduction of ATM direct charging in March 2009 has been one of the more public experiments in consumer behaviour within Australian retail payments. With three and a half years of statistics now available, we are developing a clearer view of its impact. On the supply side, direct charging has accompanied a rise in the number of ATMs. There were 25,000 ATMs in Australia in mid-2008 and now there are over 30,000. Despite more ATMs, direct charging has also seen a contraction in the number of withdrawals, with a drop by about 30 million withdrawals between 2008-09 and 2009-10. While this decline coincides with the GFC, the average withdrawal amount rose slightly during this period - suggesting slightly fewer but slightly larger withdrawals from ATMs as a response to direct charging.
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High Value Banknotes

High value banknotes: are they really under the beds of older Australians?

In September of this year, Peter Mair’s submission to the RBA Innovation Review Conclusions created a surprising media splash. Mr Mair, a former RBA official and current finance media commentator, suggested significant and widespread hoarding of $50 and $100 banknotes by older Australians. In the media frenzy that followed, Mr Mair further suggested that “the average pensioner couple could hold up to $50,000 in undeclared $50 and $100 notes to get access to the pension.” Not surprisingly, these comments set off a media firestorm. The Minister of Finance Penny Wong commented, responding, somewhat tongue in cheek, that she hadn’t been looking under any pensioner’s bed for cash! The coverage raises the issue of high denomination banknotes in Australia. Are we awash in high denomination banknotes in Australia? Is Australia out of line with its international peers? Where are all those $100 notes and what are they being used for?
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Future Of Money

The future of money

Believe it or not, the current US Presidential nomination process has thrown up a passionate debate about the nature of money, and particularly whether it is 'sound' or not. Voters are frustrated and fearful about the economy. Politicians (with no economics training) are arguing that in these uncertain times we need a currency backed by something 'real' like gold. This seems oddly backward-looking in the era of the internet. It begs a question: what sort of money do we need to fuel the economy of the 21st century?
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