The UK has moved a big step closer to becoming a cashless society after official data showed that the number of payments made using notes and coins fell by 35% in 2020.
Changes in spending habits have been dramatically accelerated by the coronavirus pandemic, with 13.7 million people leading a “cashless life” last year – almost double the 7.4 million figure in 2019. Five in six payments now involve no notes or coins, compared with half of all transactions a decade ago.
A growing number of businesses both big and small now refuse cash, with many having opted to go card-only over the past year.
The retailer Ikea says on its website that “for now” it is not accepting cash payments in its UK stores. Similarly, the restaurant chain Nando’s says customers cannot pay with cash, the Japanese food chain Itsu talks about being card-only in-store and the craft beer firm BrewDog is among the hospitality businesses that are now cashless.
Others such as Birds Bakery are discouraging the use of physical money. The Midlands chain, which was at the centre of a recent row about only accepting card payments in-store, says it “would prefer to take card payments where possible”.
Cash graphic
“There has been a significant fall in cash use by consumers in a relatively short period of time,” said the banking trade body UK Finance, which issued the figures. “Since 2017, cash use had been declining by around 15% each year, so 2020 represented an acceleration of this decline.”
The trend reflects the fact that many places where people commonly use cash, such as pubs and cafes, were shut for chunks of last year, while the lockdowns prompted a surge in the numbers shopping online. While a string of businesses have temporarily or permanently gone card-only, some consumers have been avoiding touching banknotes and coins because of Covid transmission worries.
Nevertheless, the findings are likely to fuel concern about millions of people potentially being left behind as the shift to a cashless society speeds up. About 1.2 million consumers still mainly used cash for their day-to-day spending during 2020, down from 2.1 million people in 2019.
The independent Access to Cash Review said there were more than 5 million people in the UK still “heavily reliant” on notes and coins, while the consumer body Which? said those who still depended on cash to pay for everyday essentials “must not be forgotten”.
Contactless and mobile payments exploded in popularity last year.
The number of contactless payments rose by 12% during 2020, and overall they accounted for more than a quarter (27%) of all payments. As recently as 2016, the figure stood at 7%.
This has been driven by a number of factors, including the decision to increase the upper limit for tap and pay from £30 to £45 in April 2020 – a further rise to £100 is planned – and a belief that contactless is more hygienic than handling cash.
About 83% of people in the UK now use contactless, with no age group or region falling below 75%.
Payment graphic
Cash was used for 17% of all payments in 2020 – down from 45% in 2015 and 56% in 2010.
Despite this, it remains the second most frequently used payment method behind debit cards, and next week a new £50 note featuring the scientist Alan Turing will go into circulation. UK Finance said it was entirely possible that cash may “bounce back” later this year or next year.
During 2020 there were 13.7 million consumers who either did not use notes and coins at all, or only once a month. This number has grown rapidly: in 2018 it was 5.4 million people, in 2017 it was 3.4 million and in 2016 it was 2.9 million.
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However, with large parts of the economy closed for some of last year, UK Finance said this was not necessarily a measure of people who had chosen to live a cashless life.
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In the 2020 budget, ministers announced plans to introduce legislation to protect access to cash for those who need it. Gareth Shaw, the head of Which? Money, said the government must make progress on this to ensure that cash remained a viable payment option for as long as it was needed.
The Access to Cash Review has previously warned that the country’s “cash infrastructure” – from ATMs to cash-sorting centres – could be in danger of collapsing because while the costs are largely fixed, income is declining quickly. Natalie Ceeney, its chair, said that as cash use declined, “there is an increasing risk that people won’t be able to access it or that shops won’t accept it. It’s not a case of waiting for people to learn to use digital.”
