Banks and card companies are profiting from COVID-19 fear

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While many industries have contracted or cut their prices to adapt to COVID-19, card companies and

banks have enjoyed a cashless transaction bonanza. Retailers and merchants must provide at least

one surcharge-free way to pay for goods and services but this RBA rule is being flouted.

In addition to all the extra cashless transaction revenue flowing into banks and card companies since

the COVID-19 pandemic began they also have more free information about us than ever before,.

The card companies and banks have encouraged retailers and consumers to shun cash for health

reasons but have not moved to ease the fee burden on merchants or customers. Their interests are

not aligned to our health during a virus pandemic but to their shareholders and profits.

$500 of clean, sanitised cash can be withdrawn from an ATM for free and spent without incurring

any surcharges.

$500 spent on a Mastercard or Visa card can attract $8 in merchant surcharges. But consumers may

not be aware of the extent of the fee-grab because $500 of tap and go transactions might be twenty,

thirty or fifty separate purchases.

Since 23 March, Visa’s share price has risen 41%, or more than US$50, to US$191 yesterday.

Mastercard’s share price is up 44% (US$89) to US$292 over the same period.

While cash is private, cashless transactions are data heavy and there is a lucrative market for this

information. The ‘new oil’ is data and Visa and Mastercard have the drilling rights.

Never has so much of our buying and consuming behaviour been freely available to payments

providers.

Banks in particular, benefit from greater access to consumer buying data. If the bank knows I like a

punt on the TAB or buy Uber Eats a few times per week, will they use that information in assessing

and pricing my mortgages and debts?

Most borrowers would think that they have definitely not given any permission to their bank’s loan

assessment team to scrutinise their transaction data and spending habits.

Banks, insurers and other lenders value conservative card or phone use by consumers more

attractively than they do consumers that may choose smashed avocado for breakfast. A conservative

person may get a 2.8% per annum rate for a mortgage while the gambler may get 3.5 % per annum.

Insurance companies will try to attract people who don’t travel or drink or smoke with better rates.

Your card use gives them this information. In the long run these companies will know way too much

about us, more than our neighbours, and this is very dangerous to our society. Especially when they

get it wrong and they do and will continue to.

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The COVID-19 pandemic has changed the game, people are being left behind and the RBA has put a

number on it.

Six million Aussies, to be exact, according to the Reserve Bank of Australia’s Consumer Payments

Survey for 2019. The RBA found that:

“Around one-quarter of consumers would face major inconvenience or genuine hardship if they

could no longer use cash …”

These “high cash users” include older Australians, people with low incomes, people living in rural

areas and those with low access to the internet, reported the RBA.

The Royal Australian Mint said: “To disallow cash as a means of payment could disadvantage or

discriminate against people such as those with literacy issues, on low incomes, or without regular

access to phone or internet services.”

So, with little regard to older, poorer or rural Australians, banks and card companies have fanned

fears about cash without dropping their fees, which might be a fair response if they think cash is a

threat to their customers.

Cash is a threat only to their profits. The World Health Organisation, the Reserve Bank of Australia

and the Royal Australian Mint have all reassured the public about using cash. Cash is just as safe and

perhaps safer than using an Eftpos machine and a plastic card.

While profiting from fear of cash, card companies and banks have also found themselves the proud

owners of almost all of our transaction data suddenly and without any extra investment in

technology. PayWave and Tap and Go payments are notoriously vulnerable to fraud which has only

spiked since PIN-free limits were raised to $200.

With cash consumers pay no surcharge and the transaction remains private. Cash is also the most

reliable form of payment and does not suffer from regular bank Eftpos system outages.

Cash from an ATM is clean, safe and has been stored to ensure it is disease-free. Australia and New

Zealand have some of the safest, cleanest polymer notes in the world. 95 per cent of Aussies and

Kiwis want to retain their right to use cash according to recent market research by Next Payments.

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