Cash Matters in Britain with Usage Rising and New Safeguards Proposed
Jan 22, 2024
Cash use has risen UK-wide for the first time in a decade, coinciding with a financial watchdog recommending new rules requiring banks and building societies to actively address gaps in local cash access.
The British Retail Consortium (BRC) Payments Survey 2023 showed a rise in cash transactions of four percent over the previous year—from 15 to 19 percent—which is the first increase since 2013.
This reflects a choice by many households to use cash to budget more carefully during the onset of the cost-of-living crisis, as well as a natural return to cash usage following the move to contactless during COVID.
Alongside this increase—described as ‘welcome’ by the BRC—the survey also shows cards accounted for 76 percent of transactions (down from 83 percent the previous year) and says this dominance ‘has come at a significant cost to retailers’, with figures showing a 27 percent rise in card scheme fees and a seven percent increase in interchange fees as percentages of turnover.
We are now seeing a return to many of the pre-pandemic trends in payments, including smaller but more frequent purchases, and a slight return of cash payments. Unfortunately, what has not changed is the ever-increasing scale of fees paid by retailers in order to accept card payments.
In its conclusion, the BRC calls for ‘meaningful reforms to increase competition and reduce costs in the payment market’. With cash offering robust competition to for-profit cashless options, the organisation is also keen to see greater legal protections for both access to and acceptance of banknotes and coins.
The increase in cash usage—both by spend and transaction numbers—is welcome. BRC members are committed to accepting cash payments, supporting vulnerable groups and those using cash to budget. Government should ensure that cash acceptance is a viable option for merchants and customers across the whole ecosystem.
The UK’s Financial Conduct Authority (FCA) is in agreement, proposing the introduction of rules designed to safeguard cash access across the nation. It says designated banks and building societies should be required to conduct assessments to identify gaps in cash access, with consideration given to local factors such as demographics and transport infrastructure.
Should these assessments find significant gaps, the rules would require the delivery of ‘reasonable additional cash services to fill these voids before closing any cash facilities, including bank branches.’
These proposals set out how banks and building societies will need to assess and plug gaps in local cash provision. This will help manage the pace of change and ensure that people can continue to access cash if they need it.
While these rules ‘will not prevent bank branches from closing’ they would affect areas in which branches are ‘a key local source of cash’. The consultation period for the proposal will close in February, with finalisation of the rules expected by the third quarter of 2024.