Is it too early for a cashless society?
The buzz around the cashless society concept has been growing for years. Almost every day there is a news story about bank branches closing at a fast pace, ATMs disappearing from the streets, shops and restaurants around the world going cashless. A recent example is the Mercedes-Benz Stadium in Atlanta that will only be accepting card and mobile payments from 10 March, leaving cash-loving customers with just 10 machines that enable them to exchange cash for a prepaid card.
According to UK Finance’s Payment Markets Report 2018 and Access to Cash Analysis 2018, over the course of the last decade cash payments have dropped from 63% of all payments to 34%. Despite this, there were still 13 billion cash payments made two years ago, and cash stayed (and is expected to remain) the second most popular payment method.
Don’t get us wrong, there is no doubt that cash is in decline in the UK. The fall in ATM use clearly shows that people are relying on cash less than before. Nevertheless, Britain is not ready to go cashless just yet for one key reason - digital payments don’t work for everyone. Consumers still want a guarantee that they can access cash anytime they need it, which requires FIs to radically review their cash infrastructure. The parallel with retail sector is clear: consumers’ shift to online shopping has threatened the high street, with multiple stores closing or going into administration. But just as with retail, mourning the situation and demanding that services are maintained despite being commercially ineffective won’t work. Research shows that the main reason for merchants refusing to accept cash is the increasing cost of handling cash. As it stands, the existing cash infrastructure is becoming inefficient and costly while income is declining fast. Only addressing one part of the issue – such as ATMs – or banning retailers from going cashless, like Philadelphia did recently, is unlikely to work in a sustainable way.
A widespread perception that the elderly rely on cash the most is also not entirely correct. According to Access to Cash Review, 2.2 million people in the UK only use cash for their daily transactions. For this group, low income is a common factor: 15% of Brits with income under £10,000 a year rely on cash, compared to 2.5% of higher income groups. The need for cash for these people is not only driven by local merchants who are not yet ready to implement digital payments, but also physical or mental health limitations, the risk of going into debt due to overspending or relying on others to buy things. For these vulnerable groups, cash offers certain control that digital can’t yet achieve.
As of today, Britain is not ready to go cashless. 17% of adult Brits would struggle in a cashless society, seeing the increasingly digital world around them only working for those with fast broadband and mobile connectivity. FIs and regulators need to understand that, while the benefits of digital payments are recognised by society, the technology doesn’t work for everyone yet and action needs to be taken before Britain “sleepwalks” into a cashless world to make sure no one is left behind.