The UK is gearing up to follow the footsteps of Norway and Sweden as an increasingly cashless society given the sparse usage of cash post-pandemic. London in particular has become a hub for online payments, with a significant number of retailers no longer accepting cash. The transition was intensified by the need to socially distance during the pandemic, as the usage of e-wallets and digital transactions has accelerated.
According to the World Economic Forum, the use of cash has been decreasing internationally, with currency use in the US falling from 10.4% of the GDP to 8.6% between 2021 and 2022, and falling from 10.1% of the GDP to 9.8% in the Eurozone during the same time frame. Additionally, 90% of central banks are developing plans for central bank digital currency (CBDC) that have the potential to reduce the use of cash.
Positioned steadfastly against this shift is the Payments Choice Alliance, an organisation that demands that every person in the UK should be provided with options around making payments.
Ron Delnevo, chair of the Payments Choice Alliance, explained the aims of the initiative to Finextra: “The ability to use cash in the UK is under threat. We are facing a situation where a lot of people are not being able to exercise choice, that they would have had until very recently, in making payments. The Alliance is not an industry body; it is made up of people from various sectors of life who believe in payment choice, and associated rights and values such as democracy, free speech, independence, and privacy. We believe payment choice is a pillar of democratic society - and it is a pillar we are aiming to keep in place.”
Elaborating on population segments which are at risk of becoming isolated without cash payment options, Delnevo notes that there are around 40 million adults in the UK who fall in to this category. These may be people from socio-economic brackets which cannot afford new technology, older generations, travellers who do not have access to overseas cards, and small businesses that use cash for budgeting purposes.
Can retailers offer aid where banks are lacking?
Certain retailers have been focused on providing consumers with multiple options of payment, such as grocery giants Sainsburys and Tesco, which both accept cash and often have ATM machines outside their stores. Delnevo explains that the Payments Choice Alliance aims to encourage these retailers to offer cash deposit services, where businesses can have the option to deposit cash within these stores.
“Businesses which accept cash for payments - and they all should - need to be able to deposit that cash conveniently. To help with this, it would be great if Tesco, Sainsburys and other major retailers could provide a home for cash deposit solutions, so that any business in a local community can come along and deposit their cash takings in a secure environment in a machine that's set up to accept cash deposits. Clearly, there are very few bank branches left to offer a cash deposit option and whilst it is excellent that businesses can deposit cash in post offices, that's not always convenient or available seven days a week.”
What legislation needs to be implemented to create cash options?
Delnevo points to new legislation in Spain, elements of which could be included in a UK Payments Choice Act: “In Spain, in May 2022 a law came into force which includes payment choice provisions. This law compels businesses to accept cash payments up to €1000 per transaction. The law also covers other payment methods, but at its heart it is focused on ensuring the Spanish public can spend their cash when and where they want to do so. At the Payment Choice Alliance, we believe that the British public deserve the same rights to use their cash as the Spanish public now enjoy.”
Delnevo mentions that the Alliance is looking to raise awareness for their cause, and have been speaking to MPs to generate more attention around the lack of cash payments available in the UK. He states that MPs in multiple parties are invested in the cause, and that cash payments could become a General Election issue in 2024 if a UK Payments Choice Act is not introduced in 2023.
How is the UK’s progression towards a cashless society?
Speaking from the opposing perspective is Martin Bradbury, regional director of financial services UK&I at Dynatrace. Bradbury says: “A cashless society enabled by digital innovation has the potential to unlock a range of economic and social benefits. For example, with taxation, there would be a higher level of transparency because of the precise transaction records and identifiable digital footprints that cashless transactions automatically provide."
He adds that multi-factor authentication and encrypted digital wallets can further protect users from fraud and theft, making a cashless society more secure.
Explaining the ways in which lower-income communities and older generations can be included in a cashless system, Bradbury furthers that personalisation, education, and inclusion need to be phased in the approach: “Interfaces and apps should be tailored so that all levels of digital skills and economic circumstances are fully catered for. For example, there is often an assumption amongst those who are digitally native that everyone has access to the necessary technology but this might not be the case. A good payment experience also differs across socio-economic groups, and so banks need to tailor each experience and educate users on how to best use the services for their specific situation.”
He continues to say that governments and banks should use data collected and AI automation strategies to assess payment behaviours and see where the customer experience can be improved for all societal groups. On the progress the UK is making to achieving cashless status, there is still a long way to go. The payments ecosystem and banks need to be up to task with providing everyone with options to pay online and there has to be a smooth operating system to avoid disruptions on digital services.
What is next for the UK payments sector, cash or e-card?
While both Bradbury and Delnevo’s points sit at opposite ends of the spectrum, they reflect strong perspectives on the use of cash in the UK’s future. As the nation barrels towards an increasing amount of online payment methods, it is up to cooperation between banks, fintech, and the government to provide for the needs of the public, whether that is retaining the importance of cash payment options or investing more in digital payments technology moving forward.