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Cash usage grows for first time in a decade

Cash usage in the UK has grown for the first time in a decade as consumers shy away from overspending on plastic payment cards during the ongoing cost of living crisis.

5 comments

Cash usage grows for first time in a decade

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

Across the UK, coins and banknotes accounted for nearly a fifth (19%) of transactions in 2022, according to the British Retail Consortium (BRC) annual Payments Survey, up from 15% in 2021.

It's the first time that the retailer lobby group has recorded any growth in cash uptake since it first began monitoring payments in 2013.

Card payments were used for 76% of transactions (83% in 2021), with debit cards accounting for four-fifths of these transactions.

The report states: "Faced with rising living costs, cash was a useful tool for some people to manage their finances and track their day-to-day spending."

Average transaction value fell from £24.49 to £22.43, as consumers shopped around more and made more regular, but smaller, purchases.

The BRC says the data reflects a choice by many households to use cash to budget more carefully during the onset of the cost-of-living-crisis, as well as a natural return to cash following the move to contactless during Covid.

The Consortium has welcomed the slight downturn in card usage, having fought a rearguard battle on behalf of retailers over rising interchange and scheme fees.

Hannah Regan, BRC payments policy advisor says: “We are now seeing a return to many of the pre-pandemic trends in payments, including smaller but more frequent purchases, and a slight return of cash payments. Unfortunately, what has not changed, is the ever increasing scale of fees paid by retailers in order to accept card payments.”

Other alternatives to cards such as buy now, pay later and open banking payments also grew from two percent in 2021 to 4.9% in 2022. This trends is expected to accelerate through 2023.

Says Regan: “Though alternative payment methods could provide much needed competition to the market, the dominance of card payments means it is essential that action is taken to prevent fees rising further.”

The UK's market regulator the Financial Conduct Authority is doing its bit, setting out new rules today to maintain reasonable access to cash for personal and business customers across the UK.

Under the FCA’s proposals, designated banks and building societies will need to assess gaps in access to cash. These assessments need to take into account local factors such as demographics and transport. Where firms identify gaps, they will need to act to address these needs.

Sheldon Mills, executive director of consumers and competition at the FCA says: "We know that, while there is an increasing shift to digital payments, over 3 million consumers still rely on cash - particularly people who may be vulnerable - as well as many small businesses. It’s important that we support consumers impacted by recent innovations.

"These proposals set out how banks and building societies will need to assess and plug gaps in local cash provision. This will help manage the pace of change and ensure that people can continue to access cash if they need it."

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Comments: (5)

A Finextra member 

Great to see cash on the rise...  I use cash - i generally have £100 slid into my iphone case.  My wife does not use cash  - she never goes to the ATM.... She comes to me, and generally my £100 gets spent through my wife, to pay for dog walkers coffee clubs, carers expenses for my Mother in Law etc.  I tip delivery drivers, give it to my son when I need him to get something for me, or occasionally to give to a homeless person.  Its great to have, we should use it or lose it....  The death of cash hasbeen overly reported - and it just does not want to go away.... nor do we want it to! 

David Hensley Founder at Enryo Limited

Amidst the Digital Age, Cash appears to have made a brief comeback, not unlike the end of the resession in 2008. 

In a world increasingly dominated by digital payments, the news of a resurgence in cash usage might seem counterintuitive. However, recent data from the BRC suggests that cash is making a "comeback", with a 7% increase in the number of cash payments in the UK in 2022. This trend raises questions about the future of cash and the factors driving its resurgence. It also highlights the significant cost to retailers (£1.2bn per annum) for handling digital payments. 

 

A Finextra member 

Maybe not so brief.  Interestingly there may be a lot of dark reasons for the growth of cash - many high street outlets (barber shops/fast foods etc prefer and push cash for its liquidity and lack of traceability.

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

When I wrote The Death Of Cash Is At Least 190 Years Away in 2013, I'd modeled a continuous decline in cash usage by 1.95% a year. I never expected that cash usage would go up after 10 years. Hmmm.

Patrick Lemmens Portfolio Manager Global FinTech & Financial at Robeco

It is not that surprising, Covid created a big move to e-commerce shopping and hence non-cash payments. In 2022 lockdowns (partially) ended in the UK and cash payments came back. The long term trend remains the same, less use of cash. More and more invisible, embedded payments.

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