Cash may no longer be king but an unprecedented global outage has put paid to the idea Australia will do away with paper notes and coins anytime soon.
Banks, airlines, supermarkets, media organisations and retailers were unable to operate on July 19 after an outage triggered by major cyber security firm CrowdStrike releasing a Windows software update.
The ensuing IT chaos was a wake-up call, according to electronic payments systems expert Professor Steve Worthington.
“We’ve had outages where telecoms have failed or power has failed, or one bank’s IT systems have failed, but this was much bigger than that,” says the Swinburne University academic.
“A lot of people were disenfranchised and couldn’t use their digital means or merchants didn’t have the facilities to accept them.”
Reserve Bank of Australia Governor Michele Bullock warned in December that the declining circulation of cash was putting pressure on the economics of ATMs and physically moving notes and coins around.
But Prof Worthington says the outage highlighted the need for cash to remain a back-up option despite its use dwindling and carrier Armaguard requiring a $50 million bailout earlier this year.
“Cash can’t crash,” he says.
“I don’t think it’s still king but it’s in the royal family of payments, if you like.
“The global outage reminds us of the fragile nature of the modern IT world and it’s interconnectivity. Someone’s pulled one brick out of the wall and the wall’s just collapsed.
“Without digital, you’re high and dry. What do you get then? A bunch of IOU notes?”
RMIT University finance academic Angel Zhong has previously suggested Australia will become a functionally cashless society by 2030, earlier than the Commonwealth Bank’s mark of 2026.
Functionally cashless, she explains, means digital payments make up more than 90 per cent of total payments, although cash would retain its value and not disappear.
Her calculation is based on consumer preference data from the RBA.
The latest 2022 survey, published in June 2023, shows cash made up 13 per cent of total payments, down from 69 per cent in 2007 and 27 per cent in 2019.
Dr Zhong said the CrowdStrike outage – hot on the heels of the 2023 Optus outage – didn’t change her forecast but highlighted digital vulnerabilities.
“These outages and incidents, that is why we’re not transitioning overnight,” she says.
“We are not ready to be a 100 per cent cashless society. This will shake consumers’ confidence in digital payments.”
In June 2023, Treasurer Jim Chalmers announced the federal government would move to phase out the use of bank cheques by no later than 2030.
Prof Worthington says resistance to the push shows how difficult it would be for Australia to go completely cashless, reckoning it is many decades away.
“The paper cheque was designed in 1770s,” he says.
“Getting away from using a particular payment instrument like a paper cheque is not something you can do overnight.
“The cashless society is a bit of mirage, really. It always appears to be on the horizon but you walk towards it and it’s disappeared again.”
Dr Zhong urges financial institutions to use the latest outage as an opportunity to shift from reactive to proactive risk management by enhancing systems resilience.
But University of Queensland business information systems lecturer Micheal Axelsen says he doesn’t believe a “silver-bullet solution” exists.
“You can reduce your risk but you can never make it go completely away,” he says.
Companies are turning to centralised software for efficiency and cost reasons but it has made them dependent on third parties like CrowdStrike.
“You solve the problem that you have and you’ve created new problems,” Dr Axelsen says.
“My alternative universe theory is … if I go down an alternative route for five years I’m probably dealing with more cyber every day than with CrowdStrike once.
“In this case, we’ve rolled the dice and it’s come up snake eyes.”
