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The Cash Issue

Sunday, 16 February 2020

The perennial issue of cash and the need to continue to support it as a payment mechanism has been a topic of discussion in the media during the past month.   

There have been calls for the UK Chancellor to act to save banknotes and coins, saying that without urgent new laws the cash system could collapse within a decade. A spokesperson for the Access to Cash Review has stated that it essential that the shift to digital "doesn't leave millions behind or put our economy at risk”.

In response, the Treasury has said that it wants "to ensure everyone who needs cash can access it."

Cash is important to millions of people, who still use it for paying for vital goods and services, such as utility and council bills. According to the Financial Inclusion Commission, nearly two million people in Britain don't have a bank account, meaning they need notes and coins to pay their way. Although there are many tech-savvy ‘silver surfers’, there is also a significant number of elderly people for whom the online environment is very confusing. According to the ONS, only 40% of the over-65s have used a smartphone in the past three months.

There were 11 billion cash payments in the UK in 2018, but this is forecast to fall to 3.8 billion by 2028, accounting for fewer than one in 10 (9%) of all payments. Banks are continuing to close branches in response to the migration of customers to digital channels - Lloyds Banking Group is to close 56 more branches across the UK later this year.

Interestingly it was reported this month that New York City Council has voted to ban cashless stores and restaurants, as they discriminate against the unbanked. The council voted to pass a bill requiring brick and mortar outlets in the city to accept US notes and coins or to be fined.

As cash usage is also, similar to Britain, on the wane in many areas of America with the increasing use of cards and mobile payment options such as Apple Pay, this has prompted some businesses to ban cash, which is expensive to handle, outright. However, there has been a pushback against the trend, with opponents arguing that it discriminates against the unbanked, poorer members of society who do not have access to credit cards or bank accounts.

New York is apparently following the lead of Philadelphia and San Francisco, whilst there are also moves are also underway to outlaw cashless stores in Washington and Chicago. 

Yet at the other end of the spectrum Sweden seems likely to become the world’s first cashless society, with cash no longer being accepted as a means of payment after March 2023. It is already difficult today to find an establishment in Sweden where cash is accepted; the payment norm is either card or the domestic mobile application Swish.  

Whilst some countries such as Sweden seem to be making a seamless transition to becoming cashless, it is unlikely that this model will be the solution for every country or society and that for the foreseeable future cash will need to remain a viable option.

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