While the use of physical money has been declining in many places for years, the trend may have reached its apogee. In some countries, including the UK and Spain, it even appears to be staging a fragile comeback.
There are few more cashless places in Europe than the United Kingdom — the continent’s fourth most cashless economy in 2021, according to research by personal finance website money.co.uk. The transition began in earnest some years ago as more and more Brits happily embraced the ease, speed and convenience of contactless card or mobile payments. In 2017, debit card payments overtook cash for the first time. The COVID-19 pandemic turbocharged the trend, leading many consumers and retailers to abandon cash altogether.
“Cash use has been declining over the last ten years, with a particular drop during the pandemic as many retailers encouraged contactless payments and businesses such as pubs and hairdressers closed,” Adrian Buckle, head of research at trade body UK Finance, told Euronews Next. Cash accounted for 56% of payments in 2010, falling to 45% in 2015, and to 17% in 2020, according to UK Finance. The big banks’ ruthless culling of ATMs and branches during that time has helped accelerate this trend, making life increasingly difficult for people who depend on face-to-face bank transactions and cash to pay for everyday purchases.
“Anything But a Cashless Society”
But the trend may have reached its apogee, at least for the time being. Indeed, cash may even be staging a fragile comeback. Data published last week by the Post Office shows that more and more people are increasingly relying on notes and coins to help them manage their budgets amid the so-called “cost of living” crisis. In July, £3.31bln in cash was deposited and withdrawn across the Post Office’s 11,500 branches, — a record high for any month dating back over three centuries of operations. Per the Guardian:
While the pandemic accelerated the UK’s embrace of card and digital payments, the economic crisis – with inflation going up and many bills expected to rise further – has led a growing number of people to turn once again to cash to help them plan their spending.
The Post Office said its branches handled a record £801m in personal cash withdrawals last month – an increase of almost 8% on June, and up 20% on the July 2021 figure of £665m.
In total, more than £3.3bn in cash was deposited and withdrawn at its 11,500 branches. The Post Office said this was the first time the monthly amount had exceeded £3.3bn in its 360-year history.
The organisation said it was “seeing more and more people increasingly reliant on cash as the tried and tested way to manage a budget.”
“Our latest figures clearly show that Britain is anything but a cashless society,” said Post Office Banking Director Martin Kearsley. “We’re seeing more and more people increasingly reliant on cash as the tried and tested way to manage a budget”.
While some British people may be turning back to cash or using it more often than before, actually spending physical money is easier said than done due to the growing number of high-street retailers refusing to accept cash payments. According to a report published this weekend by the UK’s number-one tabloid, The Sun, many retailers and hospitality chains in London, Birmingham and Newcastle, including Pizza Hut, Caffe Nero and sushi chain Itsu, have gone fully cashless since the pandemic. So too have many smaller retailers.
This is possible due to the fact that legal tender has a very narrow definition in the UK, and strictly applies to money used by a debtor to settle a court-awarded debt when offered (‘tendered’) in the exact amount that is owed to a creditor. In other words, if a debtor is offering to settle a debt in court with legal tender such as cash, the creditor is not allowed to refuse it. Shops and hospitality businesses, by contrast, are.
Demonization of Cash During Pandemic
Many retailers, particularly in the more salubrious parts of towns and cities, are taking full advantage of this loophole, despite the discriminatory effects it has on the millions of people who still depend on cash, including the roughly 1.3 million who are unbanked. The decision to refuse cash also has little basis in public health. As confirmed by a growing body of research, including a recent paper in the journal Risk Analysis, cash remains safe to use and poses a “very low” risk of spreading COVID-19.
This is not what people were told in the early months of the pandemic. In March 2020, as countries were locking down around the world, a World Health Organization (WHO) spokesperson responded to a question about whether banknotes could spread the coronavirus by saying: “Yes it’s possible and it’s a good question. We know that money changes hands frequently and can pick up all sorts of bacteria and viruses … when possible it’s a good idea to use contactless payments.”
Around the world, media outlets and long-standing enemies of cash such as credit card companies and fintech start-ups seized on the comments and magnified them, sparking fears over the safety of cash. The WHO eventually walked back its comments but in many countries the damage was already done. In the UK, cash withdrawals at ATMs fell sharply. Today, only 17% of payments are now made with coins and notes, according to the Royal Society of Arts’ latest Cash Census report.
At the same time, demand for physical dollar and euro notes (and many other currencies) has surged, even as the use of cash has fallen. Two and a half years after the first lockdowns of 2020, the total value of dollar and euro notes in circulation is respectively 18% and 21% higher. This surge in demand for bank notes, at a time that cash use was falling in most countries, is taken as a sign that many people have been “hoarding” cash (i.e., taking it out of the bank and storing it at home) during this time of acute economic uncertainty.
Banning Cashless Businesses
The situation in the UK contrasts starkly with recent developments in parts of the US in another major way. In the US, local or state authorities in places such as New York City, New Jersey, Philadelphia and San Francisco have approved laws banning businesses from banning cash (click here for Jerri Lynn’s analysis of these developments last year).
Another country that recently passed a law prohibiting businesses from rejecting cash is my country of residence, Spain, where pensioners recently won a milestone victory against the big banks’ war on cash…
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Nick Corbishley 