Alan Monahan writes: Ten years ago, six out of 10 UK transactions were cash. Now it’s three in 10. You don’t need a crystal ball to guess where this is going.
The independent Access to Cash Review was commissioned against growing concern among consumer groups. They are worried about the closure of rural ATMs and bank branches and those people left without easy access to cash. Regular readers will know that this is one of my hobby horses.
The review also commissioned an online survey of 2,000 nationally representative UK consumers and also met with regulators, banks, industry experts and consumer groups to understand the economics and practicalities of cash and digital payments so it could draw together a set of recommendations which meet most consumer needs – and also work economically and practically.
Its interim report published in December showed that the UK is not ready to go cashless: 17% of the population – over 8 million adults – would struggle if this happened. While most people recognise the benefits of digital payments, the review’s research shows that the technology doesn’t yet work for everyone: indeed, it highlights Sweden, the most cashless society in the world, which it says outlines the dangers of sleepwalking into a cashless society. Millions of people could potentially be left out of the economy and face increased risks of isolation, exploitation, debt and rising costs.
Although a straight-line trajectory of current trends would see us no longer using cash in 2026, the review panel believes it will still be around in 15 years’ time, but potentially accounting for as few as one in every 10 transactions.
While the UK is starting to see a decline in the number of ATMs, the report says that the underlying question is far bigger and more complex: insight from Sweden and China demonstrates that the issue of cash acceptance by retailers and merchants was more likely to drive the death of cash than access to it.
This will be the case in Britain too, it believes, and says. ‘As one consumer told us, ‘there is no point protecting access to cash if you can’t use it’.’
I suspect that most of my retailer readers still take coins and notes. Apparently, the main reason some shops refuse to accept pounds and pence are the rising costs of handling and banking money. This is driven, in turn, by the underlying economics of cash handling and distribution. As things stand, we have a cash infrastructure which is quickly becoming unsustainable, with largely fixed costs, but where income is declining fast.
But it’s not all about ATM closures.
The report goes on: ‘There’s a complex value chain behind how notes and coins move, from their minting or printing, though years of use to their eventual destruction. Any weakness in this chain can threaten the viability of cash.
‘And getting hold of cash is only half the equation: you need to be able to spend it too. This brings in retailers, government, local councils, bus and train companies and more – all of whom can choose to accept cash or not. If cash is going to stay viable for the next 15 years we need to look at the whole system.’
The review panel thinks it unlikely that we could simply preserve cash and the current infrastructure. ‘Just as retailers are transforming to adapt to digital, and high streets are changing to cope with the internet, we need to rethink cash … Cracks are appearing as we see branch and ATM closures and dire warnings of what might happen.’
It makes five recommendations ‘which will keep cash viable for the foreseeable future’.
The first is to guarantee consumers access to cash – ensuring that they can get it wherever they live or work, and not just through ATMs. ‘We see huge potential for new ways of providing cash access … which could help keep the high street alive. This guarantee will now need to be agreed by regulators, in consultation with industry and consumer groups. It may well need legislation in the medium term, but could be set up swiftly, initially, on a voluntary basis. The mechanism we propose also gives the right to local communities to ’bid’ for increased cash access through their local authorities, which could help address the issue of cash deserts.
It also recommends that steps are taken to ‘keep cash accepted, whether by a local coffee shop or a large utility provider’. Thirdly, it calls for radical change to the wholesale cash infrastructure, moving from a commercial model to more of a ‘utility’ approach, which will keep cash sustainable for longer.
Its fourth recommendation is for government, regulators and the industry to make digital inclusion in payments a priority, ‘ensuring that solutions are designed not just for 80%, but for 100% of society’.
The final recommendation is for ‘a clear government policy on cash, supported by a joined-up regulatory approach which treats cash as a system’. The review is clear that ‘market forces alone won’t make any of this happen’, and calls for ‘an ongoing action’ which will require the cash system to be monitored over the next decade and, as situations alter, the approach refreshed. The report describes this as the ‘most urgent’ recommendation, as ‘without this leadership, change is unlikely to happen’.
There is much that is sensible in this report. However, I fear that short-termism will see it kicked into the long grass. At such a momentous time in Britain’s history I cannot imagine that the future of cash will take precedence over other legislation, let alone Brexit.
