Money and the art of trading have been around for centuries. As the world progresses into the technological era, though, we find ourselves creating more innovative ways in which to pay for goods. It’s no secret that cashless electronic payments are on the rise and the favourite for a high percentage of us within the UK. The likes of electronic payments include Apple Pay, card apps, PayPal, contactless, online banking and many more. Even though more cashless transactions are taking place than ever before, Sarah Staff explains why ‘Cash is still King’.
In 2017, debit cards became a more popular payment method than cash. Many people don’t use cash due to the general ease of paying with one card rather than fumbling around in their pockets for loose change. Some might say this saves time and effort, as well as the finance industry saving millions of pounds in security and transportation, but is this really the case?
Although a bold statement to make with the future being highly unpredictable, we truly believe that cash isn’t moving anywhere (figuratively speaking, of course). With it being easily accessible, tangible and anonymous, cash is still preferred by millions up and down the country. Physical money depicts prestigious figures within British history, including warriors, healers, scientists and royalty. These important people are widely admired by the British public and reflect the UK’s diversity and culture.
Banknotes and coins are nostalgic and a large part of the culture and heritage of the UK. The total number of banknotes in circulation surged in 2016 by a whopping 10% to reach £70 billion which, according to the Bank of England, was the fastest growth in a decade.
Most frequently used payment method
Marc Terry, international managing director at Cardtronics, stated: “Despite reports of its imminent demise, cash remains the second most frequently used payment method in the UK. A recent report by UK Finance explained that 34% of all UK payments are made using cash. The organisation also reported that £188 billion was withdrawn in 2017 from cash machines across the UK, with 90% of consumers withdrawing cash at least once a month.”
Terry continued: “It’s too easy to overlook the 2.7 million consumers in the UK who rely solely on cash, which is circa 5% of the adult population. In addition, large percentages of the UK’s small businesses would be placed under duress should access to cash for UK consumers be made more difficult. The trends are obvious. UK Finance predicts that cash will be used for an estimated 6.5 billion transactions (total value £1.2 trillion) in 2027. It’s clear that cash is a significant part of the payments mix, and will remain so for the foreseeable future. It’s therefore imperative that we all act to protect cash as an important payment choice for UK consumers.”
The reasons many people still prefer to use cash can vary. Credit cards can be useful and offer tracking and travel protection, but this comes with interest rates and eligibility checks which can be time-consuming. Furthermore, bank charges may be added with electronic payments, while paying by cash allows some businesses to avoid transaction payments.
Requirement for a contingency method
Cash is present when nothing else works. It’s an integrated currency method which no other medium can yet replace. Scams, illegal credit/debit card payments, card cloning, fraud, cyber attacks… All question the reliability of electronic payment methods. Which? found that, in the first months of 2018, £500 billion was lost to bank account fraud. Relying on purely electronic transfers is to put your faith in one system, but what happens if it fails? Is it realistic to say that the UK is ready to ditch cash?
IT glitches are a major concern. In 2014, RBS, NatWest and Ulster Bank were fined an estimated £56 million after IT failures in 2012 meant that millions of customers were not able to access their accounts.
One of the most prominent IT glitches of 2018 was TSB’s migration of 1.3 billion records to a new platform and the problems which followed suit. In April last year, TSB customers were informed that over the weekend of 20-22, some services including online banking, making payments and transferring money could be unavailable. Serious technical issues became apparent and were made public across social media. There were log-in and password issues, reports of falsely credited money and the ability to view other customer’s account details. TSB took mobile banking offline to try to resolve the issues and, on Day 7, systems integration specialist IBM was called in to find a solution.
Giant financial service Visa faced an outage in June last year due to hardware issues leaving customers across Europe unable to use card machines. Shoppers noted how supermarkets had ‘cash only’ signs up and long queues for the ATMs. This led deputy editor Guy Anker of MoneySavingExpert.com to state: “After TSB’s IT meltdown, this is yet another big banking or payment systems problem for people to have to deal with. It’s simply not good enough in this day and age when we rely so heavily on technology to conduct what are pretty basic things such as buying a drink or a meal. If you’re going out or making a payment online over the weekend, have a look at what’s in your wallet and ensure if you’ve a MasterCard or Amex you take that out or use it. Until this is fixed, ‘Cash is King’ if you’re spending out and about, so ensure you’ve enough on your person in case your cards don’t work.”
The effects of these glitches should be noted as payments were missed (or bounced) and consumers faced being charged twice for products when told their cards didn’t work. Electronic payments require people to be vigilant about where their money is going and how it’s being processed. Any failures on a financial service’s/bank’s part can severely impact consumer credit ratings and will require additional time to manage transactions and communications should something go wrong.
Furthermore, data is a key element of any Internet activity. When IT problems occur in relation to finances, many worry about the impact of data breaches, but even upon notification may not ever know the full picture as to what’s happening with their data. Having cash on hand can help in those situations where digital funds are inaccessible.
Cash supports businesses
According to a Which? Survey, 98% of the 2,000 people questioned currently still use cash. 78% of consumers questioned from the two lowest household income brackets rely on cash as opposed to credit/debit cards.
Cash is crucial in local communities as nearly 50% of consumers spend money in theirs at least once a week. The presence of a local ATM is equally as important. According to a Cardtronics report, 20 million Brits say they would leave their community and spend money in a community with a cash machine should one not be present in their own.
Mark Woolley, managing director of Brinks Global, noted: “For ease of use, privacy and value, cash offers unmatched benefits for shopkeepers and consumers even in today’s digital age. That’s why 13 billion payments, a third of all payments in the UK in 2017, were made in cash. We see access to cash as a fundamental right. One of our aims at Brinks Global is to ensure cash remains freely available to those who choose to use it. We offer technical solutions which make cash an easy, secure and economical method of payment for retailers and customers.”
Woolley added: “Behind the scenes, we also help banks and other institutions to optimise the amount of cash they hold in their branches and ATMs. This helps to ensure cash is always on hand when needed, while also making sure the costs of providing cash to the public are as low as possible.”
Cash can be useful for so many reasons and, most importantly, as a contingency method. If your bank or electronic payment method fails, cash can tie you over for the interim period. It’s so easy to spend with contactless payment and yet, because of this, many people find budgeting difficult. Cash can help you budget on a small scale and keep your finances on track. If your cards are faulty, scammed or lost then cash is another method of payment to ensure nothing goes pear-shaped in your normal daily routine.
The costs of cash are low, the value of cash is high and the demand for cash isn’t going to cease anytime soon.
Sarah Staff is Head of SaferCash at the British Security Industry Association