Cash isn’t King anymore. The truth is, it’s been in decline for a while. Stats from 2017 to 2018 show cash use for payments fell by 16%. A decade ago, cash accounted for about 23 billion payments in the UK. That’s compared to about 5 billion for debit card payments.
By 2018, debit card payments had overtaken cash payments, officially becoming the most popular payment method by 2019. And it is predicted that by 2025, debit card payments will account for about 22 billion transactions a year in the UK, while cash will account for fewer than 5 billion.
So in the last decade, cash has been resoundly replaced by debit and payment cards. In the same period, cash fell further behind other payment methods. Contactless cards became more popular, leaving Chip and PIN as an outdated form of payment. And more recently, digital wallets and smart devices have started to outstrip cash payments.
All in all, cash is in crisis. And then Covid happened.
What we’ve seen in the last few months, has been an acceleration in a trend towards contactless payments. It has been growing gradually, now it’s like a rocket. The latest stats from UK Finance showed that £6.5billion in payments was taken using contactless card readers in June. Contactless payments also increased by 2.4% from the same period in 2019 (even though consumer spending as a whole decreased). And contactless payments increased 15.5% between May and June 2020.
So while payments as a whole are down, contactless payments make up a much larger majority.
Consumers are being encouraged to go contactless
What has helped accelerate the use of contactless payments, is that customers are now being actively encouraged to go contactless to help with the containment of Covid. Governments and health authorities have called for an increase in contactless payments.
Many businesses have stopped accepting cash payments.
The limit on contactless payments has increased from £30 to £45, and roughly one in three UK consumers now want that increased again as they get used to paying using contactless. What was once seen as a novelty, has become the status quo.
No going back to cash
As contactless has become more common as we’ve all got used to paying using card, even those who are now doing so for the first time, predictions are largely that there is no going back to cash payments.
Visa’s European chief executive Charlotte Hogg has previously said that customer behaviours have fundamentally changed in reaction to Covid and people who have got used to paying using contactless will continue to do so.
In July Barclaycard reported that 90 of face-to-face transactions were made using contactless cards in April.
Customers themselves say they become more comfortable using contactless card payments this year, with many saying they plan to continue doing so even after we’re officially out of the current Covid crisis.
Consumers prefer different payment options
And you only need to look at how payment technology is moving to see that the likelihood of going back to cash is basically zero. More and more we’re seeing an increase in the use of “mobile wallets” which allow us to make payments via a smartphone, or even wearable devices. Payment methods like Apple and Samsung pay are becoming much more popular, particularly among young people. 41% of 18-26 year olds adopted mobile payment apps in 2019 according to this study by Statista. For this younger generation, using a smartphone to pay for something is the normal way of paying.
Cash is becoming ‘more expensive’
Perhaps the final nail in the coffin for cash, is the fact that it is becoming more expensive for consumers to use. This is because the cost of withdrawing our own money from ATMs is on the rise. According to a 2020 study by Which, bank customers paid more than £100m to access their own cash from an ATM.
The study claimed that the cost of withdrawing our money from back machines had increased three fold within the two year period from 2018 to now. So not only is contactless more convenient, it is now cheaper for the consumer.
Cash has had its day
What is clear, is that while cash may continue to be used for some payments, it is now very much the minority form of payment choice.
With younger consumers moving more towards more tech focused payment choices, it is up to businesses to make sure they are making moves to adapt to those changing expectations. Today’s modern contactless card readers can accept contactless payments from both cards and smart devices.
At a time when customers are expecting convenience in payments, are you able to offer it to them?