Aussies hoarding $50 and $100 notes

There has been a sharp drop in the value of withdrawls from ATMs, which accelerated during the pandemic.

The value of cash withdrawals is down by 17 per cent from where it was three years ago, while over the same period, the value of nominal spending in the economy has risen by 27 per cent.

Aussies also sent more than $1trillion over a billion transactions via the country’s fast payments system – the NPP – over the past year.

The use of PayID has also grown, with nearly 13 million PayIDs registered and accounting for around a fifth of NPP payments.

Reserve Bank Governor Philip Lowe, in a speech on Australia’s payments system to the Payments Network Summit in Sydney, said it was an “exciting time” in the space.

“The Reserve Bank has a broad mandate to help shape this changing world, so that it works in the best interests of Australian households and businesses,” he said.

He said Australia had come a long way in the payment space, but had work to do.

“The NPP has been constrained to date by the fact that it catered for push payments only – that is, payments that are initiated by the customer, such as when we send payments to one another. PayTo, which launched in June, is set to change this,” he said.

“PayTo will modernise the way we make direct debits, giving customers greater control over payments authorised to come out of their accounts.

“Only one of the major banks has met the previously agreed timeline for the development of the PayTo Payer system. The reasons for this are complex, but slow progress by the major banks imposes a cost on the rest of the industry.”

Another area of reform the RBA is working to support is cheaper and faster cross-border payments.

Mr Lowe noted the G20 countries had committed to making cross-border payments cheaper, faster, more transparent and more accessible and said Australia needed to play its role here.

“The cost of international payments is too high. This is a particular problem for our neighbours in the South Pacific, where too often people on low incomes face very high charges for sending money home,” he said.

While he said there had been some progress made in the sphere, it was too slow.

“We need the assistance of Australia’s financial institutions to make further improvements,” he said.

He said that the biggest problem was incoming payments taking too long to process, and that an expansion of the NPP to include international payments would help progress.

Mr Lowe’s speech also touched on merchant payment costs, saying that while overall it was trending lower, mobile wallets were pushing businesses’ fees higher.

“(Use of) mobile wallets offered by Apple Pay, Google Pay and Samsung Pay … is growing very quickly and they are often more expensive for merchants to accept,” he said.

He said there were sustained, large differences in the payments costs incurred y small and medium businesses. Small businesses, he said, on average pay twice what large businesses do to process the same transaction.

He said the RBA was focused on increasing competition to help further drive down payment costs.