The use of cash and coins is declining at such a rate it may not remain viable for as long as the public needs it, a report has found.
Market forces could mean the use of digital payment methods could supersede cash to such an extent that it ceases to be widely accepted unless there is government intervention to preserve it.
According to the Access to Cash Review, which was authored by former financial ombudsman Natalie Ceeney, the UK isn’t ready to go cashless in the next 15 years and a “sizeable part of the UK population” will need cash for some time. The research took evidence from nearly 100 businesses and charities across the UK and was paid for by cash machine network operator Link, but was independent from it.
The report found essential services, such as utilities and council bills should continue to accept cash payments. Meanwhile, an independent body, funded by the banks, should be set up that would step in if local communities were running short of access to cash in shops and ATMs, it said.
Use of cash has been falling steadily across the UK, and in 2017 debit card use, fuelled by contactless technology, overtook cash as the most common form of payment for the first time. The report said that, at the current rate, cash use in the UK would end around 2026.
If left unchecked, the demise of cash would be driven by retailers and businesses refusing to handle it as a result of the cost of doing so.
But for the UK’s 1.3 million unbanked population, along with the 4.1 million in financial difficulty, that reality would prove problematic. Indeed, according the report, 47 percent of the UK population – around 25 million people – would be presented with real challenges by a complete move to digital payments.
Part of the solution to help maintain cash’s presence in the system is for local shops to offer cash-back to customers, rather than customers relying on ATMs.
It was also suggested that small businesses are given the opportunity to deposit cash in secure lockers or "smart" ATMs, rather than making a weekly trip to a bank branch.
It also calls for a “radical” overhaul of the infrastructure behind cash, overseen by the Bank of England.
The report found the current cash infrastructure was “built for a different age, with many different parts run by different commercial players, with no single point of oversight”.
“Right now, there are very limited powers for anyone to step in if the market fails,” it said.