Drastically exacerbated by the pandemic, the UK is reporting a decrease in the use of cash, with notes and coins accounting for only 15% of payments last year. If estimations are correct, within the decade cash will only amount to 6% of payment types, whilst debit, credit and digital wallet are due to continue to skyrocket.
Last year, it was reported that over 23 million people in the UK barely used cash in their day-to-day lives, which begs the question of why?
Since the Covid-19 pandemic hit the world in 2020, the use of cash has been on a decline, with businesses opting for card-only payments and digital wallets surging in popularity. This decrease in cash spiked during 2020, when consumers avoided using notes and coins as to not further transmit Covid-19, as per advice from the government. Businesses alike decided upon eliminating cash, at least for a while, to limit the spread of germs. Cash usage has been declining around 15% year-on-year since 2017 and was estimated to continue to fall at the same rate, however this decrease was significantly accelerated by the pandemic, and as a result usage dropped by 35% in 2020. Cash machines have also seen a decrease in recent years, with an average of over 340 machines shutting in UK high streets each month, making it more challenging for the public to take out cash when needed. For London, this has accounted to £500 million less cash being withdrawn from machines every month, compared to pre-pandemic numbers.
Other factors that make the use of cash redundant include the growth in technological payments, such as card, contactless and digital wallets. In 2022, for the first time in the UK, over half of all payments were made using debit cards (57%), with contactless payments increasing by 30%. The main driver behind the growing success in contactless payments is the convenience and speed of the PIN-free transaction. This is proving equally beneficial between business owners and consumers alike, by reducing the time spent queuing to pay, (with the average transaction taking less than 15 seconds) and adding extra security to each transaction. Additionally, one in five people do not carry a wallet on them day-to-day, increasing the likelihood of them paying for goods through contactless and digital cards.
Some businesses have also opted to remain cashless permanently, including Prezzo, Itsu and Pizza Hut, claiming ‘it makes things much simpler and quicker’ for their teams and allows them to spend more time with guests. Businesses also claim that going cashless increases the security of their stores, reducing the risk of robbery, and making them less susceptible to fraud. Reports show that consumers are likely to spend up to 18% more when paying with card over cash. Payments made from a card machine add flexibly towards spending, therefore increasing the chances of impulse purchases, which is always good from a business perspective.
Going cashless?
More than 10 million people in the UK would struggle if cash was to become obsolete, according to the Royal Society of Arts, who explain that many members of the public on lower or less stable incomes, like the security of cash. The cost-of-living crisis has greatly affected households in the UK, with many struggling to afford rent, bills, and groceries. People have resorted to financing with physical money, as it prevents overspending and helps budgeting, when visibly seeing their funds.
Having physical money also limits the risk of overspending and promotes saving, which in a cost-of-living crisis is imperative for some people and families.
Elderly and vulnerable people are more likely to be dependent on cash, for similar reasons as of those who are on lower incomes. However, they have the additional struggle of completing online payments. If the UK was to go cashless, would cause great issues for the 8 million people who depend on physical cash to make payments every day.
Additionally, cash is the only backup if card and digital payments were to fail, which could cause widespread issue if people didn’t have cash readily available.
Digital currency is harder to exploit and easier to protect, meaning that all transactions would become traceable, therefore reducing criminal activity.
A Cashless Society?
Although research suggests that notes and coins will soon be a thing of the past, the UK government is taking steps to ensure that the cash infrastructure is protected and that consumers have a choice in how they choose to pay. It is also imperative that the public has the freedom of paying how they wish, and that no group of people are locked into a cashless economy that doesn’t meet their needs.
It is estimated that by the year 2043, the UK will be a completely cashless society, however this depends on how the government accepts and actions a completely cashless UK. The demise in the use of cheques shows a similar progression to cash, in which the use has plummeted. There have been numerous and regular calls for cheques to be scrapped completely, but due to key groups that still use them, this has not happened.
The government, although not pushing towards a cashless society, does not plan to mandate cash acceptance, and if businesses stop accepting cash, then people may be forced into a cashless economy sooner than later.
