Let’s start with the answer. New Zealand going completely cashless is a possibility, but it’s not likely to happen in the near future. Yes, New Zealand is seeing a rise in digital payments, with contactless options like tap-and-go becoming increasingly popular. But no, because a cashless society is a bit concerning. Privacy issues, loss of freedom, technical difficulties, and financial exclusion are some of the concerns.
A more likely scenario is a coexistence of cash and digital payments. Cash may become less common, but it’s likely to remain available for those who need or prefer it. The focus will likely be on ensuring everyone has access to secure and efficient ways to manage their money, regardless of their preferred method.
A World Without Cash
Cashless stores are a global trend. Several businesses today opt for electronic transfers and card payments over physical cash transactions. Cashless payments streamline the checkout process so customers can enjoy a seamless shopping experience without having to wait in long queues. This can lead to increased customer satisfaction and higher sales for businesses. Customers don’t have to worry about carrying a wallet full of cash or visiting ATMs when they run out of money. Simply swiping a card or using a mobile app makes the purchasing process quick and hassle-free. Behind the counter, merchants have to collect physical cash, store it securely, and count it regularly. Electronic transactions make it easier to accurately track revenue streams and monitor payment patterns for more informed decision-making. A cashless society would eliminate these hassles.
Would a world without cash reduce crime? When people handle less cash, bank robberies, burglaries, and corruption drop significantly. Cash is easily traceable, making it a target for criminals. Should we become totally cashless, perhaps thieves would simply digitalise their strategies, however. Electronic transactions leave a digital footprint that businesses, payment providers, and sometimes even hackers can access. This could be a cause for concern for customers wary about sharing their personal information and spending habits. Another benefit regards the environment. Producing paper money and coins has a significant environmental impact. Printing and minting versus everyone having a device, though, is, on paper, an imbalanced debate. Our devices have an undeniably negative environmental impact. Maybe we aren’t ready to be at this technology’s mercy just yet. At least businesses wouldn’t need to worry about large sums being stolen from the till or during transportation to banks.
Downsides to Digital Dosh
Some worry that a cashless society could exacerbate existing economic inequalities. While cashless payments can provide benefits like easier budgeting and access to credit, these advantages are not evenly distributed. Those with higher incomes and better access to technology are likely to benefit more, while the poor and unbanked may be disadvantaged. For some people, such as older or lower-income folks, the homeless, and gig workers, transacting without cash might be a challenge as they lack access to banking services or smartphones required for digital payments. Cashless stores might inadvertently marginalise these consumers and place an undue financial burden on them.
New Zealand banks made a record $7.21 billion in 2023. Competition in the banking sector has long been a problem in New Zealand, where banks made major profits compared to the sector’s overseas counterparts. Australian-owned banks comprise 90 per cent of the market here, and Consumer surveys further outline that Kiwis agree that banks’ high profits show they charge too much. So, would the digitalisation of banks stimulate competition and consumer equity?
Digitalisation can help level the playing field by allowing smaller, more agile banks to compete more effectively with larger institutions. By leveraging emerging technologies like AI and data analytics, these banks can offer innovative products and services that cater to specific customer needs. The rise of digital banking also opens up opportunities for new entrants to the market. These new players can disrupt the market with their focus on customer-centric, digitally-driven operations.
Dominating banks will continue their efforts to squeeze smaller competitors out of the market, digital or not, however, and Consumer reports show that most Kiwis stay with their bank: “Eighty-four per cent of people have been with their bank for more than five years.” Consumer NZ said switching banks was generally easier than most Kiwis thought, but people don’t do so often, and that allowed the banks to “rest on their laurels” and get away with “lacklustre innovation and service”. Perhaps digitalisation will wake New Zealanders up to this.
An Overview
Considering physical bank closures in New Zealand over the last two years, in 2021, BNZ shut down a newly built Kaikohe branch despite an earlier promise to not axe any more regional branches until a year later. HSBC announced plans to close 114 branches around the same time, which it did in 2023. The bank has decided to wind down its wealth and personal banking business in New Zealand as part of its exit from less profitable sectors. This includes the permanent closure of its Auckland CBD branch on June 25, 2024, and no longer offering branch services in the country.
The Commonwealth Bank, ANZ, and NAB closed 219 branches in 2023. ASB closed five branches just recently, which concerned communities nationwide and truly sparked media worry about digitalisation and physical bank closures. The list goes on. Per a Consumer NZ report from July 2021, in 2012, there were 1236 bank branches open nationwide – in 2020, that number was 850. It sparked the opening of four bank hubs in Martinborough, Ōpunakē, Stoke and Twizel. The hubs provide an ATM, phone banking and tablets for online banking. Support staff were present to help customers use the service, but couldn’t provide advice on bank products, so savings accounts and loans. https://www.consumer.org.nz/articles/bank-branch-closures-are-banking-hubs-the-answer
The Future of Banking
Cashless stores represent a paradigm shift in the way we handle money, offering advantages such as improved convenience, security, and financial management. However, before embracing this new norm wholeheartedly, it’s crucial to be aware of potential drawbacks like privacy concerns and the impact on vulnerable populations such as elderly individuals or those with lower incomes.
The rise of digital finance in New Zealand is rapidly reshaping the banking sector. Traditional brick-and-mortar banks are facing unprecedented challenges as customers increasingly favour online transactions over in-person visits. Factors such as advancements in technology and changing customer behaviours are driving this shift, with online banking platforms offering convenience and efficiency unmatched by physical banks. Banks see the cost-efficiency and innovation potential of digital platforms, redirecting resources to enhance online infrastructure. Not everyone loves the change, though, and banks’ high profits, matched with the decreased costs of digitalisation, are hard for consumers to reconcile. While this transition offers new opportunities for banking innovation, it also presents challenges, including digital literacy disparities and cybersecurity concerns. New Zealand’s ongoing transformation into a cashless society offers exciting opportunities to innovate and push boundaries in the tech and business world, but the road ahead is rocky. As our nation adapts to new payment preferences, understanding both the pros and cons of cashless stores will help us make informed decisions that benefit everyone in the long run.