Home Business NewsBusinessBanking News A very real warning: We must protect the cash ecosystem

A very real warning: We must protect the cash ecosystem

25th Jul 19 12:00 pm

The architects of the ‘cashless society’ would have us believe the case for cash is dead. This is simply not true. It is true, however, that with declining bank branches, the payments and banking industries must innovative to continue to effectively provide communities with much needed access to cash.

Why cash will remain important in future

Despite the rise of contactless cards and mobile banking, cash remains a very important part of the payments mix today. In fact, according to the latest UK Finance report, 90% of the UK still relies on cash to some degree, and there is more cash in circulation than ever before.

Moreover, according to the G4S World Cash Report, almost 10% of global payments take place through cash. Contrary to popular belief, the use of cash is rising worldwide. Cash payments have increased almost 2% since 2011. Indeed, 75% of countries have reported that cash is used in over half of the world’s total daily transactions.

Earlier this year, Natalie Ceeney published her ‘Access to Cash Review’. This independent review considered consumer requirements for cash over the next five to fifteen years and revealed that approximately eight million (so 17%) of people say that cash is an economic necessity. As the longest-standing player in the global institution of money, cash plays such an embedded and pivotal role in the payments ecosystem that it is virtually impossible to totally remove.

Despite this, the report also provided the banking industry with a stark warning; that is, in Ceeney’s own words, that we are ‘sleepwalking towards a cashless society’. While one cannot deny that cash is not as popular as it once was, the report makes it abundantly clear that we are not ready to be cash-free. The specific processes that would need to be employed for this to be considered, and the time it would take, is too substantial. And as a society, we would suffer for it. Those most at risk are those that live in rural communities where cash is a crucial part of everyday life, as well as those that are most vulnerable in our society. This is, evidently, very worrying.

Innovate through existing local infrastructure

Nevertheless, as banks increasingly focus on their digital infrastructure, the continued closing of local branches will become inevitable. Many towns are set to lose their last bank – and with that, their last ATM too. For this reason, it is incumbent on the payment industry to innovate in order to continue to provide these vulnerable communities with their crucial access point to cash. And as banks consolidate and move out of local communities, making intelligent use of the existing infrastructure is the best way to do this.

One potential solution is making use of existing community access points and underutilised networks to support government’s longer-term aspirations around stability in the payments ecosystem. If local bank branches are to be eradicated, it is vital that they are replaced by an equally accessible network, so that vulnerable and rural communities don’t face financial exclusion.

By creating a hub of local services, community access points could play a big part in the future of cash in the UK. For example, the concept of ‘banking hubs’ in communities is one which is gaining traction in the payments industry, and could be a sustainable long-term answer for local financial services. They would use ATM technologies to provide customers with all functions of a bank branch. These hubs would not have a specific bank affiliation, as multiple banks would be present and sharing the costs, which means they would be available for any customer. By sharing the burden across multiple banks using ATM technologies, it would be a more efficient way to provide local services.

But these alternatives won’t be enough on their own. In order to ensure rural areas are not financially exclude, a goal we should all be set on achieving based on the worrying ‘Access to Cash’ report, we need absolute commitment from the financial services industry, the payment systems regulator and the FCA that cash will be protected. To coordinate this crucial coming together of the cash network, a dedicated overarching regulator may be required.

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