By Andrew Martin, CEO, Retail Financial Consulting Ltd.
Over the past decade, there has been a clear shift in preference when it comes to personal banking, with consumers and financial institutions alike increasingly opting for online, cash-free, payments and finance management services. In fact, recent statistics have shown that the percentage of users who regularly use online banking has shifted from 30% in 2007, to 73% as of last year.
This trend is only set to continue as online services become more streamlined and efficient, and FinTech organisations and innovative Startups maintain its surge in quantity and popularity. However, as fantastic as all of these slick, modern services are, it is absolutely essential that cash is not neglected to the point of rarity or even extinction.
Cash-use has considerable benefits for our society, the economy, and millions of individuals in the UK, and it is essential that cash remains a staple in British society. Not at least offering consumers the choice between which form of currency they use could cause huge backlash and can have a devastating impact on society and the economy.
Logistical impact of a cash free society
Put simply, the main reason cash-use must continue, is because it does not rely on IT based payment networks which can be prone to power outages, IT glitches or cyber attacks. This downfall to technology can occur at varying levels of severity – at the very top, a nationwide power outage or cyber attack could irreparably devastate a country which relies solely on online banking. This is a very real threat in Sweden, which is well on its way to becoming the worlds first cashless society. Social problems that resulted led to Swedish Parliament enacting a law to protect cash access across the entire country in November 2019. This has now been repeated across Europe, and the USA with cashless retail being banned.
On the other end, mid-low level consequences of online banking involves short term disruptions to finances and payment processes for individuals and businesses. Interestingly, this is already occurring on a daily basis in the UK – analysis from Which?revealed that, last year, UK banks were impacted by an average of five IT shutdowns every week. Therefore, to save from inconvenience, individuals should always be equipped with cash as an alternative means of payment.
Alternatively, cash is anonymous, reliable, secure and available. It is there in power outages, or when your battery fails and more importantly it is there under duress
Some people, and many banks’, desire to move banking to an entirely online space is completely ignorant to the needs of the entire population. For example, many workers such as tradesmen and hairdressers are paid in cash, and with the recent cull of high-street banks and the removal of ATMs, an increasing amount of full-time workers are being left with no option but to keep all their earnings on their person, as opposed to storing some away in a bank. Incidentally, this is the whole theme of the governments ‘Access to Cash review’.
Furthermore, online services do not cater for all demographics, such as the elderly – many of whom don’t have regular access to the internet and no longer have a nearby high-street bank in order to withdraw cash. Similarly, ATMs which charge for cash withdrawal are increasingly prevalent in the high-street, and many low-income earners are being alienated, and forced into online banking as their only method of money management.
Rural areas have been hit hardest by the removal of banks and ATMs, with our recent polling stating that 69% of British workers agree that the government prioritises cities over rural communities, in terms of infrastructure and connectivity.
Cash also runs the risk of creating a bi-polar society with the need cash and don’t need cash segments with the former being the socially poor – comprised of homeless people, and some workers who deal in cash, to name a few.
Furthermore, it’s clear to see that declining cash-use is already having an impact on the British economy and industry. For a start, declining cash-use has contributed to the death of the UK high-street, which recorded its worst year on record for 2019. Through the joint effort of online shopping and online payment methods, there is no longer a need to contribute to local retail services or brands which have failed to adopt an online platform.
Similarly, with the decline in high-street banks and the lack of ATMs, particularly in rural areas, the high-street is no longer seen as an appealing or alternative channel for consumers.
Finally, organisations such as churches and charities survive on the basis of small change donations such as pennies. Whilst it is true that most churches or charities accept online donations now, it’s important that we offer the public the right to choose how they pay and share money, whether it be via digital payment processes, cash or even up and coming payment systems such as cryptocurrency.
What’s more, exempting cash from society relies on the assumption that everybody in the UK has access to the internet and their own bank account. This is not always the case, particularly for the growing homeless population who often have to survive on cash donations from charitable passers-by.
So what can we do?
Whilst cash-use must continue, it must be reiterated that this is not to the detriment of online banking. Technology is fantastic, and the perks it provides when it comes to remittance, accessibility and efficiency are unparalleled. However, we must recognise that it is one option, and not the only option.
By championing cash-use we are rebuilding a stronger economy which is more serviceable to all people regardless of their location, age or socio-economic demographic.
When it comes to innovation in cash use, there are a few things we can and should expect to see which will discourage the extinction of cash in the UK. This starts with the reintroduction of high-quality ATM and bank services, particularly to the high-street, which has been in decline for several years now.
Furthermore, we should expect to innovation and cash withdrawal options and ATMs themselves. By introducing ATM features which incorporate internet functionality we can expect to see cash rise in popularity again – such an example might include a money transfer function, whereby ATMs can be used to send and receive money transfers. In this instance, the receiver of a bank transfer could accept the transaction directly in the form of cash. Until then, we should continue to champion traditional cash-use for the benefit of our own society.