‘Is the next logical step for payments in the UK central bank digital currencies?’ (CBDCs) questions The Payments Association, a trade group representing the payments industry, as it reveals consumer preferences surrounding cash.
The jury is still out on the ‘best’ payment method. While cash lacks the security concern that digital payment methods, like phones and wearable payment items, have, it also lacks the convenience these new payment methods bring as well. Revealing consumers’ preferred payment methods, The Payments Association published its latest annual Consumer Behaviour Survey.
Exploring cash usage in the UK, The Payments Association found that only 13 per cent of respondents across all age groups, genders and regions preferred to use cash over any other payment method. Although that’s not to say people don’t use it regularly. One in five (22 per cent) said they used cash for everyday purchases more than once a week, and 82 per cent said they use it at least once every six months. Only six per cent of respondents said they never use it.
Breaking down preferences by groups
Looking to identify if there were any cash use trends among a certain group, The Payments Association found that more men (25 per cent) than women (19 per cent) use cash for everyday purchases more than once a week, as more men prefer cash to women (15 per cent to 12 per cent).
Perhaps unsurprisingly, 16 per cent of respondents aged over 55 preferred cash, while only eight per cent of 35-44-year-olds did. A more surprising stat line though was that of those aged 18-24: The Payments Association found 16 per cent of the demographic preferred cash as their main payment method. This could be due to less experience when buying products and services in general. From a cash usage standpoint, older respondents used cash more than the 25-44 cohort.
Interestingly, those more likely to use cash were from lower social grades (19 per cent for ABC1 and 26 per cent for C2DE). One potential reason for this, according to The Payments Association, is these groups are likely to be in jobs that pay in cash and are generally excluded from the financial mainstream.
The unemployed were by far the group most likely to prefer cash, with 24 per cent preferring it to other forms of payment.
The report also found that respondents from the northeast (36 per cent) and Northern Ireland (37 per cent) were much more likely to have used cash in the past week.
Options are important
While cash use is down, 88 per cent believe that it is important for people to have cash as an option. Only two per cent believe that it is not important at all. This and the fact that over four-fifths of respondents used cash within the last six months underlines the fact that despite 87 per cent of respondents preferring other forms of payment, cash can’t be counted out.
Of respondents, 68% say they are unlikely to adopt a new digital payment method, though the simple fact that there are clear generational differences in payment types shows that people will adopt new types of payments if they are available. It could mean however that cash is not going away, and that there will always be a place for it in the UK’s economy, at least into the foreseeable future.
This in turn means that the government would be wrong to label a future CBDC as a cash replacement – the fact that cash is still being used despite more convenient alternatives being available means that for what cash is used for it is irreplaceable.
The next step
Riccardo Tordera, Director of Policy and Government Relations
Riccardo Tordera, director of policy and government relations said: “It’s not surprising to see some people aren’t enthusiastic about the idea of changing the way they pay. While cash usage remains relevant, we cannot dismiss the fact that 87 per cent of people use other forms of payments in their everyday life. Most people who use these other non-cash forms quickly adapted and see the overwhelming benefits.
“Few of them would have thought of adopting such forms before they were available. Data suggests the same will be the case for CBDCs, people are afraid of change, but once it comes adoption is quick to follow. It’s very likely we will see the same pattern continue with CBDCs.”
Cash is the jukebox of finance
Tony Craddock, director general, The Payments Association
Tony Craddock, director general of The Payments Association said: “These are rather strange findings. Most people prefer not to use cash when paying for things but they want cash to be preserved just in case.
“It’s a little like saying, I prefer to listen through my ear pods but think we should keep jukeboxes, just in case. But retaining both today’s and yesterday’s innovations comes at a cost to society. HM Treasury is currently consulting to find out what that cost is and whether we should mandate that cash is accepted
in all retail outlets.”
Craddock continued: “The report clearly shows that payment cards and increasingly mobile wallets are the payment type of choice for the majority of people across all demographics, but that cash is a tool for those times when paying digitally isn’t possible. This could be anything from paying small vendors who for whatever reason don’t accept cash to using cash to budget to simply being more comfortable using it.
“It will continue to be a useful tool even when digital currencies become mainstream, so I wouldn’t discount it just yet.”
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