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From cash to clicks: How technology is changing financial transactions

Podcasts | 23 April 2025

Richard Holden

AGSM Scholar, Scientia Professor & ARC Future Fellow

Juliet Bourke

Adjunct Professor

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Cash is out. Digital payments are in. Economist and UNSW Scientia Professor Richard Holden explains why a cashless future is inevitable – and how businesses can prepare for it

About the episode

"Do you have cash?" It's a question that's becoming increasingly rare in 2025. Nowadays, many of us prefer the convenience of digital wallets over physical cards, not to mention banknotes and coins.

According to Richard Holden, an economist and UNSW Scientia Professor, we're moving towards a "functionally cashless" society, with the costs associated with carrying cash on the rise.

But what does this shift mean for businesses? And how can we ensure a smooth transition that doesn't leave anyone behind?

This episode is hosted by Dr Juliet Bourke.

Want to know more?

For the latest news and research from UNSW Business School and AGSM @ UNSW Business School, subscribe to our industry stories at BusinessThink and follow us on LinkedIn: UNSW Business School and AGSM @ UNSW Business School.

Transcript

Dr Juliet Bourke: When you order your morning coffee, how do you pay for it? Do you stand in line with the handful of coins that you found rattling around in your car? Or when you get to the front of a queue, do you quickly tap your card and move aside? Or have you ordered and paid via an app before you even got there, so the moment you step foot in the cafe, your order's ready. UNSW economist Richard Holden says it's unlikely cash will buy your coffee for much longer, because digital payments are simply better for business.

Richard Holden: It's more efficient. You can serve more customers, get customers through the line faster. You don't have to have a float and the cash handling. You don't have to pay somebody in your cafe or your restaurant to spend half an hour or an hour, bundling up the coins and cash into the right denominations and taking them to the bank. You don't have to have the insurance associated with having cash on-site.

Dr Juliet Bourke: Professor Holden calls this a "functionally cashless" economy.

Richard Holden: Today, a little bit less than 10% of transactions, weighted by dollar value, involve cash. The rest is paid for online or with tap cards or with Apple Pay, or with Google Pay or wire transfers, those kinds of things.

Dr Juliet Bourke: So, if a digital economy is the way of the future, what do business owners need to know and how do we smooth the transition from cash so that no one gets left behind you?

Dr Juliet Bourke: I'm Dr Juliet Bourke, an Adjunct Professor at the School of Management and Governance at the UNSW Business School. This is The Business Of.

Dr Juliet Bourke: Richard, 2008 was a year in which everything changed for money and economies around the world. What was so pivotal about that time?

Richard Holden: It was the year of the financial crisis, or as Australians call it, the Global Financial Crisis. But I was in the US. I was at the University of Chicago at the time, so the US economy was in a complete meltdown.

Newsreader: September 15, 2008 Lehman Brothers filed for bankruptcy. There was nowhere for that bank to turn.

Richard Holden: The credit markets had totally frozen up, and so that was really the trigger of this period of very, very low official interest rates in most advanced economies around the world. Sort of zero interest rates for a really long time. That was one thing that changed that, sort of, the birth of cheap money. It was the year that the iPhone 3G launched.

Steve Jobs: As we arrive at iPhone's first birthday, we're gonna take it to the next level, and today we're introducing the iPhone 3G.

Richard Holden: So that's sort of the beginning of the era of mobile money. You know, paying with your phone, paying with wearable devices. It's the beginning of what became Apple Pay and now Google Pay and, you know, so on. It was also the year that Satoshi Nakamoto, which is a pseudonym for someone, or some group of people that we don't know who it was, wrote the Bitcoin white paper.

Newsreader: Nakamoto envisaged the cryptocurrency as a peer-to-peer version of electronic cash. Value would be exchanged from one person to another, without the involvement of middlemen like banks.

Richard Holden: And this is the beginning of Bitcoin. It all happened in 2008

Dr Juliet Bourke: Cheap money, why was that so pivotal in that moment?

Richard Holden: It's the trigger of incredibly low interest rates that ripples throughout individual economies and throughout the world economy. So, throughout individual economies, it arguably leads to a whole lot of different kinds of behaviours, some of those good, some of those not so good. So it potentially leads to asset price bubbles and big run-up in housing prices. It drives a lot of returns to people who own assets, versus people who earn labour income. So that has implications for economic inequality, and it also provides this fire hose of money that funds a whole lot of tech innovations that arguably leads to the magnificent seven today, which is there's just a lot of very cheap money to fund that, but it has implications for less economically advanced economies around the world.

Dr Juliet Bourke: So it's not just the tech access that's in your pocket, but this whoosh of money through the system, feeding investments as well, and one of those investments is digital payments.

Richard Holden: Absolutely.

Dr Juliet Bourke: And then, the pandemic. So that was a real accelerant to a cashless economy. I think we all experienced that. We all started buying online. Is there any more to it than that, that we all went, can't go to shops, need to buy online. Am I able to do so?

Richard Holden: I think there's also the stuff at point of sale. So, this is a time where a whole lot of businesses in Australia said, "no cash". And you know, part of that was when people were worried about touching money. You know, we're being told to Purell all the time and all this kind of stuff. So people were like, "I don't want to touch money". There was also, I think, just the practicality of it. Which is, at a time when businesses were really struggling, all the extra costs associated with cash really came to the fore. So you've got to have a float, you've got to have extra insurance. When you have a whole bunch of cash on site, you've got to bundle up the money at the end of the day and get it to the night safe or to the bank and all that kind of stuff that all takes time. When businesses are really under a lot of pressure, they try and look to take those inefficiencies out of the system. So it's a real catalyst for that. And then on the consumer side, a whole lot of people, now not everyone, but a whole lot of people, maybe most people, look at it and say, "well, this is just way better". I don't want to stand behind someone, you know, rumbling through their wallet or purse for 10 cent coins paying for a coffee. People understand the efficiency of it and get used to it.

Dr Juliet Bourke: Then there was the pay wave thing as well, that you could just, sort of, stand there and wash your card over it. So, you didn't even have to have much of an interaction, really.

Richard Holden: That's exactly right. Of course, Australia's been really at the forefront of that kind of TAP card technology. It's one of the upsides of having really only four major banks in the country is that they have, in competing for business customers, rolled out really world-leading point of sale equipment, and have been at the forefront of those innovations. Whereas, you go to the US, you still might have to use a magnetic strip on a card, sign a piece of paper and so on. I mean, that went away a long time ago in Australia.

Dr Juliet Bourke: Why haven't other economies caught on with that aspect of a cashless economy?

Richard Holden: Well some have. So, you know, Sweden's an example of that. That's arguably even ahead of Australia. But these things take both sides of the market for it to work. So, you know, you need consumers to be wanting it and pushing it and having those things. The US is a great example of a whole lot of people being unbanked. There are a lot of people in America who don't have bank accounts. Some of those are undocumented immigrants. Some of those are quite poor people. Almost no one in Australia is unbanked. So you can have that kind of technology and can roll it out. So there's a degree of chicken and egg when it comes to this stuff.

Dr Juliet Bourke: What are the consequences for businesses now? In 2025 what does it look like to be cashless? Is that where we're heading? I think that's your prediction, right?

Richard Holden: Well I think we'll be functionally cashless, is the way I refer to it. So yeah, are there going to be some people who really, really want to pay with cash? Yeah, there are some people, I think they largely fall into two categories, some older Australians, who just feel comfortable with it, and have got to a point where they find online banking and using TAP cards a bit intimidating and don't want to do it. And then there are people who have conspiracy theories about government control of stuff, and those people want the anonymity of cash. So those people are going to want to use cash until it becomes impractical. We've already seen examples of that. If you cast your mind back to last Easter, there was a real shortage of cash in the system because Armaguard and the companies that actually provide cash, that's a business that's functionally bankrupt. So there's a real question about who's going to pay for all this cash handling. You can imagine when, you have this big fixed cost of all these trucks taking cash around, dropping it off at Woolworths, picking it up at Coles and so on. Well, that's one thing if cash is 20%, 30%, 40% of the transactions, cash is now under 10% of the transactions by value in Australia. But you've got basically the same fixed cost of that delivery network. So you've got the same cost, a lot less revenue. You don't have to be a UNSW graduate to figure out that puts pressure on your bottom line.

Dr Juliet Bourke: Can you just talk me back to that 10%. What does that mean? Does that mean that 90% of the economy is cashless? Is that what you mean by a functionally cashless society?

Richard Holden: So let's just talk about today. Today, a little bit less than 10% of transactions, weighted by dollar value, involve cash. So if you think about there being $100 million of consumer transactions in a given period of time. Less than 10% of that, less than $10 million is paid for with cash. The rest is paid for online or with tap cards or with Apple Pay, or with Google Pay, or, you know, wire transfers, those kinds of things. What I'm saying is that in five years, that 10% will be down to some de minimis number below 5% and at that point, it's as if no one's using cash. It already has become kind of a pain to use cash. A lot of banks are taking ATMs out. Branches are going away. It's kind of hard to get cash these days. You know, a lot of those ATMs might charge you $3 every time you take any amount of cash out. So if you're going to pay $3 to take cash out, do you want to take out $20? That's a big percentage. Do you want to take out $400? For a lot of people, that's a lot of money. Do you want to be carrying around $400? Maybe that's not so safe. That intersects with who's using this, if you're an older Australian, and maybe not as mobile as you used to be, taking out $400 - $500 and carrying that around might not be the safest thing in the world. I mean, I think the other thing that people point to a lot is they say, Well, what if there's a natural disaster or some kind of outage, or things like that. And of course, if there's a power outage, then stores aren't open. No one's opening a convenience store or a supermarket when the lights aren't on. That's the most dangerous thing you can possibly do. It violates a whole lot of occupational health and safety laws, let alone just common sense. You know, secondly, when we had the CrowdStrike [outage], remember this software update problem last year. This is the company that provides security software that's very, very widely used. Turns out it's used by a lot of retailers, a lot of airlines in the US and so on. They pushed an update that had a little bit of a glitch in it, and all of a sudden, there were problems at airports across the United States and retailers across Australia and the US. I went to my local Woolworths supermarket the next morning, and I've still got a photo of this, where there are already newspaper articles running that morning saying, "See, aha! This is why we need cash." Well, what will Woolworths and Coles do? Well, they've got digital cash registers. So there's a sign at Woolworths and a sign at Coles that said, digital payments only, no cash because you couldn't use cash. Cash is actually, in many ways, a less good thing to have when some of the digital infrastructure goes down. So cash is going away. Now we can talk about what we should be doing to help smooth that transition for people who are concerned about it, and that's extremely important, but it's going away.

Dr Juliet Bourke: Yeah, but what about when the coffee shop still has power, but their ability to do a cashless payment goes down? They've made the coffee, and then they say to me, "hey, have you got cash?"

Richard Holden: Yeah. So now we're talking about the network going down. So the telecommunications network going down. The CrowdStrike thing is one example of that where actually, you know, it's the opposite. It is possible every now and then that the cellular telephone network that's powering those things goes down. That's usually a very, very short outage, and that's relatively rare. Sure that does happen. I think long run, what we're going to see is much more backup of that stuff with satellite technology.

Dr Juliet Bourke: So I'm getting the message loud and clear that your position is that it's a cashless society that we're moving towards. So if that's the case, what are the implications for someone who's a business owner?

Richard Holden: Well, it's better if you're a business owner. It's more efficient. You can serve more customers, get customers through the line faster. You don't have to have a float and the cash handling. You don't have to pay somebody in your cafe or your restaurant to spend half an hour, or an hour bundling up the coins and cash into the right denominations and taking them to the bank. Don't have to have the insurance associated with having cash on site. It's just better if you're a business owner.

Dr Juliet Bourke: So insurance goes down?

Richard Holden: Yeah, you don't have to have insurance for the fact that you might have your cafe or convenience store robbed because you got a bunch of cash there.

Dr Juliet Bourke: Small business owners, it feels all good. But what I'm thinking about is, there's a place I used to always go and get my coffee, let's say it costs five bucks. And then one day, they said, and we're going to charge you the bank fees that the bank's charging us, and I was really annoyed by that, but we won't charge you that if you pay cash. So doesn't that create a dilemma for the business owner whether to use cash or cards if their customer is potentially walking away?

Richard Holden: Yeah, so a couple of things with that. Firstly, people do get annoyed about, "oh, it's 11 cents more" or whatever. But, you know, people also get annoyed standing in line for a long time and the slowness of the whole thing. I mean, the government announced legislation last year saying, Well, actually for debit card transactions, you can't charge that small amount. There are already rules in place that says, all the business can do is just recover cost. They can't make a margin on it, and there's some back and forth between the banks and the credit card companies and so on about well, if you ban it on debit cards, then they're just going to increase it on credit cards and so on. That'll all get washed through in the end. A lot of businesses are going to being, you know, cashless anyway, because they understand that they'll drive more volume through their business if they do it that way.

Dr Juliet Bourke: I mean, certainly I can see that there's speed to being cashless. You can order your coffee before you even get there and pay for it, and then you can pay wave and move away. But isn't the government, or has it already introduced some legislation saying that, essential services have to accept cash?

Richard Holden: Yeah, they introduced some legislation last year. The thought that I have around essential services, and I've said this before, is, so when I go into my local Australia Post to pick up a package, and the only other people in there are people getting passport photos and passport applications, people also picking up packages, or people who are paying their utility bills in cash. And you look at what those people have done. Those people have gone to an ATM, typically downstairs in the shopping centre, right? They've taken out $120 in cash, paid three bucks for the privilege of doing that at the ATM, gone up the escalator, stood in line at Australia Post, handed the person at Australia Post something where they just scan the barcode and given them their $120 and Australia Post has to deal with all that cash. They have to worry about the insurance, they have to worry about the cash handling all of that. Imagine a different scenario where we put a digital kiosk in every Australia Post outlet around the country, big or small, urban or rural. We have an Australia Post employee stands next to it. Instead of that, typically older Australian, instead of them doing that routine that I just described, they just go straight to Australia Post. Go to the digital kiosk. It's a trustworthy organisation. They're already handing over cash in their utility bills, and they must trust it to some degree. And all they do is, they tap their tap card, scan their bill, and it's automatically done, no $3 fee, and there's someone standing there to help them through the process if they need a little bit of assistance with it. I think that would just be better for everybody. And you know, there's nothing standing in the way of doing that. Australia Post has very effectively managed and run organisation, if the government was supportive of this, that could be rolled out in the next several months.

Richard Holden: Now, you've mentioned again that we're a very banked economy. Everyone has a bank account. Is there anything on the horizon that would disrupt that?

Richard Holden: No. You can't get Centrelink payments if you don't have a bank account. You certainly can't get paid in any kind of job that you have in Australia. We don't have an enormous amount of cash under the table stuff, although there's a little bit of that. So you just can't function in Australian society without a bank account. And that's not true in certain other places, and that's not going into reverse.

Dr Juliet Bourke: You know, there was this backlash against CBA when it tried to introduce a charge for you taking your own money out of the ATM. Is that a sign of things to come? And if it is, it seems to really have an ethical issue, because this is your money that's sitting there in the bank. You're forced to put your money into that bank because your employer deposits it into, let's say, CBA, and then you have to withdraw it from that. Where are the ethics sitting here? What are the consequences of this first stone into the pond of, "we're going to charge you to access your own money."

Richard Holden: I'm not troubled by the ethics of it, but I think we should pay a lot of attention to the psychology of it. Sure, people hate it, that's right. CBA learnt that lesson, and I'm surprised they weren't more attuned to that ahead of time. But we get charged account-keeping fees. We get charged all kinds of things. They provide us with a fantastic service, the banks. They do a lot of stuff for us, and it costs money. Spending a bunch of time talking to a person in person at the bank, costs a lot of money. Running branches costs a lot of money. Somebody's got to pay for that. Younger Australians and Gen Z and Gen Alpha and so on, are people who never once in their life will step into a branch. Should they be cross-subsidising people who do step into branches? Maybe yes, maybe no. But I can tell you what the economics of that are. People don't like to cross-subsidise other people. So, I mean, I don't think CBA played the, kind of, social psychology of it as well as they might have. But you know, they're just going to take out that fee in another way. So your account-keeping fees, a buck a month higher, same, same.

Dr Juliet Bourke: So you mentioned Sweden before, and it's moved significantly to a cashless economy. What's that experience been like for Sweden?

Richard Holden: Well, they've got something relatively similar to what we've got in Australia, which is a kind of piece of the payment system architecture that's very helpful. And let me describe what it is in Australia, which is, you will have interacted with it, you'll probably have known it as Ausco. But that's part of something that the Reserve Bank helped coordinate the banks around the country to create. It's called the new payment platform. And of course, it's a way where you can costlessly, frictionlessly, 24/7 transfer money to anyone who's got a pay ID, which means anyone who's got a mobile phone number or an email address and a bank account. Which is kind of everyone. Sweden has a similar thing and a payments architecture, and that allowed them to very quickly get to very, very low single digits in terms of cash usage. They took a little bit of a step back from that. There was a question about, were they going to make the final push. When you get down to, when it's like, 3% you run into these questions of, like, okay, the armor trucks that take the cash around, you know, they're not functional anymore, and you get into these awkward questions of, is the government going to subsidise those? So there's this kind of last-mile problem and Sweden maybe hadn't thought that through very fully, so they took a sort of a pause and rethinking the last-mile problem. But yeah, I mean, a lot of other countries with advanced payment systems, and they're very often in Europe and in Asia, are very far down the curve as well.

Dr Juliet Bourke: And how does it go then for you know, I'm thinking about this because I've literally just come back from Europe two days ago, and there were some economies that were absolutely cashless, but there were some economies, Turkey was one of them, where it was all cash. So just thinking about it from a global perspective, how do people do business across different countries with different attitudes towards being cashless?

Richard Holden: The business across countries is not being done with suitcases full of cash. So yeah, sure. You know, travelling in Turkey, you're going to use cash. There are certain parts of the United States, where you probably want to make sure you've got some cash in your wallet when you're getting a taxi from the airport and things like that. So I think people who are, you know, visiting those economies, or obviously, who live there as consumers, are prepared for that. But in terms of, like, global business and so on, I mean that stuff's all being done digitally. And indeed, there's, you know, a move towards what are known as wholesale central bank digital currencies, where central banks dealing with other central banks. That's already done digitally. There's a move towards that being done in a tokenised way. You can think of it as being akin to blockchain technology, although there are some differences. But the real flows of money around the world, the big flows are already fully digital, even with countries where you know you might have to use cash as a consumer.

Dr Juliet Bourke: And let's talk about cryptocurrency, and Bitcoin and blockchain like, where is that going to and how does that fit into this cashless society conversation?

Richard Holden: Well, Bitcoin and other cryptocurrencies got a very big boost from Donald Trump being elected president. You know, he had a lot of financial backers and donors connected with the crypto industry. The big problem that cryptocurrencies have is the cost of digital trust. The animating premise of Bitcoin, and the reason that the white paper came out in 2008 was this view that people had, and the founder of it, and Nakamoto had, which was, you can't trust centralised authority. You can't trust governments, and you can't trust big financial institutions like banks, okay, they just been trading in CDOs and mortgage-backed securities and all kinds of stuff that had triggered the financial crisis. So you can understand where the backlash comes from. Okay, so how do you make sure that people don't double-spend their money, if you don't have a centralised ledger? When you use your bank account here, the bank keeps track. So when you buy your coffee, your local cafe owner knows that you've got the money in your account, that they're going to get paid. How do you do that with a cryptocurrency like Bitcoin? Well, you have to do it with a decentralised ledger, and the way that's solved is with essentially, encryption technology. And famously, the type of blockchain that Bitcoin is based on is known as proof of work. That uses a lot of energy, okay, and that has two issues to do with it. One, energy costs a lot of money. The second is, there's an environmental externality in generating that energy. So there's a social cost, but there's just a cost of trust, and that's really, really big. So the Bitcoin network in a given year uses comfortably more electricity than the entire country of Sweden uses in a year, comfortably more. And that has really bad scaling properties. The more people that use it, the more the cost. There are alternatives to that kind of what's known as consensus protocol, the 'proof of work' consensus protocol. Ethereum, the Ethereum blockchain and its cryptocurrency, Ether, has moved. They started out with 'proof of work'. They moved to an alternative, and it's called 'proof of stake'. And that basically says, to validate a transaction, you lock up some of your Ether, some of your coins, and we basically vote on the outcome. If you're in the winning coalition voting, then you don't lose your coins. If you do, you lose your coins. Now that doesn't have the environmental externality. So that's good. We're not using fossil fuels to generate the electricity for that, but you have to lock up your coins. And it turns out, in fact, a couple of economists, Eric Budish and Joshua Gans and a co-author, have proved it's just a theorem that the cost of trust between 'proof of work' and 'proof of stake' is exactly the same. Okay, exactly the same. And so the cost of decentralised trust is really, really high. So cryptocurrencies have this Achilles heel, which is, if you want to have a decentralised ledger, because, like Nakamoto, you worry about governments and you worry about big banks and you don't trust them, you can do it. And that's why I think, unless you come up with a different kind of consensus protocol that deals with that, we'll never really have a functional cryptocurrency that you can transact with because it's just so expensive to transact with it. Imagine if every time you used a credit card, it cost you 10% of the value of the transaction. We wouldn't have a lot of credit cards.

Dr Juliet Bourke: So it seems like there's two parallel themes going on here. Cryptocurrency and a cashless society, and they may intersect, but they very well might go off in different directions.

Richard Holden: That's right and where they might intersect is, if central banks stepped in and created a central bank digital currency and said, let's try and get the benefits of, say, Ethereum, let's try and get the benefits of cryptocurrency, but do it on a centralised ledger so we don't have these big costs of decentralised trust. Now, the big benefit of Ethereum, compared to Bitcoin, is Ethereum has a programming language built on top of it. And Vitalik Buterin, who was the founder of that and because we know who he is, and we don't know who Nakamoto is. Buterin is the closest we have to the kind of face of cryptocurrency. He had a great idea as a teenager, which is he said, "well, Bitcoin isn't really useful for very much stuff, but if I put a, what computer scientists call a Turing complete programming language on top of it, then we can have things like smart contracts and decentralised autonomous organisations, and programmable money and things like that", and that's what you can do with Ethereum. I've already told you why there are problems with it, because the frictions are so high, the transaction costs are so high, it's really hard to do this in an economically efficient way. The plea in my book is, that the US should create a central bank digital currency. I call it Fedcoin, for lack of a better term, that would have this programming language on it, but would be run on a centralised blockchain by the US, Federal Reserve. That will give you the best of both worlds and that's exactly where these things might intersect.

Dr Juliet Bourke: Where does this leave us as leaders of businesses, in terms of being prepared for a cashless society, or prepared for the next step after we move to a cashless society? What are your predictions for the future?

Richard Holden: I think embrace it. Whatever you want to say about, you know, Gen Z and Gen Alpha and so on. They have great facility with technology. I mean, these are people who've, you know, grown up in the social media era, who are glued to their phones, for better or worse. You know, the idea that they're going to take a step back from technology, I think, is misguided. And so, you know, retro fashion might be back in but I don't think they're going to be hankering for writing cheques and things like that. So I think thinking more about what the sort of, I guess you'd call it FinTech, but the kind of innovation ecosystem in digital payments looks like is really important. So, there is essentially no blockage to somebody inventing or creating an app in Australia, and you know, the banks could do it with their payments apps, that allows you to do what a lot of people might have remembered their parents doing growing up. Which was, have, you know, an envelope for groceries and an envelope for the insurance and an envelope for going out to dinner or whatever it might be. This kind of segregating things into different accounts. Now, in principle, you can do that by having like, nine different bank accounts or something. But then, you know, your account-keeping fees and things like that. You can already and this exists in the United States, and it ought to be coming soon to a banking app near you in Australia - hint, hint to the Big Four - is the ability to have segregated accounts within your one transaction account. Just say, look, I want nine little buckets, and I'm not going to get overdraft fees. If one of the buckets goes into the negative, it just gets covered from the other. From the other but it allows you to do, kind of, mental accounting. So I think that's just one example of many. And you know, if I had better examples, I'd be a FinTech entrepreneur, not a lowly economics professor. But I think leaning into that and saying, Okay, that's something that people want. We can do that digitally, really, really effectively and give people a better version of the kind of old school technology of cash in envelopes.

Dr Juliet Bourke: Thanks to Richard Holden for joining us on this episode. If this conversation with Richard, and in particular his mention of FinTech entrepreneurs intrigued you, we have an episode with Hayden Smith, the co-founder of investment app Pearler, that you might like to listen to next.

Hayden Smith: Most people are busy, tired, stressed, and I think the headspace is a big thing. Because, you know, if you could just press a button and suddenly put all of your money in the best savings account and the right amount, everyone would probably do it. We want to help guide people and make decisions easy. We're just providing the tools to make that happen as well.

Dr Juliet Bourke: The Business Of is brought to you by the University of New South Wales Business School, produced with Deadset Studios.

To stay up-to-date with our latest podcasts as well as the latest insights and thought leadership from the Business School, subscribe to BusinessThink.

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<h1>From cash to clicks: How technology is changing financial transactions</h1>

<figure><img src="?w=1320" /><figcaption></figcaption></figure>
 <h2>About the episode</h2>
"Do you have cash?" It's a question that's becoming increasingly rare in 2025. Nowadays, many of us prefer the convenience of digital wallets over physical cards, not to mention banknotes and coins. 
According to Richard Holden, an economist and UNSW Scientia Professor, we're moving towards a "functionally cashless" society, with the costs associated with carrying cash on the rise. 
But what does this shift mean for businesses? And how can we ensure a smooth transition that doesn't leave anyone behind? 
This episode is hosted by <a href="https://www.unsw.edu.au/staff/juliet-bourke" data-new-window="true" target="_blank" rel="noopener noreferrer">Dr Juliet Bourke</a>.
<h2>Want to know more? </h2>
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<h2>Transcript</h2>
Dr Juliet Bourke: When you order your morning coffee, how do you pay for it? Do you stand in line with the handful of coins that you found rattling around in your car? Or when you get to the front of a queue, do you quickly tap your card and move aside? Or have you ordered and paid via an app before you even got there, so the moment you step foot in the cafe, your order's ready. UNSW economist Richard Holden says it's unlikely cash will buy your coffee for much longer, because digital payments are simply better for business.
Richard Holden: It's more efficient. You can serve more customers, get customers through the line faster. You don't have to have a float and the cash handling. You don't have to pay somebody in your cafe or your restaurant to spend half an hour or an hour, bundling up the coins and cash into the right denominations and taking them to the bank. You don't have to have the insurance associated with having cash on-site.
Dr Juliet Bourke: Professor Holden calls this a "functionally cashless" economy.
Richard Holden: Today, a little bit less than 10% of transactions, weighted by dollar value, involve cash. The rest is paid for online or with tap cards or with Apple Pay, or with Google Pay or wire transfers, those kinds of things.
Dr Juliet Bourke: So, if a digital economy is the way of the future, what do business owners need to know and how do we smooth the transition from cash so that no one gets left behind you?
Dr Juliet Bourke: I'm Dr Juliet Bourke, an Adjunct Professor at the School of Management and Governance at the UNSW Business School. This is The Business Of.
Dr Juliet Bourke: Richard, 2008 was a year in which everything changed for money and economies around the world. What was so pivotal about that time?
Richard Holden: It was the year of the financial crisis, or as Australians call it, the Global Financial Crisis. But I was in the US. I was at the University of Chicago at the time, so the US economy was in a complete meltdown.
Newsreader: September 15, 2008 Lehman Brothers filed for bankruptcy. There was nowhere for that bank to turn.
Richard Holden: The credit markets had totally frozen up, and so that was really the trigger of this period of very, very low official interest rates in most advanced economies around the world. Sort of zero interest rates for a really long time. That was one thing that changed that, sort of, the birth of cheap money. It was the year that the iPhone 3G launched.
Steve Jobs: As we arrive at iPhone's first birthday, we're gonna take it to the next level, and today we're introducing the iPhone 3G.
Richard Holden: So that's sort of the beginning of the era of mobile money. You know, paying with your phone, paying with wearable devices. It's the beginning of what became Apple Pay and now Google Pay and, you know, so on. It was also the year that Satoshi Nakamoto, which is a pseudonym for someone, or some group of people that we don't know who it was, wrote the Bitcoin white paper.
Newsreader: Nakamoto envisaged the cryptocurrency as a peer-to-peer version of electronic cash. Value would be exchanged from one person to another, without the involvement of middlemen like banks.
Richard Holden: And this is the beginning of Bitcoin. It all happened in 2008
Dr Juliet Bourke: Cheap money, why was that so pivotal in that moment?
Richard Holden: It's the trigger of incredibly low interest rates that ripples throughout individual economies and throughout the world economy. So, throughout individual economies, it arguably leads to a whole lot of different kinds of behaviours, some of those good, some of those not so good. So it potentially leads to asset price bubbles and big run-up in housing prices. It drives a lot of returns to people who own assets, versus people who earn labour income. So that has implications for economic inequality, and it also provides this fire hose of money that funds a whole lot of tech innovations that arguably leads to the magnificent seven today, which is there's just a lot of very cheap money to fund that, but it has implications for less economically advanced economies around the world.
Dr Juliet Bourke: So it's not just the tech access that's in your pocket, but this whoosh of money through the system, feeding investments as well, and one of those investments is digital payments.
Richard Holden: Absolutely.
Dr Juliet Bourke: And then, the pandemic. So that was a real accelerant to a cashless economy. I think we all experienced that. We all started buying online. Is there any more to it than that, that we all went, can't go to shops, need to buy online. Am I able to do so?
Richard Holden: I think there's also the stuff at point of sale. So, this is a time where a whole lot of businesses in Australia said, "no cash". And you know, part of that was when people were worried about touching money. You know, we're being told to Purell all the time and all this kind of stuff. So people were like, "I don't want to touch money". There was also, I think, just the practicality of it. Which is, at a time when businesses were really struggling, all the extra costs associated with cash really came to the fore. So you've got to have a float, you've got to have extra insurance. When you have a whole bunch of cash on site, you've got to bundle up the money at the end of the day and get it to the night safe or to the bank and all that kind of stuff that all takes time. When businesses are really under a lot of pressure, they try and look to take those inefficiencies out of the system. So it's a real catalyst for that. And then on the consumer side, a whole lot of people, now not everyone, but a whole lot of people, maybe most people, look at it and say, "well, this is just way better". I don't want to stand behind someone, you know, rumbling through their wallet or purse for 10 cent coins paying for a coffee. People understand the efficiency of it and get used to it.
Dr Juliet Bourke: Then there was the pay wave thing as well, that you could just, sort of, stand there and wash your card over it. So, you didn't even have to have much of an interaction, really.
Richard Holden: That's exactly right. Of course, Australia's been really at the forefront of that kind of TAP card technology. It's one of the upsides of having really only four major banks in the country is that they have, in competing for business customers, rolled out really world-leading point of sale equipment, and have been at the forefront of those innovations. Whereas, you go to the US, you still might have to use a magnetic strip on a card, sign a piece of paper and so on. I mean, that went away a long time ago in Australia.
Dr Juliet Bourke: Why haven't other economies caught on with that aspect of a cashless economy?
Richard Holden: Well some have. So, you know, Sweden's an example of that. That's arguably even ahead of Australia. But these things take both sides of the market for it to work. So, you know, you need consumers to be wanting it and pushing it and having those things. The US is a great example of a whole lot of people being unbanked. There are a lot of people in America who don't have bank accounts. Some of those are undocumented immigrants. Some of those are quite poor people. Almost no one in Australia is unbanked. So you can have that kind of technology and can roll it out. So there's a degree of chicken and egg when it comes to this stuff.
Dr Juliet Bourke: What are the consequences for businesses now? In 2025 what does it look like to be cashless? Is that where we're heading? I think that's your prediction, right?
Richard Holden: Well I think we'll be functionally cashless, is the way I refer to it. So yeah, are there going to be some people who really, really want to pay with cash? Yeah, there are some people, I think they largely fall into two categories, some older Australians, who just feel comfortable with it, and have got to a point where they find online banking and using TAP cards a bit intimidating and don't want to do it. And then there are people who have conspiracy theories about government control of stuff, and those people want the anonymity of cash. So those people are going to want to use cash until it becomes impractical. We've already seen examples of that. If you cast your mind back to last Easter, there was a real shortage of cash in the system because Armaguard and the companies that actually provide cash, that's a business that's functionally bankrupt. So there's a real question about who's going to pay for all this cash handling. You can imagine when, you have this big fixed cost of all these trucks taking cash around, dropping it off at Woolworths, picking it up at Coles and so on. Well, that's one thing if cash is 20%, 30%, 40% of the transactions, cash is now under 10% of the transactions by value in Australia. But you've got basically the same fixed cost of that delivery network. So you've got the same cost, a lot less revenue. You don't have to be a UNSW graduate to figure out that puts pressure on your bottom line.
Dr Juliet Bourke: Can you just talk me back to that 10%. What does that mean? Does that mean that 90% of the economy is cashless? Is that what you mean by a functionally cashless society?
Richard Holden: So let's just talk about today. Today, a little bit less than 10% of transactions, weighted by dollar value, involve cash. So if you think about there being $100 million of consumer transactions in a given period of time. Less than 10% of that, less than $10 million is paid for with cash. The rest is paid for online or with tap cards or with Apple Pay, or with Google Pay, or, you know, wire transfers, those kinds of things. What I'm saying is that in five years, that 10% will be down to some de minimis number below 5% and at that point, it's as if no one's using cash. It already has become kind of a pain to use cash. A lot of banks are taking ATMs out. Branches are going away. It's kind of hard to get cash these days. You know, a lot of those ATMs might charge you $3 every time you take any amount of cash out. So if you're going to pay $3 to take cash out, do you want to take out $20? That's a big percentage. Do you want to take out $400? For a lot of people, that's a lot of money. Do you want to be carrying around $400? Maybe that's not so safe. That intersects with who's using this, if you're an older Australian, and maybe not as mobile as you used to be, taking out $400 - $500 and carrying that around might not be the safest thing in the world. I mean, I think the other thing that people point to a lot is they say, Well, what if there's a natural disaster or some kind of outage, or things like that. And of course, if there's a power outage, then stores aren't open. No one's opening a convenience store or a supermarket when the lights aren't on. That's the most dangerous thing you can possibly do. It violates a whole lot of occupational health and safety laws, let alone just common sense. You know, secondly, when we had the CrowdStrike [outage], remember this software update problem last year. This is the company that provides security software that's very, very widely used. Turns out it's used by a lot of retailers, a lot of airlines in the US and so on. They pushed an update that had a little bit of a glitch in it, and all of a sudden, there were problems at airports across the United States and retailers across Australia and the US. I went to my local Woolworths supermarket the next morning, and I've still got a photo of this, where there are already newspaper articles running that morning saying, "See, aha! This is why we need cash." Well, what will Woolworths and Coles do? Well, they've got digital cash registers. So there's a sign at Woolworths and a sign at Coles that said, digital payments only, no cash because you couldn't use cash. Cash is actually, in many ways, a less good thing to have when some of the digital infrastructure goes down. So cash is going away. Now we can talk about what we should be doing to help smooth that transition for people who are concerned about it, and that's extremely important, but it's going away.
Dr Juliet Bourke: Yeah, but what about when the coffee shop still has power, but their ability to do a cashless payment goes down? They've made the coffee, and then they say to me, "hey, have you got cash?"
Richard Holden: Yeah. So now we're talking about the network going down. So the telecommunications network going down. The CrowdStrike thing is one example of that where actually, you know, it's the opposite. It is possible every now and then that the cellular telephone network that's powering those things goes down. That's usually a very, very short outage, and that's relatively rare. Sure that does happen. I think long run, what we're going to see is much more backup of that stuff with satellite technology.
Dr Juliet Bourke: So I'm getting the message loud and clear that your position is that it's a cashless society that we're moving towards. So if that's the case, what are the implications for someone who's a business owner?
Richard Holden: Well, it's better if you're a business owner. It's more efficient. You can serve more customers, get customers through the line faster. You don't have to have a float and the cash handling. You don't have to pay somebody in your cafe or your restaurant to spend half an hour, or an hour bundling up the coins and cash into the right denominations and taking them to the bank. Don't have to have the insurance associated with having cash on site. It's just better if you're a business owner.
Dr Juliet Bourke: So insurance goes down?
Richard Holden: Yeah, you don't have to have insurance for the fact that you might have your cafe or convenience store robbed because you got a bunch of cash there.
Dr Juliet Bourke: Small business owners, it feels all good. But what I'm thinking about is, there's a place I used to always go and get my coffee, let's say it costs five bucks. And then one day, they said, and we're going to charge you the bank fees that the bank's charging us, and I was really annoyed by that, but we won't charge you that if you pay cash. So doesn't that create a dilemma for the business owner whether to use cash or cards if their customer is potentially walking away?
Richard Holden: Yeah, so a couple of things with that. Firstly, people do get annoyed about, "oh, it's 11 cents more" or whatever. But, you know, people also get annoyed standing in line for a long time and the slowness of the whole thing. I mean, the government announced legislation last year saying, Well, actually for debit card transactions, you can't charge that small amount. There are already rules in place that says, all the business can do is just recover cost. They can't make a margin on it, and there's some back and forth between the banks and the credit card companies and so on about well, if you ban it on debit cards, then they're just going to increase it on credit cards and so on. That'll all get washed through in the end. A lot of businesses are going to being, you know, cashless anyway, because they understand that they'll drive more volume through their business if they do it that way.
Dr Juliet Bourke: I mean, certainly I can see that there's speed to being cashless. You can order your coffee before you even get there and pay for it, and then you can pay wave and move away. But isn't the government, or has it already introduced some legislation saying that, essential services have to accept cash?
Richard Holden: Yeah, they introduced some legislation last year. The thought that I have around essential services, and I've said this before, is, so when I go into my local Australia Post to pick up a package, and the only other people in there are people getting passport photos and passport applications, people also picking up packages, or people who are paying their utility bills in cash. And you look at what those people have done. Those people have gone to an ATM, typically downstairs in the shopping centre, right? They've taken out $120 in cash, paid three bucks for the privilege of doing that at the ATM, gone up the escalator, stood in line at Australia Post, handed the person at Australia Post something where they just scan the barcode and given them their $120 and Australia Post has to deal with all that cash. They have to worry about the insurance, they have to worry about the cash handling all of that. Imagine a different scenario where we put a digital kiosk in every Australia Post outlet around the country, big or small, urban or rural. We have an Australia Post employee stands next to it. Instead of that, typically older Australian, instead of them doing that routine that I just described, they just go straight to Australia Post. Go to the digital kiosk. It's a trustworthy organisation. They're already handing over cash in their utility bills, and they must trust it to some degree. And all they do is, they tap their tap card, scan their bill, and it's automatically done, no $3 fee, and there's someone standing there to help them through the process if they need a little bit of assistance with it. I think that would just be better for everybody. And you know, there's nothing standing in the way of doing that. Australia Post has very effectively managed and run organisation, if the government was supportive of this, that could be rolled out in the next several months.
Richard Holden: Now, you've mentioned again that we're a very banked economy. Everyone has a bank account. Is there anything on the horizon that would disrupt that?
Richard Holden: No. You can't get Centrelink payments if you don't have a bank account. You certainly can't get paid in any kind of job that you have in Australia. We don't have an enormous amount of cash under the table stuff, although there's a little bit of that. So you just can't function in Australian society without a bank account. And that's not true in certain other places, and that's not going into reverse.
Dr Juliet Bourke: You know, there was this backlash against CBA when it tried to introduce a charge for you taking your own money out of the ATM. Is that a sign of things to come? And if it is, it seems to really have an ethical issue, because this is your money that's sitting there in the bank. You're forced to put your money into that bank because your employer deposits it into, let's say, CBA, and then you have to withdraw it from that. Where are the ethics sitting here? What are the consequences of this first stone into the pond of, "we're going to charge you to access your own money."
Richard Holden: I'm not troubled by the ethics of it, but I think we should pay a lot of attention to the psychology of it. Sure, people hate it, that's right. CBA learnt that lesson, and I'm surprised they weren't more attuned to that ahead of time. But we get charged account-keeping fees. We get charged all kinds of things. They provide us with a fantastic service, the banks. They do a lot of stuff for us, and it costs money. Spending a bunch of time talking to a person in person at the bank, costs a lot of money. Running branches costs a lot of money. Somebody's got to pay for that. Younger Australians and Gen Z and Gen Alpha and so on, are people who never once in their life will step into a branch. Should they be cross-subsidising people who do step into branches? Maybe yes, maybe no. But I can tell you what the economics of that are. People don't like to cross-subsidise other people. So, I mean, I don't think CBA played the, kind of, social psychology of it as well as they might have. But you know, they're just going to take out that fee in another way. So your account-keeping fees, a buck a month higher, same, same.
Dr Juliet Bourke: So you mentioned Sweden before, and it's moved significantly to a cashless economy. What's that experience been like for Sweden?
Richard Holden: Well, they've got something relatively similar to what we've got in Australia, which is a kind of piece of the payment system architecture that's very helpful. And let me describe what it is in Australia, which is, you will have interacted with it, you'll probably have known it as Ausco. But that's part of something that the Reserve Bank helped coordinate the banks around the country to create. It's called the new payment platform. And of course, it's a way where you can costlessly, frictionlessly, 24/7 transfer money to anyone who's got a pay ID, which means anyone who's got a mobile phone number or an email address and a bank account. Which is kind of everyone. Sweden has a similar thing and a payments architecture, and that allowed them to very quickly get to very, very low single digits in terms of cash usage. They took a little bit of a step back from that. There was a question about, were they going to make the final push. When you get down to, when it's like, 3% you run into these questions of, like, okay, the armor trucks that take the cash around, you know, they're not functional anymore, and you get into these awkward questions of, is the government going to subsidise those? So there's this kind of last-mile problem and Sweden maybe hadn't thought that through very fully, so they took a sort of a pause and rethinking the last-mile problem. But yeah, I mean, a lot of other countries with advanced payment systems, and they're very often in Europe and in Asia, are very far down the curve as well.
Dr Juliet Bourke: And how does it go then for you know, I'm thinking about this because I've literally just come back from Europe two days ago, and there were some economies that were absolutely cashless, but there were some economies, Turkey was one of them, where it was all cash. So just thinking about it from a global perspective, how do people do business across different countries with different attitudes towards being cashless?
Richard Holden: The business across countries is not being done with suitcases full of cash. So yeah, sure. You know, travelling in Turkey, you're going to use cash. There are certain parts of the United States, where you probably want to make sure you've got some cash in your wallet when you're getting a taxi from the airport and things like that. So I think people who are, you know, visiting those economies, or obviously, who live there as consumers, are prepared for that. But in terms of, like, global business and so on, I mean that stuff's all being done digitally. And indeed, there's, you know, a move towards what are known as wholesale central bank digital currencies, where central banks dealing with other central banks. That's already done digitally. There's a move towards that being done in a tokenised way. You can think of it as being akin to blockchain technology, although there are some differences. But the real flows of money around the world, the big flows are already fully digital, even with countries where you know you might have to use cash as a consumer.
Dr Juliet Bourke: And let's talk about cryptocurrency, and Bitcoin and blockchain like, where is that going to and how does that fit into this cashless society conversation?
Richard Holden: Well, Bitcoin and other cryptocurrencies got a very big boost from Donald Trump being elected president. You know, he had a lot of financial backers and donors connected with the crypto industry. The big problem that cryptocurrencies have is the cost of digital trust. The animating premise of Bitcoin, and the reason that the white paper came out in 2008 was this view that people had, and the founder of it, and Nakamoto had, which was, you can't trust centralised authority. You can't trust governments, and you can't trust big financial institutions like banks, okay, they just been trading in CDOs and mortgage-backed securities and all kinds of stuff that had triggered the financial crisis. So you can understand where the backlash comes from. Okay, so how do you make sure that people don't double-spend their money, if you don't have a centralised ledger? When you use your bank account here, the bank keeps track. So when you buy your coffee, your local cafe owner knows that you've got the money in your account, that they're going to get paid. How do you do that with a cryptocurrency like Bitcoin? Well, you have to do it with a decentralised ledger, and the way that's solved is with essentially, encryption technology. And famously, the type of blockchain that Bitcoin is based on is known as proof of work. That uses a lot of energy, okay, and that has two issues to do with it. One, energy costs a lot of money. The second is, there's an environmental externality in generating that energy. So there's a social cost, but there's just a cost of trust, and that's really, really big. So the Bitcoin network in a given year uses comfortably more electricity than the entire country of Sweden uses in a year, comfortably more. And that has really bad scaling properties. The more people that use it, the more the cost. There are alternatives to that kind of what's known as consensus protocol, the 'proof of work' consensus protocol. Ethereum, the Ethereum blockchain and its cryptocurrency, Ether, has moved. They started out with 'proof of work'. They moved to an alternative, and it's called 'proof of stake'. And that basically says, to validate a transaction, you lock up some of your Ether, some of your coins, and we basically vote on the outcome. If you're in the winning coalition voting, then you don't lose your coins. If you do, you lose your coins. Now that doesn't have the environmental externality. So that's good. We're not using fossil fuels to generate the electricity for that, but you have to lock up your coins. And it turns out, in fact, a couple of economists, Eric Budish and Joshua Gans and a co-author, have proved it's just a theorem that the cost of trust between 'proof of work' and 'proof of stake' is exactly the same. Okay, exactly the same. And so the cost of decentralised trust is really, really high. So cryptocurrencies have this Achilles heel, which is, if you want to have a decentralised ledger, because, like Nakamoto, you worry about governments and you worry about big banks and you don't trust them, you can do it. And that's why I think, unless you come up with a different kind of consensus protocol that deals with that, we'll never really have a functional cryptocurrency that you can transact with because it's just so expensive to transact with it. Imagine if every time you used a credit card, it cost you 10% of the value of the transaction. We wouldn't have a lot of credit cards.
Dr Juliet Bourke: So it seems like there's two parallel themes going on here. Cryptocurrency and a cashless society, and they may intersect, but they very well might go off in different directions.
Richard Holden: That's right and where they might intersect is, if central banks stepped in and created a central bank digital currency and said, let's try and get the benefits of, say, Ethereum, let's try and get the benefits of cryptocurrency, but do it on a centralised ledger so we don't have these big costs of decentralised trust. Now, the big benefit of Ethereum, compared to Bitcoin, is Ethereum has a programming language built on top of it. And Vitalik Buterin, who was the founder of that and because we know who he is, and we don't know who Nakamoto is. Buterin is the closest we have to the kind of face of cryptocurrency. He had a great idea as a teenager, which is he said, "well, Bitcoin isn't really useful for very much stuff, but if I put a, what computer scientists call a Turing complete programming language on top of it, then we can have things like smart contracts and decentralised autonomous organisations, and programmable money and things like that", and that's what you can do with Ethereum. I've already told you why there are problems with it, because the frictions are so high, the transaction costs are so high, it's really hard to do this in an economically efficient way. The plea in my book is, that the US should create a central bank digital currency. I call it Fedcoin, for lack of a better term, that would have this programming language on it, but would be run on a centralised blockchain by the US, Federal Reserve. That will give you the best of both worlds and that's exactly where these things might intersect.
Dr Juliet Bourke: Where does this leave us as leaders of businesses, in terms of being prepared for a cashless society, or prepared for the next step after we move to a cashless society? What are your predictions for the future?
Richard Holden: I think embrace it. Whatever you want to say about, you know, Gen Z and Gen Alpha and so on. They have great facility with technology. I mean, these are people who've, you know, grown up in the social media era, who are glued to their phones, for better or worse. You know, the idea that they're going to take a step back from technology, I think, is misguided. And so, you know, retro fashion might be back in but I don't think they're going to be hankering for writing cheques and things like that. So I think thinking more about what the sort of, I guess you'd call it FinTech, but the kind of innovation ecosystem in digital payments looks like is really important. So, there is essentially no blockage to somebody inventing or creating an app in Australia, and you know, the banks could do it with their payments apps, that allows you to do what a lot of people might have remembered their parents doing growing up. Which was, have, you know, an envelope for groceries and an envelope for the insurance and an envelope for going out to dinner or whatever it might be. This kind of segregating things into different accounts. Now, in principle, you can do that by having like, nine different bank accounts or something. But then, you know, your account-keeping fees and things like that. You can already and this exists in the United States, and it ought to be coming soon to a banking app near you in Australia -  hint, hint to the Big Four - is the ability to have segregated accounts within your one transaction account. Just say, look, I want nine little buckets, and I'm not going to get overdraft fees. If one of the buckets goes into the negative, it just gets covered from the other. From the other but it allows you to do, kind of, mental accounting. So I think that's just one example of many. And you know, if I had better examples, I'd be a FinTech entrepreneur, not a lowly economics professor. But I think leaning into that and saying, Okay, that's something that people want. We can do that digitally, really, really effectively and give people a better version of the kind of old school technology of cash in envelopes.
Dr Juliet Bourke: Thanks to Richard Holden for joining us on this episode. If this conversation with Richard, and in particular his mention of FinTech entrepreneurs intrigued you, we have an episode with Hayden Smith, the co-founder of investment app Pearler, that you might like to listen to next.
Hayden Smith: Most people are busy, tired, stressed, and I think the headspace is a big thing. Because, you know, if you could just press a button and suddenly put all of your money in the best savings account and the right amount, everyone would probably do it. We want to help guide people and make decisions easy. We're just providing the tools to make that happen as well.
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