Cash use is declining and the decline appears to have been accelerated by the pandemic, but it remains a key payment method for more vulnerable people

The way that consumers in the UK pay for goods and services has changed in recent years. Many consumers are increasingly turning their backs on cash and are moving to digital payments. This trend appears to have been accelerated by the coronavirus pandemic.

While there are benefits to digital payment methods, those who are unable to use this technology are at risk of being left behind. Lower income households and those who don’t have or can’t use the internet are much more likely to depend on cash and may therefore find themselves struggling in a cashless society. There is evidence that, during the pandemic, cash use declined less in constituencies with higher deprivation.

Digital payments are still less commonly used in some situations, for example: where online connectivity is limited; where retailers don’t take cards or where this functionality is down; or where someone relies on someone else making purchases on their behalf.

The cash system is under increasing pressure and there are fears for its future

Lower consumer demand is putting the system for accessing cash under increasing strain, as the economic incentives for providing cash infrastructure slowly disappear. This has led to fears the cash system could collapse in coming years as demand for cash falls further.

The number of free-to-use (FTU) ATMs fell by 13 per cent between 2018 and 2019, coupled with a 38 per cent increase in pay-to-use (PTU) machines. Data suggests that PTU ATMs have emerged disproportionately in more deprived areas since 2018. Overall, one in four areas were further from free access to cash in 2020 than in 2018 – but in most cases the increase in distance has been relatively low (less than 250m).

While ATMs accounted for 90 per cent of all cash withdrawn in 2019, consumers can also access cash via other channels, including over the counter at bank, building society and Post Office branches or through cashback at merchants that offer this service. Each of these has its own pros and cons as a way of accessing cash, however.

The other side of access to cash is the extent to which customers can pay by cash. There is limited evidence overall on the number of businesses that will not take cash. However, survey data suggest that one-in-ten consumers have been refused when trying to pay by cash since the start of the coronavirus pandemic.

Measures to protect access to cash

The 2019 Access to Cash Review highlighted the need for different government bodies and regulatory authorities to work together to address access to cash. This prompted the Treasury to set-up and chair the Joint Authorities Cash Strategy (JACS) group, bringing together the Treasury, the Payment Systems Regulator (PSR), the Financial Conduct Authority (FCA) and Bank of England to lead the UK’s strategy on this issue.

In the 2020 Spring Budget, the Chancellor said the Government would legislate to protect access to cash in the UK. Following this, in October 2020, the Treasury published a call for evidence to inform its future strategy. This outlined the Treasury’s views that ATM provision may need to move towards a more ‘utility-based’ model in future, that cashback without purchase could be made more widely available through changes to legislation, and that the FCA is likely to be best-placed to regulate access to cash in future.

Simultaneously, there are ongoing industry-led schemes to protect cash access and to pilot new ways of doing so. The Government is also taking steps to reduce digital exclusion and to support new innovations in financial technology.

Further information: Library briefing

A fuller discussion of these issues is available in our briefing paper Protecting access to cash (1 December 2020)

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