Is the UK heading for a cashless economy?

February 3, 2021

Briefing: Economy
Cash refusals put vulnerable at risk

New research from consumer choice website Which? shows one in three people have had physical cash payments refused during the coronavirus pandemic. It is feared that a blanket ban by retailers could risk excluding the most vulnerable in society, who are typically more accustomed to having notes and coins in their pockets. The data shows people were most likely to be refused the option of paying in such a way when buying groceries, followed by leisure activities and purchasing cleaning products. More than three quarters of the 2004 individuals surveyed who were unable to pay in physical cash said it had an emotional impact on them. Furthermore, 13 per cent, equivalent to seven million people when extrapolated to the UK population, said they regularly use notes and coins and would struggle without them.

When was the last time you paid in cash? With payments via physical money discouraged due to fears about the spread of COVID-19, and access to cash further limited by a long-term reduction of ATMs and high street bank branches, Dr Emma Black asks if the UK is going cashless?

The consolidation of the banking sector witnessed from the 1960s onwards gave birth to the big six providers that dominate high streets today.

During this time, competition and consumer choice were gradually eroded.

As the global financial crisis hit in 2008, the big six providers streamlined their operations, reducing their regional presence and in turn closing many branches and ATMs.

According to the British Retail Consortium, there are 10,000 fewer cash machines available today than in 2017 and 3000 fewer bank branches than in 2015.

Despite this, 17 per cent of the UK population – over eight million adults – have stated they would struggle to cope in a cashless society.

Small businesses have voiced concern in the last few years around the challenges they are facing in handling cash as local branches have gradually closed and cash charges have increased.

Those living rurally have also shared concerns the digital world is leaving them behind.

For many UK adults, cash is not a choice and remains a necessity.

Data suggests the most vulnerable in society are most at risk in a cashless universe, with poverty the biggest contributor to a dependency on cash.

Four per cent of those surveyed in the Access to Cash Review outlined that cash is crucial for them as they rely on others to buy essential goods and items for them.

This has been highlighted during the coronavirus pandemic as the elderly, vulnerable, shielding and sheltered communities have shared their reluctance to give their card details to third parties.

Instead, they prefer to give cash to friends and neighbours, who are then able to make essential purchases on their behalf.

LINK, the UK’s largest ATM network, reported a decline in the use of ATMs over the last few years.

For example, in early 2019, 8.7 per cent fewer cash withdrawals took place in London than the same time the year before.

While the North East also saw a year-on-year fall, it was to a much lesser extent with a decline of 3.7 per cent.

Withdrawals have, of course, been lower in 2020 and, as we begin 2021, transactions continue to be significantly below pre-pandemic levels.

As the UK and the world looks to recover lost ground over the next few years, it’s plausible to consider the move to a cashless society could be earlier than thought.

Regional MPs are seeking provisions to protect the access to cash for the most vulnerable.

They cite lessons from Sweden, which has seen a rapid move to a cashless society as cash transactions fell by 80 per cent. However, their switch was considered so rapid that millions were left financially excluded.

With the stakes high, we look to our regional MPs to protect the access to cash for the most vulnerable and to our entrepreneurs for innovations to help cushion the impact.

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