In the Great Cashless Debate, are you cash or credit?

First, they said vinyl records were on their way out. Next, it was books. Now, predictions that the UK will become a cashless society are also being called into question, as a new survey finds everyday cash usage may actually be on the rise among Brits.

In its annual report on UK payments, released today, banking body UK Finance recorded a 66% increase in the number of people who prefer to use cash for their everyday spending.

Meanwhile, the report shows that the volume of contactless and mobile payments also increased last year. This indicates that people are picking sides in the debate, amid growing concerns that pound notes and coins may be in danger of extinction.

Which side are you on?

The number of people who describe themselves as using “mainly cash” to make everyday purchases has been steadily decreasing. New technologies, such as digital wallets or virtual payment gateways are directing users to favour online banking payment methods.

UK Finance’s report shows that, while the number of cash-only individuals in the UK stood at 900,000 in 2022, it leapt to 1.5 million last year.

Cash has become an emotive issue for traditionalists and vulnerable groups in society. Many feel incredibly strongly about their right to pay in notes and coins. The move may also reflect a backlash against the reports of businesses refusing to accept cash payments.

Still, while cash lovers dig their heels in, so too are the people who say they live “largely cashless lives”. According to the UK Finance report, 22.1 million people identified as part of this group, and said they use notes and coins once a month at most.

Going Dutch

It’s not just the UK where the debate is happening. Across the world, countries are going cashless as more markets tune into online payments.

Hong Kong, Sweden, and The Netherlands are three regions leading the change. But their efforts have also led to troubling tales of where a reliance on card payments can go wrong.

After Sweden ditched paper money after COVID, card frauds rose by 44 percentage points between 2022 and 2023, according to Sweden’s central bank, the Riksbank.

Some are taking steps to mitigate the risk. After a similar spate of unauthorised transactions, the Hong Kong Monetary Authority is exploring introducing credit limits for online transactions. Norway has also said it will outlaw card-only payment policies in businesses.

At home, the UK’s Financial Conduct Authority has also been given powers to step in if it feels local communities lack access to cash. For example, bank branches and ATMs.

IT outage spikes concerns

Digitalisation has accelerated rapidly in the past year, largely thanks to Artificial Intelligence (AI). Brands such as Google, Meta, and OpenAI have leapt onto the Big Tech arms race, as each tries to outdo the other for the most innovative product.

The result has been a global audience of consumers being forced to download apps rather than interact with businesses through more traditional methods, such as websites.

In May, one X user’s post received 114,000 likes after they wrote: “why do i gotta download an app or sign up via email to do EVERYTHING!!? let’s unplug a bit”.

These are not just the ravings of disgruntled luddites. With big data breaches mounting, many users are concerned about the safety and security of housing their data across multiple platforms. Last week’s global IT outage only added to their worries.

Last Friday, millions of businesses including supermarkets, pubs, cafes, and payroll platforms were affected when a third-party update caused Microsoft systems to fail.

Commenting on the meltdown, Eamon O’Hearn, National Officer at GMB Union, said: “cash is a vital part of how our communities operate.

“When you take cash out of the system, it means people have nothing to fall back on, impacting on how they do the everyday basics – even buying food. Today needs to be the start of a new conversation at a local and national level of how we keep cash in our society.”

Split the difference

Despite the increase in cash-dependents, the UK Finance report shows that debit cards remain the most popular payment method, accounting for 51% of all payments in 2023.

It’s unclear whether the new UK Finance report marks the beginning of a trend, or represents an ‘out-with-a-bang’ blip for cash. A spokesperson reportedly said the organisation will monitor the situation closely.

Regardless, businesses should view the report as a warning against innovating too quickly for their audience base to keep up.

Cash, like card and contactless transactions, has its pros and cons. The best option for businesses is to cater for a combination of both forms of payment, so that every customer feels that their preferences are being met.