A guest blog by Conor Sinnott – Conor is an intern at independent financial services consultancy Enryo.

Covid-19 has not only driven new changes in consumer habits but also accelerated trends that have been developing since before the turn of the century. This is no more obvious than in the use of cash and coins for the purchase of retail products. 

The impact of lockdowns around the world have led to online retailers gaining substantial market share across almost all goods and services. Furthermore, widespread media stories at the start of the pandemic expressing concern over the safety of handling cash in the presence of Covid has sped the transition from cash to contactless in physical retail payments. However, research by the Bank of England has since thrown cold water on the risks of cash as a vector of transmission. According to estimates by financial services consultancy Enryo, the total volume of cash transactions fell by 50% from 7.2 bn in 2019 to 3.4 bn in 2020. While the permanence of these changes remains to be seen, the potential implications for individuals and companies who do not keep pace with this change across the economy are massive. How governments and firms now react to the declining use of cash is of great importance.  

The more appropriate way to view the decline in use of cash may be as the concentration of cash use in sections of society that are not yet ready to move to digital payments (Enryo). These groups include some of society’s most vulnerable such as those on lower incomes, those with physical/mental health problems and those at risk of overspending. Thus it is of vital importance that stakeholders within the system work together to ensure that the 1.7 million people without bank accounts are not left behind, either by bringing them into the digital system or maintaining suitable structures to facilitate the continued use of cash by those who wish to do so. 

Many of the unbanked are in this category because of an unwillingness or inability to embrace change and so the obvious solution derived from this is a simplification of services and an increase in breadth and depth of education. OneBanks in this way is an excellent solution. The start-up company launched in 2020 aims to streamline the physical banking service while simultaneously broadening its coverage in response to the disappearance of many high street bank branches. Allowing customers from multiple banks to access services from a single, small kiosk highlights their embrace of advancements in financial technology while also recognising the need to not allow anyone to fall by the wayside. At the moment the process of entering the banking system is for many an incredibly daunting task, OneBanks maintains face to face banking to allow those who most need help managing the digital learning curve to reach the outcome that suits them best. This appears to be an ideal antidote to so-called “cash deserts” that are emerging around the UK as a result of bank branches, ATMs and Post Office closures.

As we see the majority of society transitioning at an increasing rate from cash to digital payments the relative cost to banks of maintaining a physical presence, particularly in rural areas, rises. It is vital that in this tidal wave of digitalisation those most vulnerable are not left stranded. FinTech has the ability to revolutionise banking in an increasing number of ways, but it is important that any improvements are of an inclusive and Pareto nature.