The independent Access To Cash Review was published this month (March 2019) and immediately grabbed the headlines, with the media proclaiming the UK cash system to be ‘on the verge of collapse’ and that we’re ‘sleepwalking into a cashless society’.
The payments industry - driven largely by Fintech start-ups - is booming. There have never been more options available to help you part with your hard-earned money – so what’s the problem?
I’ve had a bank account since I was a teenager, I got a cash card when I went to uni and moved to telephone banking in the mid 90s. I now pay with my phone for my shopping, tap in and out of the tube and have generally embraced the use of contactless payments (though I’m still slightly old-fashioned when it comes to wanting the receipt!). In terms of cold hard cash, looking at my (online) bank statement, I only ever draw money out once or twice a month and it’s anyone’s guess when I last paid in a cheque, certainly not in the last couple of years.
So looking at it from an industry perspective I’m a great customer – always happy to embrace new trends and technology that in turn help them drive down the cost of service provision. But looking at it from the report’s perspective I am definitively part of the problem; ten years ago, six out of every ten transactions were cash. Now it’s three in ten. In fifteen years’ time, it could be as low as one in ten1. For my kids the situation is even more stark – pocket money goes into a debit account, they prefer online shopping, school dinners are bought with their fingerprint, bus fares are on a card, train tickets a QR code on an app – for them the concept of cash is already an outdated one.
What is clear is that those that can access the technology generally will, so what happens to those that can’t? That is where government and the idea of inclusivity in payments needs to step in.
Historically we’ve been spoilt in the UK. This country has always been at the forefront of banking advancements and technology – and UK residents have always been in the first wave of global early adopters. In modern times there’s never really been a true breakdown in the system – but it can happen. As I write this, Venezuela has been in the grip of a power cut which has caused catastrophic commercial problems because no one uses cash any more – albeit because of hyperinflation rather than any great tech adoption – but without power there’s no means of taking payments.
So for the stable and affluent, the expansion of non-cash options is both welcome and convenient, however it is the margins of society who will feel the change most acutely. Last week Philadelphia provided some leadership on the issue by banning cashless stores and restaurants in a move designed to end discrimination against the unbanked. They are unlikely to be the last with other large US cities expected to follow suit.
In the UK there are approximately 1.5m individuals who are unbanked, and that doesn’t even take into consideration the homeless or those in rural areas with little access to cash and no broadband infrastructure or signal. As the published report identifies, such factors must be incorporated into an inclusive payments eco-system. Looking at Pay360’s range of payments, we managed £433m in face to face cash payments in 2018 – which sounds a lot, but which compared to the billions we managed in online, phone and mobile card payments is miniscule. But that’s the point of inclusivity – all options are provided to ensure no one is excluded.
Payment technology and the variety of digital and biometric channels available will only increase – biometric cards for purchases above £30 are being trialled. The economic model of cash as a method of payment is diminishing - hence the pace of change will be quicker – we’ve had the debate about cheques, we’re now talking about cash, how long until ‘traditional’ plastic is usurped? The tide is only going one way.
The true challenge therefore is not to check the pace of change, after all the concept of a cashless society is not impossible or necessarily undesirable. The key is to manage that change, legislate to keep inclusivity a requirement and, most logically, look at how technology can be directed to create a new type of payment vehicle that can be accessed and embraced by all.
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Download the full Access To Cash Report
- UK Finance, UK Payments Market Report 208