The true cost of going cashless

Protecting the past or the vulnerable – why should we resist the shift to a cashless society?

Kate Hughes
Money Editor
Friday 20 September 2019 14:19 BST
Physical money now forms just £1 in every £5 spent
Physical money now forms just £1 in every £5 spent (PA)

This week saw another milestone reached in the journey towards a cashless UK with news that consumers now spend more money on credit cards alone than they do in hard cash.

While that may say quite a lot about our debt crisis, it’s also another nail in the cash coffin.

Physical money now forms just £1 in every £5 spent with UK retailers, according to data from the British Retail Consortium.

But does it really matter? And who to?

13 billion

The not-so-gradual demise of cash is well documented. UK Finance, the trade body that represents the banking and finance industry, calculates that in 2007 more than 60 per cent of all transactions were in cash.

Just 10 years later the figure was down to 34 per cent – the same year that debit card transactions took over as our preferred method of payment for the first time.

By 2027, cash will account for barely one in every 10 transactions.

But the chances of us being completely cashless anytime soon remains unlikely. At least, the 1.3 million people in the UK who still don’t have a bank account must hope so, along with the 2.2 million people who rely on cash for their everyday spending. That’s 4 per cent of the adult population.

Even last year, 13 billion transactions were still made in cash, according to Sarah John, chief cashier for the Bank of England.

“Those most reliant on cash tend to be from lower household incomes, with over half having total household incomes of less than £10,000 per year,” she added.

“The tangibility of cash is a key benefit, allowing them to physically calculate and budget their spending. Digital payments do not yet work for everyone.

“Technological advances in payments have the power to support financial inclusion. But they currently tend to be designed for the mass market rather than for vulnerable groups, meaning vulnerable groups are rarely early adopters of new payment offerings.”

Paying for the privilege

And yet consumer group Which? this week revealed that deprived areas are losing free cash machines at a much faster rate than affluent ones, forcing thousands of people in poorer communities to pay up to £2 per withdrawal to use the growing number of pay-to-use machines now quickly replacing the free ones.

Which? analysis of data from Link – the UK’s biggest ATM network – shows one in 10 free cashpoints across the country closed or switched to a fee-paying one in a 17-month period after major changes to how the network is funded.

Cost in the community

Among the hardest hit are Birmingham’s Ladywood constituency, where 47 free machines closed in less than a year and a half, followed by Bristol West, Manchester Central, Belfast South and Cardiff Central – all constituencies with a large proportion of deprived areas whose residents are most likely to rely on cash.

While some communities in cities and towns can lose a few cashpoints and still have a reasonable level of access to free-to-use ATMs, people in less well-served and rural areas that have seen a spike in the percentage of fee-paying machines are more likely to be left with no option but to pay to withdraw cash.

In Great Yarmouth, for example, half the cash machines will now charge up to £2 to allow residents and visitors access to their own money. It’s a similar situation in Vauxhall in London, and Blaenau Gwent.

Overall, Which? found that the most deprived areas across the UK saw a reduction of 979 free-to-use machines in that 17-month period alone – equivalent to 6 per cent of their ATM network.

Which?, along with the Independent Access to Cash Review, has this week called on chancellor Sajid Javid to take action to guarantee people’s ability to access and pay with cash as digital payments grow in popularity.

The consumer group is concerned that measures put in place by Link and the banking industry to help those in deprived or isolated areas just won’t do the job adequately enough long-term.

Which? believes the Payment Systems Regulator must urgently take control of how cashpoints are funded to address the rapid reduction in free cash access across the UK.

The regulator must ensure those still reliant on cash aren’t forced to pay because of the double blow of bank branch and cashpoint closures and an alarming shift to fee-charging machines, Which? warns.

“A year ago, leaders in Sweden – the most cashless society in the world – warned us to act now to stop the UK sleepwalking into a cashless society,” said Natalie Ceeney, the independent chair of the Access to Cash Review.

“Six months ago, we presented recommendations of what steps should be taken to make sure no one was left behind. With ATM numbers declining, cash use dropping, and more and more shops not accepting cash, our fear is that the UK will fast go cashless, leaving millions of people behind.”

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in