Australians Raise $ 75 Billion In Money As Value Rises

The reduced use of cash for expenses and increased hoarding are reflected in the difference between the demand for low value and high value notes. Demand for low-denomination banknotes (denominations of $ 5, $ 10 and $ 20) has been “held up,” the RBA said, while 73% of the number of banknotes in circulation, representing 94% in value, is composed of $ 50. and $ 100 bills.

Cash users also say they like its privacy, an RBA-commissioned survey showed.

There have never been more than $ 100 bills in circulation, but when was the last time someone saw one?

– Bradford Kelly, Payment Services Group

Payments analysts said strong demand for high-denomination notes will continue, and in part reflects the underground economy, where cash is king and users want to remain anonymous to avoid taxes and other scrutiny.

“There have never been more than $ 100 bills in circulation, but when was the last time anyone saw one? They’re stuffed into mattresses, and that’s more of an indication of the black market economy and a lack of confidence in banks, ”said Bradford Kelly, consultant at Payment Services Group.

“It is also a trend that is not going to stop.”

The reduced use of cash for expenses combined with the dynamics of hoarding is negatively impacting the Cash in Transit (CIT) industry which moves money in armored trucks. This prompted the RBA to suggest that consolidation, or the formation of an industrial utility, may be needed to ensure that cash transport remains commercially viable.

The drop in demand for moving money comes as more and more people hide it in their homes. The value of Australian banknotes in circulation totaled $ 100 billion last month, double the value in 2010, while the value of banknotes in circulation increased by 20% between February 2020 and October 2021.

Measured against GDP, the value of currency in circulation hit an all-time high in the last quarter of March at 4.8%, the RBA said in its Examination of the methods of distribution of banknotes, published Monday.

Since the start of the pandemic, according to the RBA, “global demand for banknotes has been extraordinarily high.”

The value of banknotes in circulation has reached 100 billion dollars; up to 75 percent of cash is accumulated. RBA

“The increase in banknotes in circulation amid declining use of transactional cash can be attributed to the growing role of cash for precautionary and / or wealth reserve purposes. “

The store of wealth function fulfilled by banknotes “is particularly important in times of financial and economic uncertainty, such as the global financial crisis (GFC) and the COVID-19 pandemic,” the RBA said.

“The demand for liquidity often increases in times of economic crisis, driven by an increase in high face value banknotes. “

Mr Kelly said the decline in the use of cash for transactions makes it more important for the RBA to ensure that banks continue to issue “dual-network” debit cards, which allow cash to be withdrawn. ‘money in a supermarket or other retailer that accepts payment with eftpos cards.

“The problem is, people always want money, but how are they going to get it? We are creating a perfect storm, where ATMs are disappearing at a breakneck pace, ATM transactions are collapsing – and therefore the cost is rising, ”Kelly said. “But every eftpos terminal in Australia has cash withdrawals, so it is essential that eftpos continue to allow withdrawals and that banks issue dual network cards. “

Disarmed guards

Although many cash are kept in the home, reducing the use of cash spending has a major impact on the cash in transit industry.

The four main players are Linfox Armaguard, Prosegur Australia, Streamcorp Armored and Brinks Australia. Some 120 companies carry out CIT work on a regular basis.

The RBA has suggested that industry consolidation may be needed to ensure that the money continues to be available to those who need it.

“The unit costs of handling and transporting cash increase as the use of transactional cash decreases, putting financial pressure on parts of the CIT industry,” the RBA said. “Banknotes don’t circulate in the economy as often as they used to. This has a significant effect on the money distribution system.

The cash operator Prosegur moves cash to and from the Reserve Bank and provides cash services to banks, large retailers and reception venues.

The decline in the use of cash for spending can be seen in the value of ATM withdrawals, which has fallen by around 40% since 2012, while the number of withdrawals has fallen by almost two-thirds over the past year. the same period.

Between 2017 and 2021, the number of bank branches fell by more than 20%, while the number of ATMs has fallen by around 20% since its peak in late 2016.

The cash in transit sector under study

Segments of the cash distribution system are likely to be characterized by relatively high fixed costs, the Committee on Rural and Regional Affairs heard and references on transport, and a declining revenue base and high costs become. more and more acute for at least the biggest players in the CIT.

Processing volumes at approved CIT depots are lower and the RBA has said some of them may be closed.

Linfox Armaguard, Prosegur Australia represent between 70 percent and 90 percent of the CIT industry market share. They recently acquired fleets of ATMs from banks, making it increasingly difficult to separate the elements of wholesale and retail cash distribution, the RBA said.

“There could be a greater degree of consolidation that would result in one main entity being responsible for some or most of the wholesale distribution of money. This could happen through mergers or acquisitions of distribution participants (by existing participants or a new entrant), or the formation of a public service, ”said the central bank, which is responsible for printing and distribution of species.

“The establishment of a utility model for ticket distribution would involve a number of organizations forming a single new entity to perform ticket distribution functions.

“This would require a coordinated response from a range of participants in the species sector. “

The RBA is accepting submissions until January 21 on how the cash-in-transit industry could be better managed.

Future of Cash Distribution Reflection Paper Highlights Fairness Concerns As Its Use for Spending Declines: About 15% of People Use Cash for 80% or More of Their In-Person Transactions , and heavy cash users are more likely to be older, have lower family incomes, live in regional areas, and / or have limited internet access, the RBA said.

About 95% of Australia’s population lived within 3 miles of a cash access point in 2020, a level broadly unchanged from 2017.

“Cash is expected to remain an important form of payment in the future, especially as parts of the community rely heavily on cash in their daily lives,” the RBA said.

Mr Kelly said the money was still needed in some demographics. “You still have old people and others who don’t have easy banking services. It is people from national networks who are most likely [to ATM closures] and if you lose your local branch, you end up with the supermarket.

The RBA is releasing a paper on cash ahead of a speech Thursday by Reserve Bank’s outgoing payments manager Tony Richards on cryptocurrencies and stablecoins.

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