Will it be a cash-free Christmas?

As the Christmas shopping season creeps closer, the great cashless debate continues – leaving many questioning whether traditional cash transactions will make it through the holiday or if we’re edging closer to a cash-free Christmas.

The UK is expected to become a cashless society by 2043, but could the rapid shift to digital payments see this transformation happen sooner?

Could 2024 be a cash-free Christmas?

As contactless payments continue to dominate, more businesses are moving away from cash. As of 2021, 5% of small businesses are no longer accepting cash, while 3% have discouraged cash payments. There were also 1.59 billion contactless card transactions recorded in March 2024.

But even large firms are beginning to go cashless, such as with the UK’s cash-free supermarkets, including Tesco’s cash-free cafes, Morrisons’s card-only self-checkouts and Asda’s plans to make kiosks across 25% of its petrol stations cashless. Pizza Hut restaurants have also been cashless since April 2020.

In terms of region, London was considered to be turning cashless faster than the rest of the UK. According to statistics reported by The BBC, residents and workers had been taking out £500 million less every month from ATMs compared to pre-pandemic levels.

The number of cash transactions in the UK was reported to drop to a record low of 12% in 2023 – down from 14% the previous year. On the other hand, debit cards were reported as the most popular payment method, accounting for 51% of all payments made in 2023 and the most used method among consumers of all age groups.

Meanwhile, gift cards were becoming increasingly popular choices for Christmas presents. According to research by the Gift Card and Voucher Association (GCVA), nearly 44% of UK adults tightened their gift-buying budgets last year due to the cost-of-living crisis. 

As a result, 14% of shoppers planned to increase their spending on gift cards to better manage their budgets and avoid wasting money on unwanted gifts. Gift cards were particularly popular among Millennial and Gen Z consumers, with 28% of those aged 16-34 choosing them for budgeting purposes.

The gift card market is expected to grow to £11.23 billion by 2028, with a compound annual growth rate (CAGR) of 6.0%.

However, cash is still considered a meaningful present to many shoppers. Last year, it was reported that 76% of parents gave their children cash for Christmas, the average amount being £109.93. 37% of consumers also said they wanted cash or a transfer as a Christmas present.

The impact of going cashless for shoppers

December is an expensive month and some consumers prefer using cash to manage their expenses and avoid overspending.

Take the “cash stuffing” trend as an example, which took off on TikTok and Instagram last year. Participants would allocate their monthly budget into different envelopes labelled for specific categories (eg groceries, entertainment, bills, etc.) and would only use the cash available in each envelope for its designated purpose.

Consumers are also more likely to spend more with a card than with cash, particularly when it comes to impulse purchases. It was reported that 36% of Brits are more likely to make an impulse buy when shopping online, while the average spending on credit cards in December 2023 was £850 – the highest ever recorded by data analytics company FICO. A survey by Lowell also revealed that the average shopper in the UK gets into £439 of debt over Christmas, taking four months to financially recover after the festive period.

Meanwhile, going completely cashless could exclude vulnerable groups, particularly elderly individuals and those without bank accounts or smartphones who depend on cash. 

The Financial Conduct Authority (FCA) estimates that there are 1.1 million unbanked adults in the UK and as of 2021, 12% of the UK’s adult population didn’t have a smartphone device. A report by Age UK also revealed that 2.4 million people aged over 65 rely on cash in their day-to-day lives.

Will we all be shopping online?

Here comes Santa Claus? Now, it’s more like here comes Amazon.

After all, shoppers spent £24.4 billion online over the Christmas period in 2023 – a 3.7% increase from the previous year. Unsurprisingly, online shopping is expected to increase by 5.1% to £32.48 billion this Christmas season, while sales are predicted to reach around £242.72 billion for Black Friday.

Meanwhile, high street sales in the UK declined by 2.7% in 2023, which was the biggest monthly decline since January 2021, when lockdown restrictions were reintroduced.

And that’s just part of the high street’s struggles. As of September 2024, almost 38 stores have closed permanently each day this year. Research reported by the Retail Gazette revealed that 6,945 outlets had closed their doors, unfortunately outnumbering the rate of new store openings, which was around 25 per day.

As the UK approaches another holiday season, the cashless debate continues. With major retailers adopting cash-free systems and contactless payments on the rise, the UK could slowly be moving towards a cash-free Christmas. 

However, this also raises pressing questions about inclusivity, financial education and the future of traditional holiday shopping.