Federal Government to Require Businesses to Accept Cash

The “War on Cash”

In 2016, the European Central Bank (ECB) eliminated the production of its €500 notes to curb fraud and money laundering. The note was the second-largest denomination across the euro currency zone, and the ECB claimed that it was the banknote of choice among criminals. At the time of the ECB’s announcement, the €500 bills in circulation represented one-third of all the euro-denominated cash outstanding.

Since 2016, global policies have been implemented to thwart the use of cash in favour of digital currency transactions. In the United States, any financial institution that receives a cash deposit of more than $10,000 must report it to the IRS, making tracing illegal activity easier.

Promoting and tracking digital transactions amounts to a war on cash. Digital money is instead being promoted because it keeps cash from being used. Transactions are handled by computers via the internet rather than passing through anyone’s hands. Critics argue that limiting the use of cash and forcing individuals to pay through banks or credit card companies compromise financial privacy, prevent interest accumulation on saved cash, and limit profits of small business owners who often rely on cash sales (Hayes, 2024).

Will Cash be phased out in Australia?

ABC New’s reported in mid-2024, that the federal government will require businesses to accept cash as payment for groceries, fuel and other essentials but will phase out cheques entirely within five years (Crowley, 2024)

Treasurer Jim Chalmers said the government would begin consultation on a “cash mandate” before the end of the year, but implementation would likely wait until after the election.

“People are increasingly using digital payment methods, but there is an ongoing place for cash in our society … [A mandate] means those who rely on cash will not be left behind,” he said in a joint statement with Financial Services Minister, Stephen Jones.

The vast majority of businesses—some 94 percent—do accept cash, which remains the preferred form of payment for at least 1.5 million Australians.

Disgruntled MP Bob Katter made headlines this week after his cash was rejected by a cafe — in Parliament House, of all places (Waterson, 2024). The incident sparked national debate again, so what are your rights when it comes to paying in notes and coins?

But crossbenchers Andrew Gee and Bob Katter are among those to have highlighted instances of businesses refusing cash. Mr. Katter decried the episode as “another example of a cashless society that gives all the power to the banks and strips you of your freedom.”

Although cash is legal tender, there is currently no legislative requirement to accept cash, provided a business offers another fee-free means of payment.

The government has signalled that it will carve out small businesses from any mandate, which could also apply to basic banking services, pharmaceuticals, utilities, and health care.

Patricia Sparrow, chief executive of the Council of the Ageing, welcomed the move, saying many older Australians remained hesitant about digital payments (Crowley, 2024).

“People are nervous about being online for security and privacy and older Australians are still more targeted when it comes to scams. This is a good way for them to be able to continue to shop for things that they need with confidence, without having additional fees and charges.”

The declining use of cash has led to turbulence in its supply chain.

Last year, Armaguard became Australia’s only remaining cash distributor when it acquired struggling rival Prosegur. But it was soon struggling to stay afloat itself, and in June its eight largest customers handed it a $50 million lifeline to stave off collapse (Clarke, 2024).

The company blamed the declining use of cash for its woes, citing the expense of delivering small amounts of money to all parts of the country.

If Cash is an Issue, What About Cheques?

They were once a mainstay of the banking system, but cheques have been slowly disappearing in recent years.

Their demise in Australia has been hastened by a Federal Government decision that the system will wind down “no later than 2030″. The government itself will stop issuing cheques by 2028.

The Australian government has revealed a timeline for its plan to phase out cheques, declaring they will no longer be issued from mid-2028 and no longer be accepted from September 2029.

‘Orderly’ transition for Cheques

The Australian Federal Treasurer, Jim Chalmers, said in June last year that the government will “manage this transition in an orderly and planned way.” He noted that only 0.2% of non-cash retail payments in Australia were made by cheque, which seems like compelling evidence to shut the system down.

Treasurer Jim Chalmers said he had written to the CEOs of the four major banks to convey his expectation that they continue to facilitate the needs of cheque users until those dates.

“The usage of cheques has declined by 90 percent in the last ten years, and many banks and financial institutions are ending cheque issuance for new customers,” his statement read.

“The government is acting to give customers and businesses the certainty and the assistance they need to switch to other payment methods [but] banks also have a responsibility to support cheque users as part of this smooth transition.”

No Option for Customers?

The transitioning away from cheques, is it a case of customers having no option? Many Australians have already been weaned off cheques by their banks (Debritz, 2024).

Among the “big four” banks:

• The Commonwealth Bank of Australia (CBA) is advising customers to “cheque out,” taking away access to some customers.
• At National Australia Bank (NAB), chequebooks are no longer available for new personal banking accounts or for existing accounts that don’t already have a chequebook.
• Westpac has begun diverting customers to other kinds of payment.
• From 16 June 2024, Australia New Zealand Bank (ANZ) stopped issuing cheque books to customers who have never had them before, as part of a planned phasing out.

Suncorp, Bank Australia, People First Bank, Rabobank, Credit Union Australia, and Teachers Mutual Bank have already stopped accepting cheques, with Macquarie and AMP to follow suit in November. Bendigo and Adelaide Bank has stopped issuing new chequebooks and begun phasing out cheque accounts for many customers.

Australia is not alone in phasing out cheques

Around the world, the transition away from cheques has been linked to the declining use of cash and the movement towards digital-only payments.

In the United States, cheque (spelled ‘check’) use is on the decline. Last year, The Washington Post declared the check “dead”, but noted that they were still used for one in 20 non-cash purchases. That is far higher than the rate here in Australia.

In the United Kingdom, cheque usage slumped 90% between 2007 and 2022. By 2022, they accounted for 0.5% of payments. There were plans to phase cheques out by 2018, but public pressure forced the UK Government to relent. They remain in circulation largely due to the efficiency of the Image Clearing System, set up in 2019, which allows users to deposit a cheque simply by photographing it with their mobile phone.

In New Zealand, most banks and even the Justice Ministry stopped accepting and issuing cheques in May 2021. The Bank of New Zealand describes itself as cheque-free (Debritz, 2024).

Summary

The Australian federal government’s intention to require businesses to accept cash as payment for groceries, fuel, and other essentials appears to buck the trend of the war on cash globally. It will begin to consult on the idea later this year with an intention to implement the mandate by 2026. It has already flagged an exemption for small businesses. However, it supports the global demise of cheques, with the government confirming a timeline for the phasing out of cheques by September 2029.

References:

Clarke, Melissa (2024), “Banks to the rescue with $50 million lifeline for cash transporter Armaguard,”abc news, June 24. https://www.abc.net.au/news/2024-06-24/banks-offer-lifeline-to-cash-transporter-armaguard/104014250

Crowley, Tom (2024), “Federal government to require businesses to accept cash for fuel and groceries,”abc news, 18 November. https://www.abc.net.au/news/2024-11-18/government-to-require-businesses-accept-cash/104612084

Debritz, Brett (2024), “Why cheques are checking out”, National Seniors Australia, August 2, https://nationalseniors.com.au/news/latest-news/why-cheques-are-checking-out

Hayes, Adam ((2024), “Why Governments Seek to Eliminate Cash,” Investopedia, April 19. https://www.investopedia.com/articles/investing/021816/why-governments-want-eliminate-cash.asp

Waterson, Larissa ((2024),“Legal tender rights for Australians in the headlines again following Bob Katter’s cafe cash snub’, abc news, February 8, https://www.abc.net.au/news/2024-02-08/right-to-pay-with-cash-or-card-legal-tender-bob-katter/103441698