Before lockdown, card payments were already becoming the norm in high-street retailers and local shops alike. But the sudden closure of physical retailers and the need for stringent hygiene measures due to the pandemic has hastened the decline of cash payments. As a result, not only are more consumers paying for things online than ever before, but card payments are now the go-to payment method in shops because they don’t require anything to change hands, reducing the potential spread of coronavirus.
But what does all of this mean for cash in the UK? Are we heading towards a future where cash isn’t needed? Perhaps one day, it doesn’t look like the UK will be going completely cashless just yet. So let’s take a look at the facts.
The Uk Today
In the UK today, around 66% of transactions are contactless, while 45% of people have said that their cash use has decreased during the pandemic, according to a survey conducted by Mastercard. Similar data from Dynata also shows that the UK is saying goodbye to cash faster than other countries worldwide, with 59% of Brits saying that they prefer to pay via contactless payments compared to 44% globally.
Card payments were already becoming the standard in the UK well before the pandemic took hold, with card payments overtaking cash in the UK back in 2017. The UK is hurtling towards card payments sooner rather than later, with some estimates predicting that cash will account for just 9% of payments across the nation by 2028.
However, despite the clear surge in popularity of contactless payments, there are still plenty of people who still pay with cash. There is currently more than £70 billion worth of notes circulating in the UK, and cash accounted for over 28% of all transactions in Britain in 2018. So a cashless society may be on the horizon at some point, but it’s not coming just yet.
The Demographics of Cashlessness
One of the reasons why there is still so much cash circulating in the UK is simply demographics: while it might seem obvious that cash dependency is partially determined by age, actually, the biggest risk factor for cash dependency is, in fact, poverty regardless of age.
Many people in poverty lack access to broadband internet or mobile data, which means paying digitally or via contactless apps isn’t feasible. As a result, they may also be more likely to rely on cash-in-hand work to make ends meet.
Of course, age does factor into it, too. Older people are also much less likely to take on new technology and payment methods than younger generations. This means that whether people pay by cash or contactless is still determined by age-related demographic factors.
Data shows that the 25-34 age group most commonly use contactless payments, followed by the 35-44 and 45-54 age brackets. Some people might be surprised to see that 16-24 year olds are actually less likely to use contactless than most other groups, but this is likely because many very young people still rely on pocket money and part-time job payments, meaning there’s less in the bank.
The age group least likely to use contactless payments are, of course, the 65+ category. In fact, research by Access to Cash Review suggests that 2.2 million people in the UK rely upon cash for day-to-day transactions. It’s these people who would suffer in a cashless society, left behind by the changes the rest of us are already starting to make.
Is Cash Still Needed?
There’s no way the UK can change into a cashless society overnight, in part because vulnerable groups still rely on cash in daily life. In addition, many older people do not have the support around them to make the changes needed to switch to contactless payments, which means they would be left behind by sudden, sweeping changes to the system.
The Bank of England has already said that they are committed to cash to ensure that people in the UK retain choice on making payments while many groups still rely on, or prefer, paying by cash. However, while the nation clearly shows a steady preference for cards over cash, groups who rely on cash will be protected for many years; switching to a cashless society will only be possible when every group has equal access to digital and contactless payment methods.
Has the Pandemic Hastened the Rise of Contactless Payments?
There’s no doubt that the Covid-19 pandemic has affected the trajectory that contactless payments are on in the UK. This began with fears that the virus might spread on cash, passed between buyers and retailers millions of times a day.
Some studies have shown that the virus can survive on surfaces for hours or days at a time, and cash may be one such surface. The Royal Mint is quick to point out that the new coronavirus is no more likely to survive on cash than any other common surface, but this doesn’t mean caution shouldn’t be advised.
As early as March and April, retailers were showing a preference for contactless payments over cash. Signage in many shops indicated that customers should pay via contactless methods where possible. This, thankfully, doesn’t mean that those customers who are cash dependent can’t pay, but it has led to more people foregoing cash in favour of cards on a daily basis.
What Is the Government Doing to Protect Cash?
Those groups who rely on cash haven’t gone unnoticed by the UK government. In the March 2020 Budget, Chancellor Rishi Sunak announced initiatives designed to ensure that cash would be available to those who needed it.
The initiatives include the founding of a new joint cash strategy group that will oversee the UK’s cash system and be headed by the Treasury and a commitment to maintaining all current cash denominations and safeguarding against cash fraud and counterfeiting in the UK. The Chancellor also promised to improve the UK’s cash distribution system, ensuring that cash is dispersed equally across the country.
However, some MPs are pushing for further legislation to protect free ATMs across the nation. In a letter to the Chancellor signed by 37 cross-party MPs, it was written that “cash is a lifeline for many at the best of times and an important budgeting tool, particularly for the hundreds of thousands of vulnerable people that depend upon it to go about their daily lives.”
Further action to enable more pubs and retailers to offer cash back services and legislation to protect free ATMs across the country is needed to ensure that those who rely on cash have free, convenient access to it no matter where they live.
What Will a Cashless Society Look Like?
A cashless society means that physical cash – coins and notes – are no longer in circulation. This might mean that people pay using debit or credit cards, which could mean the rise of new payment methods, including contactless apps, mobile apps and more.
Many of us already use contactless technology to make payments every day, but contactless is changing every year as new payment methods arise. So by the time society really does go fully cashless, payments might already look very different than they do today.
Paying by phone is set to become more common. There are already many payment apps around, including Apple Pay and Google Pay, which allow consumers to make contactless payments in shops via their phones by storing digital credit and debit cards and vouchers in an e-wallet. According to research conducted by Juniper Research, the number of people across the world using e-wallets will rise from 2.3 billion in 2019 to almost 4 billion in 2024.
Another rising sector is that of wearable technology. This includes smartwatches such as the Apple Watch but will also include wearable tech designed only for payments. These devices combine financial tech with fashion to create modern, on-trend accessories which make paying faster and more convenient.
Tovi Sorga is a UK designer of contactless bracelets and key fobs currently retailing bracelets from £75, each powered by a hidden chip loaded with payment app Pingit. Similarly, a London-based designer is retailing waterproof payment rings from £99.99, which allow wearers to make payments simply by tapping the rings against the terminal. However, there is no doubt that these companies are just the tip of the iceberg, and wearable payment technology will likely play a much bigger role in the industry in the future.
Finally, biometric payments may feature in our future cashless society. Biometric payments will allow consumers to pay with their fingerprints, which means that your fingerprint would be connected to a particular bank account. While we’re undoubtedly a way off this becoming the norm, the Royal Bank of Scotland has already conducted trials of biometric payments using a fob that reads fingerprints and can be used at existing contactless terminals. RBS got positive feedback from customers, indicating that this technology may see further investment in the future.
What Are the Pros and Cons of a Cashless Society?
We may not be going completely cashless any time soon, but it’s clearly the direction we are slowly headed in. There are many advantages of living in a cashless society: it’s convenient, making it easy to pay the exact amount at every transaction without hunting for pennies or dealing with change. It also means everyone has all of their cash to hand, all the time – provided they’ve got their phone or another payment device on them.
Switching from cash to contactless also makes it harder to commit certain kinds of fraud and tax evasion, particularly in those industries where it’s common to be paid in cash, which can then go unrecorded (and untaxed). More significantly, organised criminals typically work with cash because it’s so hard to track; even just removing large denomination bills such as £50 notes could go a long way towards tackling many criminal activities.
However, it’s not all good news. A cashless society means people cannot easily help out others or give cash gifts – for example, giving money to a homeless person. It also increases consumer’s risks of overspending because when no cash changes hands, it’s very easy not to think about the reality of how much money you’re spending. You’re not limited by the amount of money in your pocket.
In reality, by the time the UK is fully cashless, there will undoubtedly be a myriad of new technologies in place to account for these drawbacks. Spending limits and reminders aren’t difficult to incorporate into e-wallet apps. Perhaps contactless payment methods will be so ubiquitous that even homeless people will have their own contactless key fobs by then.
So, When Will the UK Go Completely Cashless?
Likely, the UK will not go completely cashless for many years yet if only to protect vulnerable groups who lack access to digital payment methods. However, even over just the next five years or so, society in the UK will undoubtedly change significantly enough that a variety of hi-tech contactless payment methods will become the new normal, with cash use ever more seldom for most of the population.