Debit cards were the most popular form of payment in the UK last year, overtaking notes and coins for the first time and by the mid-2030s cash is likely to represent only 10% of all payments, an independent report predicts.

The newly-published Access to Cash Review follows an interim report last December that considered UK consumer requirements for cash over the next five to 15 years. It noted that despite the growing use of cards and electronic payments, around eight million Britons – one in six of the population –  say that cash is still an economic necessity.

Although commissioned in July 2018 and funded by cash machine network Link, the review’s content is independent and was overseen by the former head of the UK’s Financial Ombudsman Service Natalie Ceeney, with other members including Richard Lloyd, the former executive director of consumer group Which?.

The new report concludes that the UK is not yet ready to move to a totally cashless society. Despite the increasing popularity of contactless and mobile payments, an estimated 2.2 million people still rely on cash for their basic day-to-day transactions.

 “Britain’s shift away from cash is irrefutable,” says Ceeney. “Today, we only use it for three in every 10 transactions, down from six in 10 a decade ago.”

Funding crunch

The review warns that while many UK adults would struggle to cope in a cashless society the country’s “cash infrastructure” is in danger of collapsing.

It reports the annual cost of maintaining the UK’s cash infrastructure – from automated teller machines (ATMs) to cash-sorting centres – at around £5 billion, paid for predominantly by banks, and ultimately consumers.

While these costs are largely fixed, income has been in sharp decline, resulting in “a cash infrastructure which is fast becoming unsustainable”. The review’s authors urge the government, regulators and banks to “act now or risk leaving millions behind” and add that access to cash should not be left to be determined by market forces.

They suggest that some of the companies that support the current ATM network “may consider exiting the market as its profitability declines – leading to the risk of disorderly collapse … Without an effective wholesale cash infrastructure, ATMs won’t get filled, cash deposits won’t get counted, and we won’t trust the value of money.”

The volume of cash removed from ATMs is in sharp decline and Which? estimates that currently around 300 cash machines across the UK are closed each month

Review recommendations

The report makes a series of recommendations to protect cash, calling on regulators to:

• Guarantee access to cash.
• Ensure cash remains widely accepted.
• Create a more efficient, effective and resilient wholesale cash infrastructure.
• Make digital payments an option readily available to all.
• Ensure joined-up oversight and regulation of cash.

Which? is also lobbying for a regulator to be appointed to oversee the UK cash infrastructure and protect access for those who still who rely on cash.

Lloyds Bank is reported to have launched a scheme to pay small shopkeepers to offer customers cashback in areas of the UK where ATMs have been withdrawn. The scheme aims to restore access to cash and boost footfall for shops in smaller towns and villages.

The review notes: “Clearly, some communities will need the 24/7 access that ATMs offer, but for others, a convenience store offering cashback might work better… and may be cheaper and more sustainable, as well as supporting local high streets.”