We need to protect access to cash, but there is no one-size-fits-all approach
Most people will have discovered that they use less cash these days. We now tap on our card, even for small purchases, whereas before we would have handed over coins. We send money to people through mobile apps rather than handing out banknotes.
As a result, cash made up 17% of all payments in the UK last year, up from a decade ago the figure was 56%.
At the same time, there has been a significant increase in the use of digital payments – last year contactless made up more than a quarter of all payments in the UK, down from just 7% ago four years.
It’s an easy refrain to look at these statistics and say that the UK will follow Sweden as they see the use of money dwindle more and more and move us towards a cashless society.
However, even though the use of cash fell by 35% in 2020, it was still the second most popular payment method. Cash will continue to be important for some time.
The transition to digital payments offers many opportunities, but there are customers for whom digital may not be an option for the foreseeable future.
To support them, and all the other people and businesses that continue to use cash, earlier this year, the largest retail banks and mortgage lenders publicly pledged to ensure they can at the both withdraw and deposit money when and where they need it.
This is the backdrop to the consultation with Her Majesty’s Treasury which sought advice on the government’s legislative proposals to protect access to cash.
In our response, which we have just submitted, we set out a general view that any legislation in this area should aim to preserve access to cash, but not be prescriptive about how it should be provided.
The banking and financial sector wants to preserve access to cash for individuals and small businesses in a flexible and modern way.
There is no one-size-fits-all solution here, so understanding the needs of local communities is essential. We are learning from the work of the Community Access to Cash Pilots, which currently operate at eight locations across the UK, and are testing various solutions to help keep access to cash sustainable.
As it stands, the FCA would take responsibility for ensuring that all geographic legislative requirements on access are met.
To support this and make it work in practice, we believe there is a need for a central agency to coordinate the identification and proactive filling of treasury “cold spots” on behalf of the industry.
This coordinating body would also play a valuable role in fostering innovation through development and cross-sector testing.
Any regulation in this area must also recognize the importance of new solutions and innovation to protect access to cash, for example buy-free cashback which is currently being rolled out to more and more retailers.
And of course, solving accessibility issues will only really benefit consumers if the money they withdraw can be spent where and when they want it. Access to cash and acceptance of cash are ultimately two sides of the same coin
Earlier this year, the consumer group Who? launched its Cash Friendly pledge, a pledge retailers can make to show they are happy to accept cash payments.
Many, alongside the Federation of Small Businesses and the Confederation of Industry, support this commitment.
There is no denying that the way people choose to pay is changing, but cash remains an important option. We need a system that recognizes this transformation in consumer behavior, offers practical solutions to help communities, and ultimately works for everyone in the long run.
David Postings is Managing Director of UK Finance