Moving the “UK Fintech Week 2020″ to an online format was a smart move – especially as it meant that I could join the excellent ‘The Future of Cash Post COVID-19” webinar moderated by Natalie Ceeney and supported by Graham Mott and John Howells from LINK (the operator of the UK’s ATM network) – all from the comfort of a garden recliner in the sun.

Each week LINK publish weekly ATM usage data which has shown that the already significant reduction in ATM withdrawals has accelerated due to the impact of the COVID lockdown. LINK’s data shows that not surprisingly the number of transactions has more than halved over the past few weeks, after all there are so few opportunities to actually spend any cash.

Joining the UK Fintech Week 2020 session on ‘The Future of Cash Post COVID-19″ provided an opportunity to gain a better understanding of the current short term cash predicament and stimulate thinking on what this might mean in the medium to long term for the use of cash in the UK.

The webinar is still (currently) available at: The Future of Cash Post COVID-19. and certainly worth an investment of 60 minutes of your time.

Webinar’s are ten a penny and come and go but every so often one is worth its weight in gold. For me, this webinar is one of those rare beasts – helpful, clear, authoritative, focussed, informative and thought provoking.

To support listening to the real thing or instead of investing sixty minutes – let me share the key takeaways (my take aways so apologies if I didn’t accurately capture everything that was said):

Last year the Access To Cash report noted that ten years ago cash was used in 6 out of 10 transactions and that this had reduced to 3 out of 10 transactions in 2019. It further predicted that in 15 years time the use of cash would have fallen to 1 in 10 transactions.

UK Finance have recently stated that in such is the rate of cash payment substitution the 1 in 10 prediction may be achieved within a decade.

Natalie expressed a view that most consumers see advantages to digital payments but ‘digital’ doesn’t work for everyone. Whilst I am cashless advocate I’d agree on this point – it is vital that digital options are accessible, inclusive and equitable for all in society.

The Swedish path to a cashless society is often cited as a leading case study, with cash based payments only equating to 15%, this is certainly true. As physical cash becomes less important in Sweden there is much the UK can learn from their experience regarding digital inclusion and viable models for the availability and processing of cash for this who choose to continue to use it.

Learning from transition challenges that other countries such as Sweden experience is important. My view is that we preserve cash for cash sake at our peril. Rather we must ensure that a broad range of payment options are available for consumers to use – options that are accessible, inclusive and equitable for all in society and do not leave people (who continue to rely on cash) behind.

The barriers to a cashless society expressed in the Access To Cash report are real but even after just twelve months are being addressed:

  • poor phone / internet connectivity – initiatives are underway to banish ‘not spots’
  • digital options don’t meet everyones needs – the Connected card from Starling Bank is an excellent example and perfect for some of the COVID19 isolation challenges.
  • digital options for budgeting – the emergence of Open Banking is delivering solutions for digital based money management and budgeting like Goals / Pots from the challenger banks
  • cash helps some people avoid exploitation and abuse – I am not in a position to make a comment here
  • loss of cash risks personal independence – the emergence of Open Banking is delivering solutions for digital based money management

The cashless debate is two sided as the issue goes beyond just access to cash and includes the acceptance of cash – recently a number of firms have decided to be cashless.

The view expressed on the podcast was that:

  • cash is required until digital works for everyone
  • the provisions in the recent Budget to guarantee access to cash are welcomed
  • cash should be widely accepted
  • that the cash infrastructure is expensive for the ‘banks’ to operate and, like recent changes in cheque processing infrastructure, there may be a case for a wholesale cash distribution infrastructure
  • that there needs to be joined up oversight and regulatory approach to cash.

Having set the scene, LINK took the opportunity to share their perspective on the impact COVID19 is having on cash usage in the UK. It’s important to recognise from the outset that the insights provided by LINK were informative, honest and incredibly useful.

LINK report that:

There has been a 60%+ reduction in ATM usage over the past four weeks. On this basis the predictions on reducing cash usage made in the Access To Cash report have been significantly accelerated by COVID19.

It is possible that cash based payments have already reached 1 in 10 payments and will not bounce back. Habits formed by consumers and changes to retailers processes will continue this trend.

Notwithstanding the significant reduction in ATM usage and cash withdrawals, one third of the UK population are still using ATMS every week and £1 billion is still being withdrawn.

LINK believe that this step change reduction in cash use (both access and acceptance) will have a significant impact on companies that are part of the cash distribution network and points to the need for a utility structure (through industry consolidation) to preserve the future of a cash distribution network in the UK. The UK’s current cash infrastructure was built for a previous age of high cash usage and is not sustainable based on significantly less cash being used.

LINK and Gov.UK recent commissioned some research on peoples use of cash during the COVID19 pandemic. The key findings are:

  • 57% of people are using cash a lot less
  • 17% of people are using cash a little less
  • 21% of people are using the same amount of cash
  • 1% of people are using more cash

Given the number of places where the UK population can actually spend cash are severely restricted during this period the results are not necessarily a surprise – but with new habits formed this research may be an indication of future trends.

The research also asked about the use of cash post COVID19 – it seems that new habits might drive future behaviours:

  • 50% said they expect to use cards more
  • 40% said they expect to use contactless / phone payments more
  • 30% said they expect to purchase more online
  • 27% said they expect to use ATM’s less
  • 30% said they do not expect COVID19 will effect their use of cash (note: these people may be cashless or cash-only now).

When asked about challenges faced when using cash the research found:

  • 7% find it difficult to keep track of finances
  • 8% use cash to pay family and friends
  • 13% keep extra cash at home for emergencies
  • 9% find situations when they wanted to pay cash but could not.

All small percentages but, more importantly, all addressable with a digital approach that is accessible, inclusive and equitable for all in society.

LINK suggest that, like toilet rolls, the hoarding of cash as a COVID19 reaction has ceased.

For many months now LINK have been tracking the declining use of ATM’s and noted that COVID19 has significantly driven this decline – from 50 million transactions a week (12 months ago) to 20 million transactions a week now. Whilst LINK expect some post COVID19 recovery they do not expect previous levels of ATM usage to be achieved.

The average value of an ATM withdrawals has risen from £63 (in 2019) to £83.

Natalie rounded off the session with Q&A’s – of special note:

  • The suggestion that the Coin Act of 1971 that fires a company to accept cash was dismissed as a myth
  • Infrastructure resilience was stressed as a fundamental requirement for any systemically important payment system
  • The current cash distribution network is inefficient to maintain and could be addressed via the industry considering a utility model – but this would need government / regulatory support.
  • If ATM deployers withdrawal from age market the ‘bank’ ATM deployers will step in
  • If cash use is in such decline then banks and the finch community need to step up and make digital wrk for everyone
  • COVID19 has firmed cashless habits and previous levels of cash usage will not bounce back
  • Cash access points need to be set by government not banks
  • Consumers who want cash are used to free access to cash and, therefore, the costs should be met by the ‘banks’
  • Cash inclusion is greater than just access to ATMs and includes developments in cash back, post office and cash by post
  • Making digital payments a reality for everyone may have gain some learnings from the Digital / Analogue TV switchover

In closing, LINK predicted that in five years cash will still be ‘here’ but with significantly less usage, fewer ATM’s with a different geographic distribution, there will be different cash access points, local solutions and less dependancy on a physical infrastructure.

I’d tend to agree with this prediction but do wonder whether the 1 in 10 estimation might be on the high side.