The idea of a cashless society has long been championed as the future of finance, but despite the buzz around digital wallets and contactless payments, cash stubbornly refuses to disappear.
This week’s British Retail Consortium (BRC) Payments Survey revealed that cash usage in the UK has risen for the second year in a row, accounting for 19.9 per cent of transactions in 2023. It’s a modest uptick from 18.8 per cent in 2022, but significant nonetheless.
While debit cards still dominate payments at 62 per cent of transactions, the increased use of cash reflects changing consumer behaviour during the ongoing cost-of-living crisis. People are shopping more frequently but spending less per visit, opting for cash as a physical way to control their budgets.
Chris Owen, payments policy advisor at the British Retail Consortium
As Chris Owen, payments policy advisor at the British Retail Consortium, explains: “Persistent inflation and the cost-of-living crisis continued to affect households across the country, and many consumers used cash to budget more effectively.”
This trend may reflect the unique role that cash plays in personal finance. Unlike cards, which allow for frictionless spending, cash offers a tangible connection to money. For some households, particularly those in financial difficulty, this physical experience of seeing and feeling money might help with budgeting and control.
The BRC also noted that larger retailers remain committed to accepting cash – not just for its accessibility but because processing cash is often cheaper than accepting card payments.
Cash: A necessity, not a relic
Many consumers seem aware of these fees, with PayComplete’s Why Won’t Cash Just Die?! report revealing that 65 per cent of shoppers know that card transactions incur costs for retailers. As a result, 57 per cent actively choose cash to help businesses save money and this figure rises to 71 per cent when supporting smaller or local enterprises.
Simon James, CEO of PayComplete
Simon James, CEO of PayComplete, a global cash management solutions provider, touches on the enduring relevance of cash and its societal benefits.
“Cash, once seen as on its deathbed, is not going anywhere. The reason for this is twofold. Firstly, consumers prefer using cash for several reasons. Research shows that over half (57 per cent) want to pay in cash to support businesses, while nearly two-thirds (62%) believe it helps children learn financial management. Amid the cost-of-living crisis, many, especially Gen Z, are turning to cash for budgeting, evident in the rise of ‘cash stuffing.’
“Secondly, many people depend on cash as their primary payment method, with over one million unbanked individuals in the UK relying on it. This significant number has prompted the FCA to make access to cash a legal requirement this year.”
James suggests the UK’s decision to enshrine cash into law is a major signal: “The UK, though, is seen as at the cutting edge of fintech and payment technology, so for it to enshrine cash into law sends a real message: cash is going nowhere.”
Making cash work smarter
Brendan Thorpe, ATM strategy expert at Auriga
The enduring demand for cash doesn’t come without challenges. Keeping cash accessible requires significant investment in infrastructure, including automated teller machines (ATMs), cash-in-transit services and processing systems. As Brendan Thorpe, ATM strategy expert at an omnichannel banking software and technology vendor Auriga, outlines – this infrastructure comes at a cost.
“Another jump in UK shoppers using cash is no surprise and further hammers home how access to cash is a fundamental need,” Thorpe says. “Some banks have recognised that to be truly customer-centric, they need to preserve and invest in this service alongside their digital offerings.
“But we do need to recognise the cost of supplying cash is high and rising, and interchange rates aren’t closing the cost gap. While things like cash-in-transit costs can be better managed by using AI and machine learning to run smarter forecasts of when and where cash needs to be in an ATM, we do need a more joined-up approach to address the costs for both the distribution and acceptance of cash.
“While some may dismiss a future for cash, the reality is that customers do want this choice, and the barriers to maintaining access are not insurmountable for those banks and ATM operators who are willing to take bold and innovative steps.”
The card conundrum
While cash usage has grown modestly, card payments – particularly debit cards – remain the dominant method of payment, accounting for over 75 per cent of all transactions and 85 per cent of spending in 2023. However, this dominance has its own cost for retailers.
The BRC’s survey highlights a sharp rise in card fees, with the total paid by UK retailers to banks and card schemes increasing by 25 per cent in 2023 to a huge £1.64billion. The BRC has called for urgent reforms from the Payment Systems Regulator (PSR) to improve transparency and foster competition in the card payments market.
The burden is particularly heavy on smaller businesses, many of which operate on slim margins.
Giles Hutson, CEO and co-founder, Insignis
Giles Hutson, CEO and co-founder of cash management service Insignis, points out that businesses must find ways to make their cash work harder.
“The rise in cash usage, now at 19 per cent of all transactions, highlights its utility and relevance. This trend also highlights the opportunity for fintech solutions that help both individuals and businesses make the most of their cash assets – such as cash management platforms that can enhance returns whilst maintaining much-needed flexibility.
“As digital and traditional payment methods evolve, financial services must ensure accessible, efficient and secure ways for families and companies alike to make their cash work for them.”
What the future holds for payments
Ryta Zasiekina, founder of payments firm CONCRYT
While some fintechs may view cash as an outdated relic, Ryta Zasiekina, founder of fintech company CONCRYT, believes it remains a cornerstone of consumer trust.
“The recent glitches at UK banks and retailers, combined with a rise in fraud and a need for better budgeting tools, have severely undermined customer trust in payment systems. With these instances serving as a reminder of the risks often associated with a cashless society, it is not surprising that the British Retail Consortium has reported a rise in the use of cash.”
She sees the future as one where payment methods will diversify: “In the face of a changing economic landscape, I believe the future will see a diversification of payment methods that provide customers with security and convenience – including everything from cash to biometric payments.
“Moving forward, banks and merchants alike must prioritise strengthening their security measures and operational resilience, to ensure that customers have the confidence to use a wide variety of payment methods.”
This focus on innovation highlights a broader truth: cash, despite its long history, continues to play an indispensable role in the economy. From being a reliable budgeting tool to offering a lifeline in emergencies and supporting local communities, physical money remains essential to millions.
Yet, the challenges of managing cash cannot be ignored. James of PayComplete, stresses the need for modernisation in this space. “While cash has its benefits, it also presents challenges, such as inefficiencies in counting, sorting and transporting. As the future of cash becomes clearer, it is crucial for businesses and banks to automate and modernise their cash management systems with cashtech.
“Investing in cashtech systems is not only the smart choice; it’s fundamental to ensuring long-term resilience and efficiency within cash handling processes.”
The post Digital Dreams, Cash Realities: Why Physical Money Still Matters appeared first on The Fintech Times.
