Landmarks in an Australian Journey

Australia is ahead of most of the world in its journey back to more normal times, albeit with a long way to go (for example Melbourne, a city of some 5 million people, has recently had to lock down again, and so it is interesting to note the landmarks and character of the recovery). The headlines are that in Australia, April saw a major drop in economic activity with steady recovery in May and June. There was a major switch to online shopping using debit cards rather than credit cards and the public has been paying off their credit card balances. Cash usage has increased with the $50 in most demand. The $100 saw an initial surge but demand has fallen back. There are signs of cash usage returning. Economic activity remains significantly reduced. Paul Blond, Managing Partner of The Blond Group, is writing a series of posts about the changes in cash during the pandemic based on data from the Reserve Bank of Australia and his own analysis. This article is a digest of two of those posts. Australia’s cash in circulation data between 31 December 2019 and the end of June 2020 increased by $6.1 billion, or 7%. In January and February, it fell but thereafter, with one exception, it increased by over $2 billion each month. In April, the increase was only $372 million. As the data below shows, April was the month where the economic impact of the pandemic has been most evident with payment activity severely affected. Cash in circulation A look at the number of banknotes in circulation by denomination reflects what was probably an increase in notes withdrawn as a precaution against the unknown. For banknote volumes, the annual CAGR between 2012 and 2019 was 4% and yet the increase of $6.1 billion only increased the CAGR to 5%. The three lowest denominations went down 3-4% each, presumably reflecting the lack of day to day expenditure using cash, while the $50 and $100 increased by 11% and 6% respectively. The $100 can be assumed to be largely a store value note. The $50’s increase may be both for transactions and to store value given that the increase in May nearly doubled compared with its March increase (2.3% compared with 4.3%, while the $100’s May increase was only slightly half its March increase (3.4% compared with 1.8%). The $20, a transaction note, also increased in volume in June, perhaps reflecting the start of a journey back to cash usage for payments for both the $20 and $50. The value of ATM withdrawals dropped

Growth of Australian Dollars in Circulation

The wider payment landscape If cash has had a difficult time, albeit with signs of recovery, the payments picture is more complicated across the

Value of Australian Dollar @ Point of Sale (POS) Transactions

(Source: Reserve Bank of Australia/ Blond Group analysis) Growth of Australian Dollars in Circulation.

In an article I previously wrote Cash is not just a dirty word!, I reported that the Reserve Bank not only publishes detailed banknote by denomination data, but also a comprehensive range of Cash withdrawals payments use statistics, although given it is gathered from a number of reporting institutions The GDP data for the first quarter shows a , this information takes a little longer to appear. Data for the month of April 2020 (the first full month of economic and social lockdown) has just been published and provides some fascinating insights into slight reduction of 0.31%, but the payment how Australian’s (and in normal times, visitors to Australia) pay data tells a starkly different tale. for their goods and services.

different alternatives.

(Source: Reserve Bank of Australia/ Blond Group analysis) Value of Australian Dollar POS transactions. 30% in April compared with the previous month before recovering by 17.1% in May. The $7.5 billion withdrawn in May was still a third lower than compared with the same period in 2019. Volumes were down even more which was reflected in the average withdrawal value increasing from $230 to $294. In May that figure hardly moved, remaining just under $295. A move online or ‘in app’ While physical point of sale transactions are substantially down, device not present –online or in app purchases –have been much less impacted. Australian domestic (Australian acquired) purchases have fallen just 8 percent (from $14.87 billion in April 2019 to $13.63 billion this April) while the number of transactions has actually increased 4 percent year on year. The consequence is a fall in average transaction values from around $130 a year ago, to $114 now. Value of Australian Dollar Device not Present Transactions As with cash, April saw a major fall in the value and the number of point of sale purchases (POS), down 27% and 25% respectively with the average purchase value $51. In contrast the number of online/ in app purchases rose 4%. The fall in average value from $130 to $114 meant that the value fell 8%. One assumes this reflects more day to day items being bought

The figures for cashback received at the with cards rather than with cash. till in retailers remained steady at $77 and credit card advances similarly remained unchanged at $380. In May the recovery gathered pace, rising $6 billion on April. Interestingly, debit card expenditure rose 24% to reach 99.85%

The total withdrawal of cash from all of its May 2019 figure but credit cards, sources fell between March and April by While an immediate headline grabbing statistic would be to report the dramatic fall in ATM cash although they increased by 22%, only 43% compared with the year before, from withdrawals (total demands in April was $6.4 billion, down 30 percent on the March figure and reached 72% of the 2019 figure. Since $13.9 to 7.9 billion. nearly 40 percent less than a year earlier analysis. ), the breadth of data provided deserves more detailed December 2019, the total outstanding Independent ATM Deployer (IAD) figures for The value of ATM withdrawals is down, the number of ATM withdrawals have dropped even more (Source: Reserve Bank of Australia/ Blond Group analysis) credit card balances have fallen by nearly

March and April were down much more, 20% to $40.3 billion. At this time of 57% by value and 64% by number of The chart below illustrates the dramatic drop in ATM withdrawals across the board. Total ATM withdrawals in Australia, both from bank and reporting Independent ATM Deployers (IADs), was uncertainty, it appears the public are being transactions, reflecting that their machines down from $10.57 billion in April 2019 to just $6.41 billion in April 2020, numbers not seen since the cautious about their financial positions. tend to be in pubs, clubs and small stores. start of the new millennium. The number of withdrawals fell even more sharply from 46.1 million to 21.8 million (down nearly 53%) with a consequent significant increase in the average withdrawal Overall POS expenditure by the end of May In May cash withdrawals started to recover. value from around $230 to $294 (USD 204 / EUR 181). 2020 was still only 88% of 2019. In addition to the ATM rise, IAD withdrawals For Independent ATM Deployers, typically with many of their ATMs located in pubs and clubs, the Online debit and credit card transactions increased by 17.9% and cashback went up 27.5% (both were still under half of the nationwide blanket closure of these venues in late March had a profound effect. The fall in transaction numbers and, as a consequence transaction revenue, which are usually fixed per transaction regardless of withdrawal value, were even more severe. IAD ATM withdrawals in April saw a shift from credit to debit cards as well, with debit cards achieving a record equivalent 2019 figures) and advances on fell to $688M from $1,498M the previous year, a near 57% drop and the number of withdrawals fell 40% of all online transactions. While credit credit cards rose 5.3%. 64% to just under 3.3 million transactions. card usage in May increased to 75% of

Australian Dollar Value of ATM Cash Withdrawals

their 2019 figure, debit cards increased by 115%. Debit cards had increased by 88% and credit cards by 67%.

The decline in tourists visiting Australia and of Australians travelling overseas is also visible in the figures. The use of overseas cards in Australia at ATMs fell 54% and at POS 89% in April and Australian cards used overseas fell 83%. May’s figures were similar.

(Source: Reserve Bank of Australia/ Blond Group analysis) Australian Dollar cash withdrawn at ATM and POS. Cheque usage dropped 42% by value and a third by volume year on year in April 2020.

While ATMs are a main source of physical cash, point of sale cash out (or cash back) and credit card This continued in May with a further drop to cash advances, as well as over branch counter withdrawals, are also other important sources. Debit card cash out and credit card advances were also significantly lower. When combined with 47% by value, less than a million cheques ATM data, total cash out is down from $13.9 billion in April 2019 to $7.9 billion in April 2020, a 43% per month. fall.