Payment volumes (millions) from 2010 to 2020 (UK Finance, 2021).

During 2020, there were 13.7 million consumers who used cash only once a month or not at all, and instead relied on card or other payments. This was a significant increase from 7.4 million the previous year (UK Finance, 2021).

The decline of cash has been attributed to three key factors for consumers:

• Increase in the use of contactless payments (via both cards and mobile phones)
• Increase in the upper limit for contactless to £45 
• Lockdown government guidance on staying safe by using contactless

And these factors for businesses:

• Cheaper access to card readers for businesses 
• Making Tax Digital – which makes it easier for businesses to get their tax right and keep on top of their affairs

However, cash is still the second most common form of payment, and is relied on by the most vulnerable people, such as the elderly and low-income households. 

In February 2020, 5.4 million adults (10%) relied on cash for all or most of their daily purchases (FCA, 2021).

Why do businesses use cash?

Businesses face relatively few barriers to accepting cashless payments or increasing the amount of cashless transactions they accept. The main barrier was customer preference for using cash, rather than technical or cost implications. 

Cash payments had the lowest direct fees associated with them in comparison with other payment methods, and many businesses said there were no direct costs associated with cash payments at all (HMRC, 2021).

Among small businesses that provided ongoing direct costs for the payment methods that they accepted, the highest mean costs were for online bank transfers at £8,471 per annum. The lowest mean direct costs were for cash payments at £676 per annum (HMRC, 2021). 

• 44% of respondents said security is a top factor when considering what payment method to use
• Most businesses weren’t aware of the difference in cost between payment methods (FCA, 2021)

Businesses such as market stalls still rely on cash heavily, so for these traders, access to cash is crucial. 

Response so far:

The government’s main response is to support digital payments while safeguarding cash for those who need it. The government has allocated oversight to the Financial Conduct Authority (FCA) and Public Sector Resourcing (PSR); however, these are not decision-making bodies.

Stakeholders:

Currently, no single authority has overall responsibility for overseeing the maintenance of a well-functioning cash system.

Developments:

KEY STATS:

2019: Research from Public Sector Resourcing (PSR) indicates that only 54% of small businesses accept cash.

LINKS:

Access to cash: Call for Evidence (October 2020)

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/926666/Call_for_Evidence_-_Access_to_Cash_15.10.2020.pdf

Joint Authorities Cash Strategy (JACS) Group: Safeguarding the UK’s Cash Infrastructure (July 2020)

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/900535/JACS_Group_Update_July_2020.pdf

Cash and Digital Payments in the New Economy: Summary of Responses (May 2019)

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/799548/CfE_-_Cash___Digital_Payments_Response_020519_vf_digicomms.pdf

Consulation on the Future of the UK’s Wholesale Cash Distribution Model (June 2020) (WDSG Consultation Paper)

https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/consultation-on-the-future-of-the-uks-wholesale-cash-distribution-model.pdf?la=en&hash=D9B4FB7B6CA6FD3F846E5C277AE3BB8D20F2B928

Community Access to Cash Pilots 

https://communityaccesstocashpilots.org/for-small-businesses/

Understanding the Use of Cash by Small and Mid-Size Businesses (March 2021)

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/992010/HMRC_research_report_616_Understanding_the_Use_of_Cash.pdf

Protecting Access to Cash (House of Commons report) (October 2021)

https://researchbriefings.files.parliament.uk/documents/CBP-9054/CBP-9054.pdf