The COVID-19 pandemic has hastened the trend towards a cashless society. Fear of infection through cash handling has given a further boost to the popularity of digital payments, with the use of cash predicted to decrease more and more over the coming months.
Ten years ago, almost six out of ten transactions were done in cash. This number has reduced to fewer than three in ten transactions in 2019. With the pandemic on the rise, it is set to decline even further. Experts say this is likely to put the use of cash at risk. It means older generations familiar with, and in some cases, reliant, on cash transactions will be at risk of being excluded from the economy.
Some rural locations in the UK have seen widespread closures of banks and ATMs, leaving people with little access to coins and notes, which is proving to be a huge problem. The government has proposed that people in locations that do not offer easy access to cash will be able to ask for cash in local shops, without having to buy anything.
The Treasury has asked the Financial Conduct Authority (FCA) to produce a plan to ensure the availability of cash across the country. It has called for a month and a half of evidence collection to gain better insights as to how withdrawing and depositing cash can continue seamlessly, as well as how to improve cashback offered in shops. It is also inviting views on where the regulatory responsibility of ensuring the availability of cash should lie.
Initially, the Treasury was considering altogether eliminating the rules that allowed people to request cashback without making any purchases since EU regulations made it difficult for businesses to adopt this practice. However, data revealed that in 2019 almost £3.8 billion was claimed by customers in cashback while making purchases at a till. This made cashback the second most popular method for withdrawing cash after ATMs.
John Glen, Economic Secretary to the Treasury, said, "We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK's cash system and make sure people can easily access cash in their local area."
The FCA’s review comes just after the government announced eight trials that would test ways to improve people’s access to cash. These trials are likely to several months to conclude, so it is difficult to know whether they will achieve their intended impact.
In September, the National Audit Office said that it saw no link between this government initiative and the public bodies that would be involved in the actual execution of this plan. Natalie Ceeney, one of the initiators of the Access to Cash review published by the NAO said that the government’s proposal needed to address this at the earliest to prevent over eight million people being put at risk from the demise of cash.