Cash is declining in the UK quicker than any other country in EuropeData Insights, Small Business Advice 11 August 2020
As the COVID-19 pandemic spread across the globe at a rapid pace, we changed our daily lives dramatically. Children left school, businesses closed their offices, our favourite restaurants closed their shutters and we were forced indoors, only venturing out for essentials.
When we did take to our local shops in search of that elusive toilet roll, a lot of us wanted to avoid touching anything, including our own money.
With a lot of younger people ditching cash pre-Coronavirus in favour of contactless and digital payment technologies such as Apple and Google Pay, has the pandemic pushed the UK to a cashless society?
Life before lockdown
2019 was the year when card payments broke a record. According to UK Finance, they accounted for more than half of all transactions made in the UK, with cash only being used for 23% percent of purchases.
UK Finance also predicted that this trend was set to accelerate across the next few years, as they forecast that by 2028 a mere 9% of all payments will be made using physical currency.
So with cash payments already in the minority across 2019, how did the Coronavirus impact our attitudes towards physical coins and paper money in 2020?
Corona ousts coins
As Coronavirus hit there was hysteria amongst the UK and panic-buying set in. We cleared the shelves of pasta, dried goods and flour, as keen bakers stayed in to practice their sour-dough loaves.
With little to no-information yet available on the transmission of the virus, we were told that frequent hand-washing was a must (singing happy birthday to ensure we’d washed for the optimum time). We were also advised to keep contact with things and surfaces outside of our homes to a bare minimum.
This naturally left cash with a huge stigma.
Already known to carry dirt and bacteria from everyday usage, our fear of spreading pathogens in a pandemic was rightly directed at something passed around through millions of hands globally. So how did we react globally?
- South Korea’s central bank announced it would take notes out of circulation for at least a two week period.
- China, where the outbreak of COVID-19 was first recorded, introduced a deep cleaning initiative that included zapping all cash with high temperatures and UV rays, or in some cases, simply destroying it.
- The US Federal Reserve sought to ‘quarantine cash’ that had circulated across Asia before redistributing it.
- In Paris, the Louvre, the internationally known art gallery that houses the Mona Lisa stopped taking cash payments from its flock of tourists.
In the UK, where possible, we’ve seen essential retailers ask customers who can do so, to pay with contactless or Chip and PIN.
To make this easier for consumers, the card association and retailers across the UK implemented an increase in the limit for contactless transactions from £30 to £45 on April 1st, following suit for other European countries.
Is the future for the UK one without cash?
New data from Accenture shows that between 17th-25th March 2020 cash usage in the UK had declined by 50%.
Their research forecasts that the decline will reach 40% across the whole of 2020 compared to 2019. According to Accenture, this is 10% higher than the rest of Europe’s decline which is currently forecast at 30% year on year.
When panic set in in early March cash withdrawals in ATMs spiked due to a ‘just-in-case’ hunkering down survival mindset, however previous cash-lovers are now seeking alternative payment methods.
How are tokenised payments paving the way?
Accenture’s report also looked at the rise of the Digital Wallet, aka. digital payment technology such as Apple Pay and Google Pay which enable consumers to pay on smart devices such as their phones or watch.
Why have digital wallets increased in popularity during COVID-19?
- Ease of use: They enable a smooth and quick transaction for both the merchant and the customer.
- No contact: Everything is digital so there is no contact necessary between the card machine or the device.
- No contactless limit: Most digital wallets don’t have a contactless limit of £45 because they use a two-factor authentication such as fingerprint or facial recognition.
Currently most popular with younger people, it’s likely that post-Covid tokenised payments will further increase in the UK as they prove to be effective and efficient in the retail sector.
How can business owners prepare for a decline in cash?
Small businesses are the least likely to accept cards at the present moment. However, they will need to consider taking card payments as soon as possible in order to cater for customers who no longer feel comfortable carrying cash. It’s important for retailers to offer contactless and Apple and Google Pay so customers can pay in the way that feels the most comfortable to them.
UK Finance – Card spending
Accenture – 10 ways COVID-19 is impacting payments