What does the future have in store for cash?

The use of cash has been declining for some years now, with electronic payments in multiple formats increasing to take its place. This was a trend accelerated by the COVID-19 pandemic, when health was added to the list of reasons not to use cash. Some predictions have suggested that the UK could become cashless in little over a decade. If this were to happen, nobody yet knows what it really means for consumers or for the UK economy. However, the government has now begun to take steps to protect access to cash.

Here, we look at the future of cash.

UK could go cashless

The Access to Cash Review was set up by ATM network provider Link to help understand how consumers use cash and how behaviours will change as we head into the 2030s. It predicted that society would be at the point of being 'virtually cashless' by 2035, with fewer than 10% of transactions being made in cash. Between March 2019 and March 2020, it found that 13% of free UK ATMs closed as they have become 'economically unviable'.

There are fears that these issues with the country's cash infrastructure will only get worse following the pandemic.

In addition, a growing number of retailers are 'going cashless' as they find the costs of banking cash rise, particularly as branches close making it more challenging to deposit their cash takings. This is already starting to exclude people.

Cash-free Covid

Data from the National Audit Office (NAO) shows how cash was used in 60% of transactions before 2010, but that number fell to less than 30% by 2019.

The data suggested that the Covid-19 outbreak may have accelerated this trend further, as market demand for notes and coins declined by 71% between early March and mid-April during the first lockdown of 2020.

Meanwhile, consumer group Which? found that over a third of UK consumers were blocked from paying for goods with cash during the pandemic.

Which? surveyed more than 2,000 people across the country in and found 34% had had cash as a means of payment refused.

Vulnerable people

The NAO has warned that without co-ordinated effort there is a risk that vulnerable people who rely on cash will be excluded from the economy.

This was also reflected by a report commissioned by the Royal Society of Arts (RSA). This suggested that millions of individuals in the UK would struggle if cash was phased out as a form of tender.

Despite just 17% of payments being made with notes and coins, the RSA said that ten million people would struggle to cope in a cashless society. An additional 15 million people stated that going cashless would make budgeting more challenging.

The report found that many individuals felt that they have been pushed into a world they're ill equipped for, despite millions making use of contactless and smartphone payments.

New laws

The Access to Cash Review, the NAO and the RSA have all called upon the government to take action to protect the use of cash in the UK. The government has responded with a provision in the Financial Services and Markets Bill, which will protect cash by ensuring continued access to cash facilities.

Under the new rules, the financial regulator – the Financial Conduct Authority (FCA) – will be granted new powers over the UK's largest banks and building societies, to ensure that cash withdrawal and deposit facilities are available in communities across the country.

The FCA's new powers will allow it to address cash access issues at both a national and local level. To support the FCA, the government will in due course set out its expectations for a reasonable distance for people to travel when depositing and withdrawing cash. This will reflect the existing spread of cash withdrawal and deposit facilities in the UK.

Economic Secretary to the Treasury, John Glen, said: 'Millions of people across the UK still rely on cash, particularly those in vulnerable groups, and today we are delivering on our promise to ensure that access to cash is protected in communities across the country. 

'I want to make sure that people are still able to use cash as part of their daily lives, and it's crucial to ensure that no person nor community across the UK is left behind as we embrace a more digital world.'