In 2019, an Access to Cash Review suggested that the UK was ‘Sleepwalking into a cashless society.’ It reported that the country wasn’t ready for such a shift and that it would inevitably leave millions behind.
Twelve months later, in February of this year, the same organisation followed up their report. They stated that the UK was at a tipping point, predicting we will be ‘virtually cashless’ by 2035, with ‘fewer than one in ten payments set to involve physical money by the end of the decade’.
A month after this report – in response to the coronavirus pandemic – the UK went into lockdown.
With all but essential retail outlets closed, those that remained open shunned cash in favour of contactless card payments. And with many of us confined to our homes, internet shopping became the norm.
So has Covid-19 helped to speed up the demise of cash?
How the UK lockdown hit cash payments
UK Finance figures for 2019 confirmed that 7.4 million consumers were already living a virtually cashless life last year. That’s more than double the amount from 2017.
In a society already abandoning cash, the coronavirus pandemic has only hastened the problem.
With most of the UK stuck indoors once lockdown was announced on March 23, the contactless payment limit was increased to £45 and most of us moved online for all our shopping needs.
Of the shops that remained open, many worried that the proximity and bodily contact of cash transactions might speed up the spread of the virus. Some went so far as to stop taking cash as payment altogether.
It can be expected that the percentage of payments made in cash for 2020 will be lower than the 23% reported for 2019.
The elderly will be affected more than younger generations
Whilst internet banking, PayPal, and Apple Pay, are second nature to Millennials and Generation Y, some members of older generations may still be heavily reliant on cash.
Sharing the view of Access to Cash, Age UK wrote an open letter to the Financial Conduct Authority (FCA) last month, suggesting a ‘headlong rush towards a cashless society is leaving some older people unable to pay their way.’
Cashpoints have been disappearing from our high streets for some time. And rural ATMs have been quickest to go – a worst-case scenario for isolated elderly people in areas that already have poor or non-existent public transport links.
A Which? report in 2018 confirmed that between November 2017 and April 2018 ‘cash machines closed at the unprecedented rate of around 300 a month.’ The report went on to say that, ‘Strikingly, some 2.7m UK adults still rely almost entirely on cash in their day-to-day lives.’
At the other end of the spectrum, younger generations are mostly cashless already.
The Money Pages reports that Generation Z could be the first generation of ‘cashless natives.’ Those born between 1997 and 2012 could be ‘the first cashless generation’ according to generational expert Dr Eliza Filby.
In the same article, Louise Hill, co-founder of prepaid pocket money card and app gohenry says: “With collective pocket money earnings of £4.5 billion in 2018, Gen-Z is already making a big contribution to the economy, with girls alone showing significant spend on the high street.”
The future
In 2019, cash was the second most common payment method for transactions in the UK. The graph shows total payment volumes in millions (though it excludes CHAPS payments).
Source: UK Finance
It’s clear that debit cards, with contactless payments included, are by far the most popular form of payment. Cash can only manage just over half the volume of payments. And remember that 2020 figures could look much different from this.
So, does this mark the end of cash?
There is some good news for Access to Cash and Age UK. In 2018, cash accounted for only one in ten payments in Sweden. It was hailed as the world’s first cashless society.
Now, though, the Telegraph reports that the Swedish government has been forced to backtrack ‘embracing old copper coins and paper notes once again.’
The issues are the same ones we face in the UK: older people and rural communities suffering from a lack of access to cash, whilst lacking alternative means of payment.
If the UK does head in a similar direction to Sweden, might we see a similar backlash, with our government forced to step in to delay cash’s demise?
Speaking before the coronavirus pandemic, the Bank of England predicted a positive future for cash.
It pointed to the ‘over £70 billion worth of notes in circulation’ and the innovation represented by new, harder to counterfeit, polymer notes.
Get in touch
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