Since the Covid-19 pandemic, the use of cash in everyday purchases has been in rapid decline. The UK finance report suggests that the UK, considering the current cost of living crisis, is not economically prepared to completely discard the use of cash in this country.
The move towards online banking has been growing rapidly in the last decade due to many societal and economic factors. The possibility of a cashless society is growing and the UK needs to be prepared for many changes.
What is a cashless society?
A cashless society is one where cash, paper, and coin currency, aren’t used for financial transactions. Instead, all transactions are electronic, using debit or credit cards or alternatively PayPal, Klarna and Apple pay. Many countries are moving in this direction, but it is difficult to tell which ones will eliminate cash altogether.
What are the benefits and drawbacks of a cashless society
– Significant reduction in money theft crimes: when people are handling less cash, bank robberies, physical burglaries and corruption drop. Other crimes such as fraud will be easier to track down but may be more common.
– Supporters of cashless transactions also point to greater ease in the everyday management of money, for individuals and businesses. The need to store, protect, withdraw and deposit physical money disappears.
– International travel would be more convenient without the exchange of paper currencies.
– Less physical contact in the everyday economy minimises the potential for any future pandemics.
– Elderly people may be less comfortable with online banking.
– Rural areas may be left behind due to poorer wireless connectivity or broadband, leaving them without access to their money.
– Greater fraud and cyber theft possibilities.
– Some people think that cashless spending in harder to control.
– A cashless society could prove expensive for small businesses.
– There are many doubts about system vulnerability and how resilient the technology that supports a cashless society.
Why is cash in decline?
Cash payments have been on a steady decline for many years now with new types of payment tools like cards, contactless and mobile wallets. Where cash payments declined at a growth rate of 13.61% between 2012 and 2021, whereas the popularity and annual growth rate of card and alternative payment methods have been on the rise to 30.8% in 2022.
In addition to new payment tools, the use of cash is growing smaller due to bank branches closing down around the country, making cash more and more difficult to get hold of.
According to Global data card payments analytics, the number of ATMs in the UK decreased by 4,000 between 2020 and 2021, as well as forecasting an additional 8,300 closures by 2026. These closures lead back to the lack of people utilising these ATM branches, as a majority of the public has adopted online banking.
With fewer people using these facilities the cost of operating these banking branches is becoming too expensive for banks to keep running.
Furthermore, the effects of COVID-19 have caused the demand for contactless payments to skyrocket, accelerating the shift from cash to digital. During the pandemic, the way people used cash changed drastically, with less and less cash being used for everyday transactions because of reduced consumer spending as a whole.
However, the decreased cash demand in this time frame could relate to concerns about hand-held money transmitting the virus.
What the public thinks
Research conducted in 2022, shows that over 1 million UK adults say they would struggle in a cashless society.
In 2019 the Access to cash review concluded that Britain was not ready to go cashless, however with new research, the large amount who rarely use cash are embracing a digital future where almost half (48%), say that a cashless society would be incredibly problematic and underlining concerns about how to handle debt, digital fraud, control finances as well as increased isolation.
With the new possibilities of a digital finance-based society, researchers have segmented the UK adult population into five groups which include:
Cash dependents: An Older segment that has a strong preference for cash. (10 million)
Cash keepers: A younger segment that like the security of having cash (12 million)
Cashless sceptics: The oldest segment whose scepticism about a cashless society runs deep. (12 million)
Cash occasional: A younger segment that prefers to manage their money digitally but uses cash occasionally or in emergencies. (9 million)
Cashless converts: A segment that strongly prefers digital payments and doesn’t see many benefits to cash. (11 million)
Is Britain ready to go cashless?
Even though digital payments seem to be more desirable in the eyes of businesses and consumers, with inflation and rising living costs, more and more people are relying on cash to help them budget.
A new report from the Royal Society of Arts (RSA), the cash census has proven that the pandemic did not accelerate the nation’s move towards a cashless society. The use of cash in the UK during the pandemic indeed took a hit, however, the UK is still reliant on cash, and those who are not reliant still want the flexibility to choose between cash or card when making payments.
Research shows that cash payments and transactions are likely to fall to as little as 10% by 2026.
Over 8 million adults, over 27% of the population rely on cash to make payments every day. Those based in rural areas may find that poor broadband and mobile connectivity can make it difficult to access digital services.
In addition, around 17 million people in the UK do not have a bank account and 90% of those are low-income, the decline in cash threatens to leave them even more behind.
Even though digital banking is on the rise, we must be conscientious of those who still rely on cash to live.
What does a cashless society mean for charities?
With digital cash transactions becoming more and more frequent, cash donations for charities have been lower than ever. The Charities Aid Foundation UK Giving Report 2022 found that only 23% of donors gave cash donations over the past 12 months down from 58% in 2017.
But what does this mean for charities? Especially when it comes to filling donations buckets.
In an increasingly cashless society, charities will need to adapt and develop keeping in line with current trends. Things like QR codes, and now Apple pay to account for 43% of all one-off donations made. There are many digital fundraising systems that can help charities to increase their donations such as:
A handheld card reader: Some can take donations offline, allowing fundraising to take place in areas with no internet access.
Larger tap-to-stand devices: Things like contactless collection boxes which can be manned and stand alone.
QR codes: These can be used on a range of media and surfaces and collection buckets.
Digital kiosks: Can be used as a marketing tool as well as a fundraising device.
Text to donate: Simple and easy for those who are not on the go as much.
Digital donations remove the hassle of counting notes and loose change, and any donations made go directly to the charity.
Donating online via charity’s websites.
However, with the increase of new donation technology, charities must protect themselves from cyber-attacks and data breaches which, since the pandemic, are becoming ever more common.
There are many ways charities can harness the new societal changes of digital giving for beneficial outcomes. Even though these methods are effective and modern, charities must remain conscientious about their information online.