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Jun 2017 - The resilience of cash in a contactless world

According to a report published recently by Payments UK, the increasing popularity of contactless cards is likely to mean that cash will be overtaken as the UK’s most frequently used payment method by the end of 2018. It is forecast that debit cards will become the most frequently used payment method in late 2018, three years earlier than previously predicted, due largely to the rapid growth in the use of contactless.

In 2016, there were nearly 2.9 billion contactless payments in the UK, more than 2.7 times more than in the previous year (1.1 billion) and accounting for 7% of the total number of payments in 2016. Debit cards were used 11.6 billion times during that year, with just over one in five of the transactions made using contactless.

Cash remained the most frequently used payment method in 2016, with 40% of all payments being made using cash.

The tipping point, when debit card usage overtakes cash usage, is anticipated to occur in 2018, when 13.4 billion debit card payments are predicted, 4.6 billion of which are forecast to be contactless. It is forecast that cash will be used for 13.3 billion payments in 2018, meaning that, for the first time, it will not be the most frequently used payment method.

Payments UK is at pains to point out, however, that in spite of the acceleration in the use of contactless, any claims that the UK will soon become a cashless society are “wide of the mark”.

This sentiment has been very much echoed by the Bank of England’s Chief Cashier. In a recent speech at a celebration of the 50th anniversary of the cash dispenser machine, the point was made that the demand for cash continues to grow. Apparently the value of Bank of England notes in circulation peaked in the run-up to Christmas 2016, reaching over £70bn for the first time - an increase of 10% on a year earlier, and the fastest growth seen in a decade.

Although there have been many predictions about the death of cash, it should not be forgotten that many people rely on cash – according to the Bank of England, 2.7 million people, 5% of UK adults, spread relatively evenly across age groups, rely almost entirely on cash to make their day-to-day payments.

Whilst reliance on cash is less significant than in the past, it continues to have multiple benefits. It is often quicker than alternatives (especially in areas of poor communications network coverage), is universally accepted, it is immediate evident the transaction has taken place, and can be anonymous if required. Most importantly, it is easily available to and usable by everyone in our society.

The continuing growth in usage of debit cards, in particular contactless, is significant and looks likely to continue to be so; nevertheless the importance of cash in our lives today should not be underestimated and may well trounce all predictions of its eventual demise. 


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