Could physical money soon be extinct? Industry expert on her five-year deep dive into the world of cash

Five years ago, Natalie Ceeney, independent chair of the Access to Cash review and chair of Cash Access UK, wrote a piece for This is Money on how the downfall of coins and notes could unfold.

In it, she wrote in depth about how cash infrastructure works and why commercial providers were facing extra costs. Much of what she covered has been eerily accurate.

Since October 2018 when the piece was published, we’ve had a pandemic where cash usage plummeted. But this year, the signs are of an uptick of people using physical money again.

Here, she gives an update on cash and banking and where we’re at now, broken into two parts – with part two to come tomorrow.

Cash usage plummeted during the pandemic, but the signs point to an uptick in people using physical money again

Five years ago, I started to dive deep into the fascinating world of cash and our transition to digital payments.

I had been asked to chair an independent review into the future of cash and to provide an answer to the question ‘is Britain ready to go cashless?’.

Working with a panel of consumer, business, and payment experts, we started on a journey which led to conversations with thousands of individuals and small businesses up and down the UK, visits to countries which were already more cashless than us to learn lessons (Sweden and China) and a huge amount of data analysis.

But we didn’t just want to understand the issue, we wanted to identify the action that industry and government would need to take as the UK became a low cash society to ensure that no-one was left behind.

At the time, I had no idea that this would become a campaign and then occupation which would last me the next five years.

I got hooked by an issue which got more interesting the more I looked at it, and which mattered hugely to individuals as well as society. I started to realise the risks to millions of people if nothing was done.

In 2018, when I started this work, around a third of all payments were made in cash. 

In fact, it was only in 2017 when cash stopped being the most popular payment method and was overtaken by card for the first time, but it was a massive reduction from just a decade previously when more than two thirds of all payments were in cash.

In 2018, people scoffed at the idea that cash could disappear, but according to the most recent figures published by UK Finance, in 2022 just one in seven of all payments were made using cash.

Five years ago, it was front page news when a pub in Suffolk stopped accepting cash. Now, I often find I’m greeted with surprise if I ask to pay in cash.

So what has happened? Is this a big conspiracy by the government or the banks? Over the past five years I’ve heard almost every theory imaginable, but I really don’t think there is a massive conspiracy to move everyone to digital.

For most of us, digital payments are just convenient. Why carry cash around when you can tap with a card, your phone or even your watch.

The problem is that digital payments don’t work for everyone.

Five years ago, we did foresee a continued switch away from cash towards digital payments.

What we didn’t anticipate was a global Covid-19 pandemic which would force most of the UK population indoors, strongly encouraged to shop online.

Unsurprisingly, cash use plummeted, as even people who preferred cash were given no option but to get to grips with ordering food and other essentials using their cards.

Cash use recovered very slightly as lockdowns eased, but figures from LINK, the ATM network, show cash machine use has fallen by around 40% since the beginning of Covid to now. It’s not a surprise.

Places which never used to accept cash payments, started to have card devices, which meant we needed even less cash.

And many people who had overcome their fear of digital payments found it easier to keep using them and got used to the convenience of online shopping.

A new issue did start hitting MPs and charities’ postbags though, which was the rise of shops and services who refused to accept cash. Many forgot that, even though cash use had fallen, it was still needed by millions of people.

So, what did I learn from the review? Firstly, cash is still very important, and it’s not just used by older people. 

Most of us can quite easily operate without visiting an ATM or a bank branch. But there are still millions who can’t. 

Not everyone can afford the technology or has good connectivity.

Not everyone is confident or able to use digital payments. 

There are still more than a million people in the UK who can’t get a bank account, who have no choice but to use cash.

Cash is still found by many to be more effective than digital as a way of budgeting, as you can literally take out your money for the week and put it in pots for food and essentials.

I often hear people commenting that ‘eventually everyone will learn to use digital and then cash will die’. This is nonsense.

There is evidence that, with the cost-of-living crisis, many people have moved back from digital payments to cash as they sought more control over their spending.

And let’s not forget illness – sadly, over the past five years my highly intelligent father-in-law who was very savvy at online banking has moved back to relying on cash as his Alzheimer’s has progressed.

Cash use is also highest among the less well-off. ATM use fell by as much as 60 per cent in parts of the country during the pandemic, but if you look at some of the UK’s poorest constituencies, cash withdrawals only fell by 15 per cent. Increasingly, those who use cash do so by need, more than choice.

When I started my review, my remit was firmly ‘cash’. But what I found was that when I talked to people, everyone talked about bank branches in the same breath.

For cash to survive, it’s not just about ‘getting’ cash, but also about ‘depositing’ cash.

Retailers who accept cash need to be able to pay it into their account, and they really don’t want the risk and insurance premiums of keeping cash in their tills overnight.

People who are paid in cash, including taxi drivers, cleaners, and many others, need to get that cash into their bank account before bills go out.

But as most people now bank online, increasingly empty bank branches have closed at a fast rate –

Consumer body group Which? say around 50 close per month. So, while there is obvious concern when ATMs close or move to charge for access, the lack of bank branches has just as big an impact on cash access.

Enabling deposits is just as critical to the survival of cash as withdrawing cash.

And let’s not forget that it’s impossible to get out £7.35 from an ATM, but if you’ve only got £7.35 in your account, that’s what you need to be able to withdraw, and you can only do it over a counter.

I’m often asked ‘why are banks closing so many branches’? The answer is simple – economics.

We’ve all seen the high street change over the past decades as more shopping has gone online and retailers just can’t survive.

Over the past decade we’ve seen the failure of iconic brands from HMV to Debenhams. The same pressures apply to banks.

Keeping a branch open five to six days a week is hugely expensive, particularly in smaller towns where there are few customers.

It’s also easy to see why there might have been a rush for the door as it’s the last bank in town gets all the flak for closing.

A cynic might say that closing before everyone else is the easiest thing to do. But it’s left many communities without the essential services that they need.

Many had assumed that if branches closed, people would switch to another bank, or go online.

Some did. But many didn’t. We found that people who rely on cash and these services will travel, often at great expense and difficulty, to go to another branch some miles away.

Very few consumers ever switch their bank. Retailers who want to accept cash from their customers would also need to travel, often in working hours, unless they chose to simply stop accepting cash.

The lack of cash access on high streets, started causing real harm to vulnerable consumers as well as whole communities.

I heard from people describing three hour bus trips with disabled relatives just to pay in cash before a bill came out as well as retailers choosing between relocating, going cashless or paying higher insurance costs as a result of leaving money in their till overnight because the only place to deposit cash locally was only open between 10am and 3pm on a weekday.

TOMORROW: Read part two of Natalie’s column on why Britain cannot become cashless

This post first appeared on Dailymail.co.uk