Banking in the Bush : a decade of change

Economic Papers (Economic Society of Australia),  March, 2005  by Diana J. Beal,  Sarath Delpachitra

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The retail financial system will operate much more smoothly once cheques are substantially no longer issued. However, the ultimate abolition of cheques is still likely to be some time off, because a payment mechanism apart from cash is still needed for transactions between small business operators and their customers. When communications infrastructure, public education and the cost of EFTPOS equipment is such that all small businesses including opportunist merchants such as occasional crop-residue sellers or part-time consultants are able to accept credit or debit cards, then the residual volume of cheque-facilitated transactions will be quite small and demand for physical banking capacity also small.

The increase in the use of credit cards in the last few years has been spectacular. RBA (2003, p. 3) data show credit-card use to have increased by 24% on average annually for the period 1997-2001. Again, these rural respondents have shared in this trend. Credit cards were reported to be the payment vehicle of choice by the majority for clothing, household goods, and car repairs. Additionally, more than 56% of business respondents now use credit cards to pay business expenses. Only a few years ago, this practice was seldom considered. Moreover, internet and phone banking have become increasingly accepted and used, such that nearly one-third of respondents normally use the internet to check account balances or transaction histories and slightly more normally use phone banking.

The change in the way people obtain their supplies of cash provides an informative example of one aspect of the transformation of financial-service delivery. The most popular method reported to obtain cash was 'cash out' with debit cards while making purchases (21.6% of respondents), followed by own financial institutions ATMs (20.0%) and over-the-counter at own financial institutions (17.8%). Less popular were the use of any ATM (15.9%), because the fees are higher, cashing cheques at non-bank businesses (13.3%), over-the-counter withdrawal at giroPost or RTC (7.9%) and 'cash out' with credit card. Again, there are financial penalties in withdrawing cash from a credit-card account, unless the account is in surplus. In contrast, the Ralston and Beal (2000) study found the majority of respondents (52%) nonexclusively used over-the-counter withdrawals, cashed cheques (41%), used EFTPOS (42%) and used ATMs (37%).

Changes in shopping habits and loss of local expenditure and business opportunities were again reported in this study, just as they were in the previous two studies. The average decrease of local spending was $830 per month per respondent. This estimation of the average decrease is larger than those estimated in the previous studies. The larger current estimate is due to the effects of inflation on individuals' expenditure estimates and the presence of some large business expenditures. After allowing for those households that reported no change in shopping habits, the loss of local turnover amounts to about $1.25 million p.a. for 300-household districts and $1.65 million p.a. for 400-household regions.