Impact of Cashless Banking on Profitability and Market Share in Australia

This study investigates the impact of cashless banking on profitability and market share in the banking industry of Australia. It reviews the literature on cashless banking and its channels such as mobile banking, internet banking, and telephone banking. The study aims to answer questions such as the effect of cashless banking on profitability and market share, the relationship between the growth of commercial banks and the cashless policy, and the advantages of implementing cashless banking in the banking sector in Australia.

IMPACT OF CASHLESS BANKING ON PROFITABILITY AND MARKET SHARE: A
CASE STUDY OF BANKING INDUSTRY OF AUSTRALIA

CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
The Banking system is the most common and known financial service provider all over the
world. Combining banking and information technology has revolutionized the world over. The
increased and rapid use of the internet and creation of information and technology has
radicalized changes that have been observed in the banking practices from the traditional
physical banking to cashless banking. Because of this it is an important need of bank to have
latest technology and highly developed services which increase trading, exports and improvise
industry as a gift of globalization.
Cashless banking has been on the rise in the recent years especially with deregulation and rapid
technological advances in information flows, communications infrastructure and financial
markets. Banks are now aiming to decongest banking halls so as to reach out to a large market
share and are heavily investing in cashless products eventually leading to increased revenue
streams. Additionally, with banks needing to increase their revenue and utilizing customer
unused deposits, there has been an increased financial trading on Bonds and foreign exchange
the preceding being a risk free investment and has an assured return is becoming quite common
in Banks due to increasing competition in the local banking sector.
1.1.1 Cashless Transactions
According to Tiwari et al., (2006), Cashless Transactions involve payment for goods and
services by use of credit cards, debit cards, mobile devices and electronic funds transfer instead
of use of hard cash or checks. These cashless transactions are known to attract transaction fees;
debit and credit card application charges and electronic transfers also attract charges depending
on whether it’s a local or foreign transfer. The wide-ranging economic developments of the
previous decade such as the integration of world economies have made a significant impact
towards increasing the mobility of the working populace and their families. At the same time,
technological developments especially in the field of telecommunication have made it possible to
offer innovative, location sensitive services on ubiquitous basis to customers on the move.
In Australia, 37% of consumers made their payments in cash, compared with 47% in in 2013 and
69% in 2007, a once-every-three-years survey conducted at the end of last year finds.
Meanwhile, credit and debit cards combined were the most frequently used means of payment in
the 2016 survey, the RBA reveals.
1.2 Statement of the problem
Adoption of cards over cash is propelling the Australia’s financial technology(fintech)
revolution. According to findings by Reserve Bank of Australia (RBA, 2017), cashless
transactions have overtaken the more traditional means for paying for goods and services.
Continuous technological advancements have greatly increased product base in banks leading to
new revenue streams such as mobile banking, telephone banking, automated teller machine
withdrawals, electronic point of sale transaction, card usage, online banking and cashless

transactions through bank agents and merchants. The basic purpose of this study is to establish
the impact of cashless banking services on profitability of the banking sector in Australia.
Majority of research done on this subject has focused on effects of mobile banking on financial
performance of commercial banks. None of the studies reviewed has specialized on the effect of
cashless banking on profitability in the banking industry. Therefore, there remain considerable
debate surrounding the effect of cashless banking and profitability in the banking industry in
Australia as there is no major study that has been done. The research will seek to answer these
questions: what is the effect of cashless banking on profitability and market share of the banking
industry in the banking sector in Australia?
1.3 Research Objectives
The study sought to establish the impact of cashless banking on banks profitability a case study
of banks in Australia. The broader objectives were:
i) To establish the effects of cashless banking on profitability in banking industry
ii) To establish the effect of cashless banking on the market share in banking industry
iii) To establish the relationship between the growth of commercial banks and the
cashless policy
iv) To establish the advantages of implementing Cashless banking in the banking sector
in Australia
1.4 Research Questions
This thesis will present an empirical investigation to study the effects of cashless banking on
profitability and market share in Australian banking industry. The proposed study consists of two
main research questions as follows
i) What is the effect of cashless banking on profitability in banking industry?
ii) What is the effect of cashless banking on the market share in banking industry?
iii) What is the relationship between the growth of commercial banks and the cashless
policy?
iv) What are the advantages of Cashless banking to the banking sector in Australia?

CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter introduces the literature review adopted by the researcher and it captures the
theoretical review and empirical review. Literature review is important to every research study. It
gives an overview of what kinds of research have been conducted and what are the gaps in
literature. Therefore, various research studies on Effect of Cashless Banking on profitability and
market share which were conducted in Australia and abroad have been reviewed.
2.2 Review of Literature
The evolution of conventional money has been well documented in economics literatures.
However, recent informational and communication technology developments have influenced
the role of money in economic activities. As a result, we can now talk of electronic money and
hence cashless banking. Empirical studies have attempted an estimate costs of payment
instruments as it was done by Humphrey and Berger, in 1990, e-payment instrument user
patterns by Humphrey et al 1996 and Carrow and Staten, 2000, the cashless and monetary
economy (Gali and Gambetti, 2009; Kriwoluzky and Stoltenbery, 2010), and the role of Central
Bank in a cashless economy (Claudia and DeGrauwe, 2001; Marco and Bandiera, 2004).
With the arrival of electronic banking, not only has traditional banking reduced drastically, but
also, the manual processes of recording transactions by hand has reduced. Banking has become
efficient that customers can get their services quickly and reliably. Local and international
transactions have become faster and require little time as compared to before (Sana et al, 2011).
Electronic banking according to business dictionary is the use of computers to carry out banking
transactions, such as withdrawals through cash dispensers or transfer of funds at Point of Sales
(POS). In other words, it is banking transactions conducted through computerized system, as
electronic fund transfers by Automated Teller Machine, intended to speed operation and reduce
cost. Electronic banking and cashless banking are closely related. Cashless banking is aimed at
reducing, but not completely eliminating, the amount of physical cash circulating in the economy
while at the same time encouraging more electronic based transactions. Basically, it is a
combination of electronic banking and cash-based banking (Odior and Banuso, 2012)
According to Ejiofor and Rosak (2013), it is the system with the ability to store money in an
electronic wallet on a card which facilitates purchase of products at vending machines or at any
point of sales terminals. Furthermore, Akhalumeh and Ohiokha (2012) see cashless banking as a
system where transactions are not done while exchanging actual cash. They are It is considered a
mobile payment system that allows the customers to make payment through cellphones with or
without internet connectivity. The system has increased ease of doing business while at the same
time creating more service options for the customers and reducing the cost of cash related
crimes. The system also provides cheaper access to credit.

2.2.1 Cashless banking in Australia
A research commissioned by The Reserve Bank of Australia’s showed that the use of cash was
on the decline in Australia down from around 40% to 30% and that cash had been substituted by
debit cards. The decline in use of cash reflected change in payment habits and choices and
Australians’ increase in comfort levels of using electronic transactions. The study also showed
that other countries like New Zealand, moved to electronic banking favoring the safety and
convenience brought about by electronic payment systems over cash. (Malcom Edey, 2011)
There are signs of acceptance of electronic form of payments in Australia as indicated by eftpos
which provides Australian-based convenient, and low cost debit card. By 2014 eftpos had more
than 39 million debit cards in the market, which was acceptable in more than 800,000 point of
sale terminals across the country. This in turn generated 2.4 billion transactions, with an
aggregate value of $139 billion which represented more than 40% of all debit card transactions
in Australia. As of 2018, eftpos is the most used debit card in Australia but it’s market share is
being cut by the boom and adoption of new technologies like contactless and online payments
methods. Eftpos is transforming their core infrastructure so as to provide upcoming Australian
electronic payment platforms. It is revolutionizing processing, product functionality, to include
contactless banking, online payment and mobile transactions.
According to PwC report in 2016, significant changes in revenue due to the forces that shape the
future of payment in Australia will take effect from 2020. It is predicted that the future market is
will be stable and there will be a steady growth in revenues even though growing volumes
because of transitioning from physical cash to electronic payments methods. Regulators and new
entrants will affect pricing. The consumers are likely to be affected the most by the price
pressures and migrating from credit to debit which will lower revenue growth rates for banks as
opposed to the business sector.
The most innovative and non-traditional players such as large tech players, new tech start-ups,
telecommunications giants and retailers will see an increase in their market share by around 10%
of their revenues by 2020. Technological developments in the market will facilitate the payment-
chain participants and give them accessibility to compete for new and fresh revenue streams.
There is a possibility that understanding the dynamics of the entire digital commerce lifecycle
will be commercialized. This will go beyond the payment event to how consumers research
before purchasing to what they will end buying, how they will pay for it, the frequency of item
returns and how to better enhance their experience. There will be a boom in system to system
integration because of ISO 20022 developments meaning that payment-chain participants will
greatly benefit through value addition to business customers.
Industry players invest heavily in new solutions that will increase convenience of the consumer
through from transportation, to businesses adopting account based solutions to government
entities investing in new business models. For this to be realized, financial service providers in
Australia will have to embrace change so as to serve consumers and avoid the risk being creating
a gap between them and their customers. It is with this reason that the Australian Payments
Council started the Australian Payments Plan in December 2015 which acted as a roadmap for
improving payment system for the next ten years.

2.2.2 Cashless Banking Channels
The most common channels of cashless banking channels known all over the world include but
not limited to: mobile banking, internet banking, and telephone banking.
2.2.3 Mobile Banking
This is defined as provision of banking and financial services with the help of cellphone/mobile
devices. The system allows the customers of a banking institutions to transact a number of
financial transactions through a mobile device such a mobile phone. Mobile payments involve
the use of mobile phone for settlement of financial transactions. It used the card infrastructure for
movement of payment instructions as well as using Short Message Service (SMS) to confirm
receipt to the receiver. This form of payment is commonly used for low value transactions where
speed for completing the transaction is a key
It is growing in popularity because of the low infrastructure requirements and the rate at which
mobile phone penetration is increasing. Services offered by this option include making account
enquiry/queries, transfer of funds, cellphone vending, changing of passwords, and bill payments
(Siyanbola, 2013). Banks have begun using mobile banking to serve their customers. Some of
the features of mobile banking are: the GSM phone number serves as the account number which
is linked to the customer’s account; it has a wallet which can be loaded just by moving cash from
bank account.
2.2.4 Internet Banking
Also known as online banking and involves conducting banking transactions such as account
enquiry, printing of bank statement; transferring funds, and paying for goods and services on the
internet. It is facilitated by use of electronic tools such as the computer without visiting the
banking hall. Similar to mobile banking, it is maximizing the use of electronic card infrastructure
for executing payment instructions and settlement of goods and services through the internet
between the vendor and the customer (Siyanbola, 2013).
2.2.5 Telephone Banking
This is electronic banking product allows customers to access banking services through a
dedicated telephone line from the comfort of their homes or offices. Some of the services
rendered here include; balance transfer, change of pin, authorization of inter branch/bank money
transfer, transaction alert whether withdrawal or deposit and enquiry (Adewuyi, 2011)
2.2.6 Electronic card
This is a physical plastic card that uniquely identifies the holder through a Pin and can be used
for financial transactions on the internet. For example, an ATM machine and an electronic point
of sale terminals are used to authorize payment to the vendor or seller (James, 2009). Some of
the examples of electronic cards include but not limited to debit cards, credit cards, and
releasable cards which require the holder to visit bank for top-up. Debit cards can be linked to
ones’ local bank accounts and offers immediate payment confirmation. Credit cards on the other
hand are used to link a customer to a credit line while at the same time it can be used to access
local and international networks and are acceptable widely in most countries. Their infrastructure

and operational rules are subjected to global trusted schemes (such as visa and master card) in
addition to local lines (James, 2009).
2.3 Challenges faced by the banks while using E banking
Development of efficient monetary transfer system is plagued by a lot of problems which are
mostly related with infrastructural deficiency such as erratic power supply and communication
link especially challenges for the case of developing countries. The government is liable in
providing stable and efficient power supply and telecommunication system (Oleka, 2009). There
is also the challenge of inadequate skilled managers and requisite tools for end users and client
systems. Efforts should be put in place to ensure good infrastructure and skilled man power is in
place. Large accumulation of cash in the economy is also a big challenge with cashless banking,
the government should come up with legislations that will change the dominance of cash usage
to electronic payments. The high cost of charges or cost for the e-payment terminals (ATMs) and
there is need for banking legislation so as to standardize the charges for e-payment services
(Littler, 2006).
There is also inadequate security for fraud prevention, the banks are left with the need to install
stand-by-camera in every ATMs machine for confirming to help in confirming identify of
account operators. There is also need to employ good computer wizards to help in detecting and
preventing frauds committed by computer hackers.
The government has also done little to support improvement of e-banking, the central bank
should be involved in creating public awareness campaigns and also in escalating infrastructural
challenges to the relevant government agencies.
2.3.1 Power Failure and Communication Link
With rampant power outages, most ATMs are left with no service to the customers which greatly
slows down the rate and the number of electronic transactions. With power outage also comes
the problem of failure of communication links between the banks and the ATMs. Power
outages/instability also cause a lot of spikes which may damage the ATMs (Akinuli, 1999).
2.3.2 Lack of computer bank up
Many banks have suffered loss of consumer information because of inadequate or lack of backup
at all. Incidence of bank system suffering from corruption have led to the loss of information
about a customers which in most cases leads to misappropriation of customers bank account.
This means that banks should invest in a manual backup (ledgers) that will contain all the
information about the customers (Akinuli, 1999).
2.3.3 Lack of adequate investment capital
New information technology requires adequate funding to succeed, however, funds to be used in
modernizing existing systems has been in generally short supply. There are a number of modern
banking applications that are needed to be implemented which will allow integration of the
banking systems. The banking system are continuously evolving because of the constant
innovation especially around product development. There has also been a significant
improvement in the speed in which funds are transferred within and outside the domestic
economy (James, 2009).

2.3.4 Reduces employment in the country
As much as electronic banking has been efficient, there is also noted unemployment created
through modernization and automation of the banking systems. Most works that was traditionally
done by humans have been replaced by machines thereby lead to minimum rate of employment
and high rate of unemployment in the country (Oleka, 2009).
2.3.5 High charges on machines
The high charges imposed banks for electronic transactions have been the leading reason why
many customers are discouraged from using the electronic machine for exchange of transactions
for example charges for ATMs withdrawals and online transfer from one bank branch to another
(James, 2009).
2.3.6 Low public acceptance
There is generally a perception of mistrust on the machine by the consumers. There is a
perception that fraudulent individuals use the system to carry out fraudulent activities especially
banks using the computer to loot money from the bank accounts of the customers. There are also
cases where customers have complained that sometimes when they go for withdraw with their
ATM the machine will seize the cards and at the same time their accounts are still debited for the
withdrawal that did not happen (James, 2009).
2.3.7 Insecurities in banks
Banks have not invested in making the electronic machines secure therefore making it easier for
fraudsters to carry out their fraudulent activities without being nabbed. It is because of this that
banks cannot prevent stop or detect any fraudulent activity. Most hackers use the system to steal
customer information by breaking of codes. (Hodagho, 1996).
2.3.8 Encourages excessive withdrawal
There is the tendency for excessive withdrawals especially on weekends when the banks are not
operational. Customers tend to use their ATM withdrawals a lot. When they run out of cash, they
can rush to a nearby ATM machine to withdraw money for excessive spending, customers have
been complaining about this in interviews conducted by the banks (James, 2009).
2.4 Critical review and gap in the literature
Technological changes are taking place quickly and these changes are acting as stimulus for
banks to move towards cashless banking foundations. several studies have been conducted to
examine the impact of electronic banking, internet banking or mobile banking on banks
profitability. Studies show that, banks that introduced Automated Teller Machines (ATMs)
pretty early, secured large market share compared to their competitors. It is shown that they have
a competitive advantage especially through cost reduction. According to Dos Santos & Peffers
(1995) they believe that ATM machines have increased bank’s revenues which in turn has led to
growth in income. Simpson (2002) studied the impact internet banking had on the profitability of
bank profitability in USA. His analysis confirms the theory that operational efficiency was
witnessed use of internet banking where there was increased revenue and decreased costs. The
US benefits from strong information technology framework which leads to revenue generation is
more compared to emerging economies banking sector.

Holden and El-Bannany (2004) also carried out research studies to check profitability of the UK
banking industry as a result of introduction of modern e-banking equipment along with
traditional measures like bank size, market share etc. the results from the study show that ATMs
machines tremendously increased profitability of the banking industry in the UK. Hernando and
Nieto (2007) also carried out a study of the Spanish banking sector so as to determine the impact
of investing in information technology framework. Their research shows that internet based
banking improved bank profitability.
DeYoung, Lang, and Nolle (2007) tried to conduct an evaluation on the impact of internet
banking by surveying on 424 US community banks. It was observed that there was a massive
increase in revenue during study time in deposit service charges head. The study also highlights a
change in loan proportional mix. The study shows that internet banking increase flow of deposits
to money market investments.
Commercial banks are fighting off the pressure brought about by globalization and competition
from nonbanking in the strive to add value to the services. There are questions as to what drives
profitability and market share of the banks. Several efforts have been made through research
have gone into addressing these questions, starting from the strategic level and going down to
operational details. There was a study on bench marking the strategies of leading retail banks that
was carried out by the bank strategies of leading retail banks (Vander Velde 1992). The study
was based on the opinions of heads of retail banks at all commercial banks and it revealed that
there was a linkage between marketing, operations, organizing excellence. These findings led to
the formulation of the service management strategy (Foth and Jackson 1995). The capabilities
service quality-performance trail is, in turn, a focused view of the service profit chain described
by (Heskettet all, 1994) based on their analysis of successful service organizations.
2.5 Summary
Information technology has brought about big changes in the nature and the way businesses are
applying/using technology in business. Information Communication Technologies provides
powerful strategic tools for organizations including banks, which, when properly used, could
bring great advantages in promoting and strengthening their competitiveness. The growth of the
different e-banking tools like Internet and the main stream communication media has generated a
wide range of strategic implications for businesses in general as well as for the banking
industries in particular (Li-Hua and Khalil, 2006). Information and Communication
Technologies (ICT)have always played a big role in the banking sector performance (Poon,
2003) but with the entry of the Internet and open source technology their impact is becoming
increasingly more crucial and evident (Buhalis, 2004; Jacobsen et al., 2008)
It is evident from the previous literature that several studies conducted on this issue but very few
in Australia. This study is different from other because it incorporates all the cashless banking
dimensions. Call center banking is not previously considered potential dimension of cashless
banking to checks its outcome on profitability.

CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter deals with the procedures used in conducting the study. It identifies the procedures
and techniques that were used in the collecting, processing and data analysis. The chapter
contains the following; research design, target population, sample design, data collection and
data analysis.
3.2 Research Design
The study adopted descriptive research which attempts to describe or define a subject, by
creating a profile of a group of problems, people, or events, through the collection of data and
tabulation of the frequencies on research variables or their interaction as indicated by Cooper &
Schindler (2003). The design best suited this research because it allows for an in-depth study of
the adoption of cashless banking in commercial banks.
3.3 Data Collection
This study used of both secondary and primary data for analysis. The raw data on cashless
banking data was collected from quarterly and annual reports of Commonwealth Bank, NAB
Bank, Westpac Bank, St. George Bank, and Suncorp Bank. Return on Equity (ROE) was used as
a proxy for profitability, calculated from Financial Analysis reports of the banks under study.
Data for this study was collected targeted 3rd quarter of 2011 to 4th quarter of 2016 with a total
of 30 observations being made. Variables under study comprised of Return on Equity (ROE),
Volume of ATM Transactions (ATMT), Volume of POSs Transactions (POST), Volume of Call
Center Transactions (CCT) and Volume of Mobile Banking Transactions (MOBT).
3.4 Data Analysis
Data analysis was done by use of Ordinary Least Square (OLS) multiple regression analysis
which helped in exploring the relationship ship between cashless banking and bank profitability.
Similar model has been used before in studies carried out by Itah and Emmanuel in 2014, Rauf
and Qiang in 2014 to examine the effect of cashless banking on banks in different countries all
over the world. Descriptive statistics, correlation matrix and diagnostic tests were also used to
perform and validate the authenticity of results. STATA 12 software was used for analysis
Model Specification
ROE=f (ATMT, POST, CCT, MOBT) -------------1
The Equation 1 explains the function which is the main theme of this analysis. Equation 2 below
is the model used in this study to test the functionality of equation 1. It incorporates ATMT,
POST, CCT and MOBT as independent/ explanatory variables and ROE as dependent variables
of the study. Logarithmic transformation is performing on all independent variables to normalize
the data to get better and reliable estimates in comparison with ratio values of ROE. From the
literature review it is evident that all these determinants of cashless banking have not been
analyzed before anywhere in the world. Therefore, to find the impact of ATMT, POST, CCT and
MOBT on Australian banks performance following model needs to be tested:

ROE = [alpha] + [beta]1logATMT + [beta]2logPOST + [beta]3logCCT + [beta]54ogMOBT +
[mu]----2

CHAPTER FOUR
4.0 DATA ANALYSIS AND PRESENTATIONS
4.1 Introduction
This chapter presents the information processed from the data collected during the study on the
effect of cashless banking on banks profitability
4.2 Descriptive Statistics for variables
This section presents the descriptive statistics for all the variables used in the study. Table 1.0
presents the descriptive statics of the variables under study which are: Return on Equity (ROE),
Automated Teller Machines Transactions (ATMT), Point of Sale Transactions (POST), Call
Center Transactions (CCT) and Mobile Banking Transactions (MOBT) from 2011 to 2016.
Table 1.0 Descriptive Statistics
Variable Obs. Mean Std. Dev. Min. Max
ROE 30 3.258 0.849 1.57 4.77
ATMT 30 38402.1 17838.03 14393 72219
POST 30 4705.484 1144.176 3411 7676
CCT 30 197.677 37.524 157 278
MOBT 30 669.816 619.548 4 1887
The mean value of Return On Equity in Australian banking sector is 3.26% per quarter with
range from 1.57 % to 4.77% lowest in 3rd quarter of 2011 & highest in the 3rd quarter of 2016.
Automated Teller Machines Transactions mean value is at 3,8402.10 transactions per quarter,
with lowest number of transactions in 2nd quarter of 2011 and highest in the 4th quarter 2016
which is growth of 402%.
The average of Point of Sale Transactions stood at 4,705.484 transactions per quarter with lowest
being 3,411 in 1st quarter of 2013 and highest 7,676 in 4th quarter 2016.
The mean value of Call Center Transactions stood at 197.68 transactions per quarter with lowest,
at 157, in the 2nd quarter of 2014 with the highest, standing at 278, in 2nd quarter of 2013.
Mobile Banking Transactions had a mean value of 669.82 transactions per quarter with the range
from 4 to 1,887 and the lowest being in the 2nd quarter of 2013 and highest in being in the 3rd
quarter of 2016
Table 2.0 Correlation Matrix
ROE ATMT POST CCT MOBT
ROE 1
ATMT 0.4576 (*) 1
POST 0.3420 0.7220 1
CCT -0.5223 (*) -0.5764 (*) -0.1987 1
MOBT 0.5379 (*) 0.9505 0.6250 -0.6615 (*) 1

Correlation provides an insight into the relationship or the association that exists between the
variables. Table 2.0 present the relationships between each of the variable studied.
ATMT and MOBT is shown to have positive and significant relationship with ROE of the banks.
POST is shown to have a positive but not a significant relationship with ROE of the banks. CCT
is the newly tested variable and is shown to have a negative but with a significant association
with ROE of the banks. Highest no significant correlation was found to be between ATMT and
MOBT, whereas, the lowest non-significant correlation was between ROE and POST.
Table 3.0 Model Summary
Scurce SS df MS Number of Obs=30
F (4,26)= 4.89
Prob>F= 0.0045
R-squared= 0.4292
Adj R-squared= 0.3414
Root MSE = .68941
Model 9.29327241 4 2.3233181
Residual 12.3576111 26 .475292736
Total 21.6508835 30 .721696118
ROE Coef. Std. Err. t P> |t| [95% Conf. Interval]
LATMT -2.752233 1.287668 -2.14 0.042 -5.399073 -.1053931
LPOST 2.692345 1.081388 2.49 0.019 .4700214 4.915669
LCCT -1.933221 .8970748 -2.16 0.041 -3.777185 -.0892576
LMOBT .5913391 .2710359 2.18 0.038 .0342168 1.148461
_cons 16.32161 8.398324 1.94 0.063 -.9413904 33.58462
The regression results which are shown in table 3.0 above shows the value of [R.sup.2] at 42.92
% meaning that close to 43% of the increase in the profitability of banking sector is as a result of
cashless banking factors. 57 % of increase in profitability is due to other untapped factors which
have were not considered during the study and hence have not been incorporated in this model.
The value of the F Statics is great at 5%, and therefore rejecting the null hypothesis in the
process affirming that our estimated coefficient values of independent variables are not equal to
zero. This therefore show that cashless banking has significant impact or effect on profitability of
banks in the Australian banking sector.

CHAPTER FIVE
5.0 SUMMARY AND CONCLUSIONS
5.1 Introduction
This chapter provides a summary, conclusion and recommendations of the main
findings on the effect of cashless on banks profitability.
5.2 Summary of the findings
The outcomes of the study also show that all the studied variables are meaningful at 5 %.
However, LATMT and LCCT have less significance and the other two in this case LPOST and
LMOBT, have positive significance.
There is a strong indication that LPOST has a positive impact on profitability of the banking
industry in Australia. This is shown by the fact that a 1% increase in LPOST leads to 2.69%
increase in profitability. Part of the reason this is significant is because it is convenient and
secure for customers to use POS. POS also increases customer's confidence as well as perception
of the bank improves in customer's mind due to ease for user. There is an increase in deposits in
the banking sector which through efficient channels increases profitability as shown by previous
studies by Karimzadeh in 2014. There is also a strong indication that LMOBT has positive and
significant impact on banks profitability, which indicated by the fact that that 1% increase in
mobile banking transactions leads to 0.59% increase in banking profitability. There is a
significant fact that mobile banking provides ease to customer to do their transactions without
visiting the branches. It also increases employee performance by reducing fatigue which also
increases profitability. The result is confirmed by the research carried out by Rauf and Qiang in
2014.
There is evidence that LATMT has negative with a major relationship with profitability, as
indicated by the fact that 1% increase in ATMT leads to 2.75% decrease in banks profitability.
Some of the reasons attributed to this are: breakdown or failure of ATMs b, shortage of cash in
ATMs, increasing case of ATM frauds, theft at ATM and long queues on certain days of the
months. The above reasons have shown that there is reduced sense of security and ease which
ultimately reduce profitability. These results are backed by similar studies done by Albert, 2010
and Giordani & Floros in 2015. It is also shown that LCCT has negative and significant impact
on profitability of banking industry which is supported by the fact that 1% increase in LCCT
leads to 1.93% decrease in banks profitability. However, this variable has not been tested before
in relation to banks profitability. This service is usually considered by customers for non-
financial transaction rather than financial transaction that results in increased operational costs.
Some of the reasons for outcome could be as a result of long waiting time on calls that is which
do not provide any sense for ease. One more prominent reason is because of lack of trust to
divulge information dealing with monetary aspects with fear of leakage or breach of
confidentiality.
5.3 Conclusions
There is evidence of huge and significant investments made by the banking sector on ICT
infrastructure to provide the banking services to customers with convenience but lowest cost

possible. Cashless banking is a way towards the innovation in providing the banking services to
customers for them to avoid carrying cash.
This research set out to establish that what impact cashless banking had on profitability of the
Australian banking industry through ATMT, POST, CCT and MOBT during the period 2011 to
2016.
For the first time, call center transaction was studied as a variable. The analysis show that POST
and MOBT have a significant and a positive impact, as evidenced by a scenario where an
increase in these services led to increase in profitability of the banks. There is evidence that to
some point CCT the newly tested variable affect the bank's profitability negatively. This is
because the feedback obtained from 19 out of 30 banks which are offering call center banking
services to its customers. The service mostly used for non-financial transaction rather than
financial transaction that results in increased cost. There is a lack of trust by customer on this
channel because of fear of breach of confidentiality.
There is also evidence that ATMs have negative and significant impact on profitability of
Australian banking industry. Issues linked with ATM machines range from stuck ATM card are
stuck in the machines or instances where machines do not dispense cash as a result of server link
being down, which reduces customer satisfaction.
Some of the recommendations that would enhance use and success of cashless banking in the
Australian banking sector are:
 Reserve Bank of Australia being the regulator needs to emphasize on commercial banks
need to educate their customers on the need to use of cashless banking sources, this will
ultimately lead to cost reduction as a result of less traffic at the banks’ branches.
 Need for banks to install sufficient standby generators in case of power failure. This is to
help cover the deficiency of power failure.
 To ensure smooth functioning of the payment systems, the government will play a
significant role financing payment systems that require capital investments and to create
awareness of electronic products and their benefits to the public.
 Skilled personnel should be employed by Banks to prevent fraudulent hackers from
accessing and manipulating the Banks’ data

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