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Why a cashless society could be the reason for ‘debt traps’

by Rajat Roy, Associate Professor of Marketing

As Australia edges ever closer to becoming a cashless society, the sad reality is that the people most affected by a tap-and-go culture are the ones least equipped to deal with the fallout.  

I’m not talking about older people, who lived through imperial turning into decimal and are today arriving at coffee shops, book fairs and sausage sizzles to be met with hastily scribbled Cards Only signs where the cash register used to be.  

Baby Boomers and Gen X are showing they’re more tech savvy than they probably get credit for and have decades of experience watching the ins and outs of their bank accounts like hawks.

No, it’s those in their teens and early 20s using their phones and watches to pay for things they never knew they needed who fall into the biggest debt traps because money has never been physical to them.  

These are people who have never known life without the internet, the first to be constantly connected through phones, screens, and tablets.

There are no physical books in bed, records or CDs playing at parties - so why would they worry about not having a lobster or a pineapple in their wallet - or even know what those things are?  

They want instant gratification with their purchases, don’t really believe in savings, and are surrounded by so much technology that mental gymnastics, like working out the cost of a couple of drinks at the bar, isn’t necessary.  

And it’s not their fault because they are simply a generation born on the frontline of great institutional change, here and across the globe.  

Physical cash that is held and handed over has a reality to it and an unmistakable awareness of what is being spent, whereas electronic funds are ethereal.

Cash represents the here and now, while online funds are more tomorrow, or the day after tomorrow, or the day after that.  

And what a lifesaver it was for many in the Hinterland at Christmas when the power went down, and cash was the only way to buy torches and batteries and gas other survival essentials from darkened local hardware stores?

Even the institutions that used to exemplify the cash-is-king ethos – the banks – are turning away from banknotes because of the costs involved in maintaining a distribution network.  

ATMs have long provided convenience but declining usage, the logistics of setting them up and servicing them is now a drain on banks’ bottom line which is why you see cash machines disappearing from shopping centres, service stations and the like.

Some cash ATM locations are being repurposed into cryptocurrency ATMs, but for how long no one really knows.  

Retailers still want a shopfront because they know humans are social animals and want to be with other people to make our shopping an experience.  

But they also know customers want the convenience of online where they can get products from all over the world, quickly at the price they want to pay, so they have grown their online presences exponentially, with Millennials big spenders in this space.

At the end of the day, it’s young people stepping into this brave new world of commerce and consumerism and it’s up to them to maintain control over their financial destinies - to keep pace with their own spending and investments and to appreciate that there’s no turning back once the printing presses at the mint stop rolling.

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