Few countries have taken to digital payments as enthusiastically as the UK.
With Covid-19 accelerating pre-existing trends in consumer behaviour, digital options have overtaken cash as the most popular means of paying for goods and services. As contactless limits rise, paying with digital wallets gets easier and tracking our finances on phone apps becomes more convenient, it won’t be long until only relatively few people are using cash. But there are concerns that this small minority might be left behind in the transition to a digital economy.
The network for cash infrastructure is large and expensive – estimated at around £5bn per year. As the use of notes and coins dwindles, there would be strong incentives to scale down cash access and acceptance if not for the UK government’s commitment to protecting access.
In a landmark agreement, UK banks have responded to the government’s concerns over the maintenance of cash access by announcing that they will share bank branches. This will ensure that anyone who depends on cash can continue using it for the foreseeable future.
While banks might be able to save some costs through shared services, much of the physical infrastructure required to provide an extensive cash network is fixed. As the volumes of cash usage fall, costs per user will continue to increase. Either the small number of cash users may end up shouldering these higher costs, or other customers will be left paying to maintain the network for the few that still use it. Neither option is ideal. Moreover, banks, payment providers and retailers that bear these costs will face increasing competition from digital firms that offer limited or no cash services. So the cost pressure of continuing to provide access to cash is likely to remain a concern.
Having settled on an approach to ensure access to cash for the medium term, the most sensible next step for all parties concerned might be to help everyone to embrace the move to digital payments, and focus support where it is most needed. Putting a fully inclusive digital economy at the top of the policy agenda would ensure nobody is left behind, making “access to cash” a lesser concern.
Most people will naturally switch when digital alternatives become easier to use than cash. New, better tools are emerging all the time. But there is a small group of people who are unable to embrace digital payments for different reasons. They may lack a smartphone, rely on others to buy things for them, or do not have an address and so are unbanked. The best way to protect them is to design solutions that let them participate in the digital economy.
To do this, we need to thoroughly understand the barriers to going digital and come up with creative ways to tackle them. If a barrier is the lack of a smartphone, why not provide one and simultaneously open access to lots of other services beyond payments? For those who rely on others to do their shopping, there needs to be an easy, intuitive way to move money between individuals and see their balance – a well-designed app could do that. As for the homeless, a system in Glasgow managed by local shelters enables them to pay for groceries using QR codes.
Once people are able to participate in one part of the digital economy, it would open doors to others. That means that solving access to digital payments could allow the unbanked and others who rely on cash to take advantage of a broader range of digital services, such as paying bills and ordering prescriptions online or getting the best deals on holidays. The time and cost savings many of us already enjoy could be available much more widely.
An all-inclusive digital economy would make it easier for all parties to share a common objective, delivering benefits far beyond access to cash.