Has COVID-19 killed cash?
The old adage once stated that cash is king. In the Corona era, this seems increasingly untrue. The BBC has this week reported that a pilot scheme is being run to provide cash to communities which are currently lacking access to it. Meanwhile, the consumer group Which? has called upon the government to prevent the total collapse of cash. The concerns around COVID-19 transmission has created a serious acceleration in the UK’s potential shift to a cashless economy, following in the footsteps of nations such as Sweden, as consumers shun handling and withdrawing cash. It is reported that 75% of people have used less cash in lockdown, and there is likely to be a 40% contraction in cash usage compared to 2019.
This has raised concerns however, as an estimated 8 million people in the UK rely on cash, whether because they do not have access to a bank account, online banking services, or they simply don’t trust or understand online payments. These are often the most vulnerable people in society, including the elderly, the homeless, and the disabled. This presents a significant challenge to keeping the economy accessible and fair for all. In response this has spurred the formation of the independent Access to Cash initiative; which has called upon the government to form a regulatory body to ensure cash remains viable, to commit to a ‘Guarantee to Cash Access’ in rural areas, and to bolster the UK’s cash infrastructure.
In an effort to keep cash infrastructure resilient, the pilot scheme is looking to subsidise ATMs and provide cash deposits as a way to counter-act the loss of bank branches and ATMs many communities have faced. It is unlikely rural bank branches will return, as these have become financially untenable as more and more customers move to online banking. This raises the contention that it is not cash itself that has become less popular, but rather the ability to access it is limiting its use. Ampthill in Bedfordshire became infamous as a town of 8000 that was being served by a single cash machine. It may not be COVID that is killing the cash economy, but rather the lack of infrastructure is. An increase in supply may precipitate a revival in usage.
Yet these concerns about lack of access to cash must be balanced both with controlling the spread of COVID-19 and the march of progress. It is estimated that 1 in 10 people have been turned away while attempting to make transactions in cash, and major outlets have stated that they prefer cash where possible. The contactless payment limit has been increased to £45 from £30 as of April 1st to encourage more digital transactions.
It is likely that COVID-19 accelerated a trend that was already well underway, namely that more and more people are voting with their wallets and opting for the ease, convenience, and security of online transactions. The debate rages on about whether the instantaneous and intangible nature of online purchases encourages reckless spending; with some saying they prefer cash because it allows them to stick more closely to a budget as they physically have to hand over the cash.
The answer in the end, to the vexed question of whether COVID-19 has put the nail in the coffin of cash, may be: not quite yet. Both the banks and the government have agreed to guaranteeing access to cash for the foreseeable future. The demand, for a multitude of reasons, means that cash will be a feature of the economic landscape for at least a while longer.
Nevertheless, it is becoming increasingly apparent that businesses must diversify the way they accept payments if they wish to avoid missing out. Card terminals and the ability to accept payments online through e-Commerce are now vital, and still many shops and businesses have yet to catch up to current trends. Many further still are unaware that not all card machines and eCommerce platforms are made equal. There are huge variations in rates charged and features provided. Here at UTP we aim to offer market leading rates, to find out more view our current range of terminals.
In conclusion, while cash is on the decline, it is far from dead yet. The safest approach to take is to ensure your business can accept the widest range of payment methods, both to future proof it long term and to ensure no customer is left behind. We here at UTP aim to help with that and support your business as it grows through these uncertain and challenging times.