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From bartering to smartphones—how our money habits have evolved

Ever since King Alyattes of Lydia minted the first coin in 600BC, humanity’s relationship with money has been constantly evolving.

Fast forward to more recent developments and mobile banking was offered to European consumers as early as 1999, with contactless payment cards appearing in the UK in 2008.

When it comes to money, fashions come and go. But perhaps the best illustration of the changing trends is the lifecycle of the humble cheque.

Cheques—the decline and fall

At one time, the ability to pay for goods and services by signing an authorised slip of paper from your banking institution was cutting edge technology.

These signed pieces of paper took days to process, the signatures were easy to forge and settling the transaction involved a complex network of clearinghouses. But at the time they would have seemed the height of sophistication and ease. The concept caught on quickly and so the humble cheque was born.

Until quite recently it would have seemed unthinkable that you couldn’t use a cheque. But many Australians under the age of 40 have never even seen a cheque book, let alone used one.

The cheque is predicted to die out completely by the end of 2019.

Back to the future

As for the next big thing, who knows?

In the space of a few thousand years, we’ve gone from resource exchanges based on the need for survival to quick, instant and virtual money exchanges, driving mass consumption and instant gratification.

Cash is no longer king

So is cash on the way out? It would seem so if we look at overseas trends. Over in Europe, Sweden is moving to a completely cashless society, with cash payments due to be phased out by 2023. It’s not only about convenience. Among the mooted benefits of a cash-free society are reducing crime, fighting tax avoidance and helping businesses feel more secure.

And it’s not just small Nordic economies going electronic. The world’s most populous country is also moving away from cash. Chinese consumers have embraced mobile payments via QR codes, and spend 90 times more using their smartphones than their American counterparts.

Back here in Australia cards have overtaken cash as the most frequently used payment method, according to the Reserve Bank’s Consumer Payments Survey. Electronic transactions more than doubled to around 480 per person in the 10 years to 2018. And paper-based payment methods such as cash and cheques declined from 320 per person in 2007 to 210 in 2016.

What the future holds for cash

So if we look forward 20 or 30 years into the future—assuming current trends continue—it’s possible that the only place our children will see notes and coins is in the museum.

The implications are profound:

  • What does a cashless society mean for people on the margins who don’t have access to credit and rely on physical money to survive?
  • What does a cashless society mean for our spending and saving habits?
  • What does a cashless society mean for privacy when every transaction we make is logged, tracked and analysed?

Whatever the future holds, we’re living through interesting times as our relationship with money evolves at a pace unmatched in human history.

Source: AMP, 2019

ICG Financial Planning Melbourne