The decline in cash usage has bottomed out and fears about the UK transitioning to a fully cashless society have been overstated, according to a new article by global payments news publishers PCM (Payments, Cards & Mobile).
The article, written by industry analyst James Dean, states cash ‘shouldn’t be written off yet’, citing a January 2023 report by the Bank of England (BoE) which observed a big reduction in the rate of decline in cash use. The report found that cash accounts for 15% of all payments in the UK.
Further, Dean highlights other similar reports suggesting cash usage is on the rise.
According to research by LINK, the UK’s main ATM cash machine network, in January 2022 73% of consumers indicated they used cash, up from around 50% in mid-2020.
Similarly, data from Nationwide Building Society revealed that more than 30.2 million cash withdrawals were made from Nationwide ATMs last year – a 19% increase on 2021.
Amidst the backdrop of high inflation and squeezed household budgets, Dean also points to research suggesting working families and young adults prefer cash over cards or digital wallets. In October 2022 inflation peaked at 13% and it is thought that up to 15 million people use cash as a helpful way to budget their finances.
The article also points to research conducted by the Post Office which attributes the growth in cash usage to more Brits choosing to holiday at home.
Online security threats, coupled with fears about personal data protection, are other reasons Dean cites for the increased rise in cash usage.
Table from Nationwide Building Society revealing ATM cash withdrawals
The news that cash usage is on the rise is likely to embolden calls to make it illegal to refuse cash as a means of payment in physical transactions, as is the case currently in European countries like Norway and Sweden.
In March this year a debate was held in UK Parliament after 60,000 people signed a petition arguing that the ability to use cash should be protected.
Amongst the petitioner’s concerns, as well as some MPs, is that people on lower incomes, particularly the elderly and disabled people are among 10 million who would become “financially excluded” if the UK transitioned to a fully cashless society.
MP Martyn Day said: “For some people not being able to use cash is a profound barrier in everyday life.”
“Cash can be a vital means of budgeting. The march towards going cashless risks the exclusion of a great many people.” He added.
Looking ahead to the future, PCM analyst Dean suggests coins and notes are likely remain a significant factor in the payments sector for at least the next decade, not least because it is easier for the elderly and other groups to understand and handle.
Dean also summarises that concerns about privacy and being monitored in the digital environment show no signs of abating, leading to a sustained reliance on cash transactions.
Finally, Dean comments that recent legals moves to protect the status of cash will only enhance its viability as a payment method in the UK.