Gee whiz! The distinguished Michelle Bullock thinks we should pay for cash? How elite! Access to cash and banking should be essential services, not money-making ventures for the rich.
– Regional bank and cash user
Let’s provide more context to Governor Bullock’s comments here.
She was saying that as the use of cash transactions declines (as the graph in my previous post shows), it affects the economics of providing cash services and this in turn puts pressure on the cash distribution system.
Think of everything involved in handling physical cash in the economy — the armored truck companies, the ATMs, the bank tellers, all of that.
As demand for physical cash continues to decline, Ms. Bullock says it undermines the economics of the old services ecosystem that used to support that traditional way of doing things (when physical cash was more commonly used).
So what can we do about it?
The RBI really wants the banking industry to maintain broad ATM coverage across the country, especially in rural and regional areas, at affordable rates, she said.
She said the government had also highlighted the importance of maintaining adequate access to cash services for Australians as a key priority in its strategic plan for the payment system in the coming years.
But everyone knows that the economics of dealing with cash are becoming more difficult.
Therefore, she said, economists generally want people to encounter prices for using services that reflect the costs of providing those services.
If you look at ATMs, people are used to paying a small fee to use the ATM, she said.
If we extend this logic to cash, people would likely pay a small fee to use cash as well, to help pay for the costs of transporting and handling that money.
However, she said she doesn’t think people will support it, given the unique role physical currency plays in our society.
“The challenge with criticism is that it really has a huge aura of community and public service attached to it,” she said.
“If companies start charging people to use cash, I think there will be a very big backlash.
“Right now, I think we might be in a situation where it’s very difficult to enforce cash payment. But it will end, and what will happen, and what’s happening at the moment, is that the costs and part of the costs of the financial institutions that are providing the services end up being faced by people.
“I think it’s going to be a very big challenge to get people to face the costs of cash,” she said.
So, and this is my opinion, it seems like Ms. Bullock was saying something more accurate than “people need to start paying cash.”
She was probably telling people He should Pay a little, given the economics of it all, but she doubts people will support that.
Why? Because cash is one of those things that has incommensurable elements. If we were to force people to pay a fee to use it, people might feel very offended, like we’re messing with their rights as democratic citizens or something.
That’s what I took her comments to mean.