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UK's cashless transition under the microscope as Payments Choice Alliance pushes back

UK's cashless transition under the microscope as Payments Choice Alliance pushes back

The UK is gearing up to follow the footsteps of Norway and Sweden as an increasingly cashless society given the sparse usage of cash post-pandemic. London in particular has become a hub for online payments, with a significant number of retailers no longer accepting cash. The transition was intensified by the need to socially distance during the pandemic, as the usage of e-wallets and digital transactions has accelerated.

According to the World Economic Forum, the use of cash has been decreasing internationally, with currency use in the US falling from 10.4% of the GDP to 8.6% between 2021 and 2022, and falling from 10.1% of the GDP to 9.8% in the Eurozone during the same time frame. Additionally, 90% of central banks are developing plans for central bank digital currency (CBDC) that have the potential to reduce the use of cash.

Positioned steadfastly against this shift is the Payments Choice Alliance, an organisation that demands that every person in the UK should be provided with options around making payments.

Ron Delnevo, chair of the Payments Choice Alliance, explained the aims of the initiative to Finextra: “The ability to use cash in the UK is under threat. We are facing a situation where a lot of people are not being able to exercise choice, that they would have had until very recently, in making payments. The Alliance is not an industry body; it is made up of people from various sectors of life who believe in payment choice, and associated rights and values such as democracy, free speech, independence, and privacy. We believe payment choice is a pillar of democratic society - and it is a pillar we are aiming to keep in place.”

Elaborating on population segments which are at risk of becoming isolated without cash payment options, Delnevo notes that there are around 40 million adults in the UK who fall in to this category. These may be people from socio-economic brackets which cannot afford new technology, older generations, travellers who do not have access to overseas cards, and small businesses that use cash for budgeting purposes.

Can retailers offer aid where banks are lacking?

Certain retailers have been focused on providing consumers with multiple options of payment, such as grocery giants Sainsburys and Tesco, which both accept cash and often have ATM machines outside their stores. Delnevo explains that the Payments Choice Alliance aims to encourage these retailers to offer cash deposit services, where businesses can have the option to deposit cash within these stores.

“Businesses which accept cash for payments - and they all should - need to be able to deposit that cash conveniently. To help with this, it would be great if Tesco, Sainsburys and other major retailers could provide a home for cash deposit solutions, so that any business in a local community can come along and deposit their cash takings in a secure environment in a machine that's set up to accept cash deposits. Clearly, there are very few bank branches left to offer a cash deposit option and whilst it is excellent that businesses can deposit cash in post offices, that's not always convenient or available seven days a week.”

What legislation needs to be implemented to create cash options?

Delnevo points to new legislation in Spain, elements of which could be included in a UK Payments Choice Act: “In Spain, in May 2022 a law came into force which includes payment choice provisions. This law compels businesses to accept cash payments up to €1000 per transaction. The law also covers other payment methods, but at its heart it is focused on ensuring the Spanish public can spend their cash when and where they want to do so. At the Payment Choice Alliance, we believe that the British public deserve the same rights to use their cash as the Spanish public now enjoy.”

Delnevo mentions that the Alliance is looking to raise awareness for their cause, and have been speaking to MPs to generate more attention around the lack of cash payments available in the UK. He states that MPs in multiple parties are invested in the cause, and that cash payments could become a General Election issue in 2024 if a UK Payments Choice Act is not introduced in 2023.

How is the UK’s progression towards a cashless society?

Speaking from the opposing perspective is Martin Bradbury, regional director of financial services UK&I at Dynatrace. Bradbury says: “A cashless society enabled by digital innovation has the potential to unlock a range of economic and social benefits. For example, with taxation, there would be a higher level of transparency because of the precise transaction records and identifiable digital footprints that cashless transactions automatically provide."

He adds that multi-factor authentication and encrypted digital wallets can further protect users from fraud and theft, making a cashless society more secure.

Explaining the ways in which lower-income communities and older generations can be included in a cashless system, Bradbury furthers that personalisation, education, and inclusion need to be phased in the approach: “Interfaces and apps should be tailored so that all levels of digital skills and economic circumstances are fully catered for. For example, there is often an assumption amongst those who are digitally native that everyone has access to the necessary technology but this might not be the case. A good payment experience also differs across socio-economic groups, and so banks need to tailor each experience and educate users on how to best use the services for their specific situation.”

He continues to say that governments and banks should use data collected and AI automation strategies to assess payment behaviours and see where the customer experience can be improved for all societal groups. On the progress the UK is making to achieving cashless status, there is still a long way to go. The payments ecosystem and banks need to be up to task with providing everyone with options to pay online and there has to be a smooth operating system to avoid disruptions on digital services.

What is next for the UK payments sector, cash or e-card?

While both Bradbury and Delnevo’s points sit at opposite ends of the spectrum, they reflect strong perspectives on the use of cash in the UK’s future. As the nation barrels towards an increasing amount of online payment methods, it is up to cooperation between banks, fintech, and the government to provide for the needs of the public, whether that is retaining the importance of cash payment options or investing more in digital payments technology moving forward.

Comments: (18)

John Davies
John Davies - Velo Payments - London 12 May, 2023, 14:234 likes 4 likes Forcing merchants to accept cash would be a major step backwards. The merchants should have the choice too and if they don’t have the provisions to accept cash they should be within their rights to exercise choice not to. Banks now charge to take cash, leaving cash on the premises risks crime and more time is required to handle cash. Cards however are not the solution, they cost the merchants a significant proportion of their profit margin. The future is Open Banking, no cash, quick and safe transaction and virtually cost-free.
A Finextra member
A Finextra member 12 May, 2023, 16:52Be the first to give this comment the thumbs up 0 likes

I think you miss the point... Cash is legal tender, cash offers an alternative to individuals who do not want 100% of their spending habits to be tracked, cash provides a fallback in the event that hostile parties or technical failures impact digital payment processing and enable the underbanked to access services.  If cash is excluded from acceptance or is charged for at premium pricing - then the underbanked are disenfranchised completely, and we lose a valuable DR solution and alterative fallback option

Jeremy Light
Jeremy Light - pingNpay - London 13 May, 2023, 14:12Be the first to give this comment the thumbs up 0 likes

cash is the only truly inclusive financial instrument. A cashless society and financial inclusion are a contradiction. Anything that requires owning a device or registering credentials creates an immediate barrier and a vector for financial exclusion.

Digital payments are great but it is best to avoid any policies that promote or discourage cash and let the market i.e.society decide.

David Gyori
David Gyori - BANKING REPORTS, LONDON - London 13 May, 2023, 15:291 like 1 like

I agree with John Davies, except, I want to call it real time, free, digital, 365/24/7, local currency, interbank messaging, clearing and settlement, with QR-ized bank accounts. A2A (Bank Account to Bank Account) payments as iDeal in the Netherlands does it. 

This can work in E-Commerce as well as Point of Sales In-Store Physical Commerce. 

Ritesh Jain
Ritesh Jain - Infynit / Former COO HSBC - London 14 May, 2023, 19:07Be the first to give this comment the thumbs up 0 likes

The UK's shift towards a cashless society is intriguing, but we must consider the impact on cash-dependent populations. The Payments Choice Alliance's focus on preserving payment options is commendable for inclusivity and democratic values. Balancing cash and digital payments, tailored solutions, and stakeholder collaboration is crucial for a smooth and inclusive transition. I prefer a less cash economy with an increased focus on digitisation and policies favouring payments as digital public goods, accessible, transparent, and secure! 

A Finextra member
A Finextra member 15 May, 2023, 08:15Be the first to give this comment the thumbs up 0 likes

Dont go in there...... its a trap!!! 

A Finextra member
A Finextra member 15 May, 2023, 10:11Be the first to give this comment the thumbs up 0 likes

I'd like to see a cashless society, but first we need an easier way to lend small amounts to each other without a smartphone.  We also need businesses such as hairdressers and casinos to catch up.  

A Finextra member
A Finextra member 15 May, 2023, 10:302 likes 2 likes

Cash is ok if you as a user accept to pay for the cash payment service you receive. Most people who demand cash usage, demand it for free both to obtain, spend and possibly deposit it somewhere. This means that the free of charge users are inflating cost of goods and services for all that are forced to offer cash availability and thus expect somebody else to pick up the tab. Free housing, free TfL access could be other issues that should be availabe to all for free. Cash services should be subject to same competition based  pricing as the pricing of all services we consume. If the government wants to "protect vurneable groups" this should be made through social services and not demanding that any business should subsidize the cash users.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 May, 2023, 11:07Be the first to give this comment the thumbs up 0 likes

Maybe things have changed now but last I heard, cash is legal tender and it's illegal not to accept cash.

A Finextra member
A Finextra member 15 May, 2023, 11:08Be the first to give this comment the thumbs up 0 likes

Certainly not true in the UK, Ketharaman.  Lots of businesses, especially startups like food trucks, are card-only.  A lot of bars are now going the same way.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 May, 2023, 11:34Be the first to give this comment the thumbs up 0 likes

TY @FinextraMember, I get that, in fact I've come across some businesses like that myself, but my question was about legality of such practices. Going by many new-age companies that leverage regulatory gaps, I've stopped believing that the continued existence of a certain business practice automatically means that it is legal. 

John Davies
John Davies - Velo Payments - London 15 May, 2023, 11:34Be the first to give this comment the thumbs up 0 likes “A FinExtra Member”, people who don’t want transactions tracked are usually laundering or avoiding tax. From your window cleaner to the nail salon, it’s simply the black economy, like cryptocurrencies but without the Ponzi part. One of our largest groups of users are hair dressers and barbers. Clients turn up today with no cash (as it’s largely useless in major cities), they are then stung with having to pay 3% for the card networks (PSPs, PayFac, POS, acquirer, network, issuing bank etc.). Through Open Banking we save them the 3% and give it back to the merchant. As fewer shops take cash, people will stop carrying cash, as is the case today. Cash will eventually disappear just like carrying a lighter or matches just in case. Regulating to keep it is fighting progress, there are better ways to help those who still want cash without alienating them. We need to adapt to change and help those who are less able to adapt to the inevitable.
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 May, 2023, 11:47Be the first to give this comment the thumbs up 0 likes

These guys only want.

The guys who actually launder money and avoid tax have been using wire transfers to offshore banking jurisdictions for decades. Global banks have been slapped billions of dollars in fines for money laundering. I'm guessing they didn't aid and abet using sacks of currency notes.

While I have a vested interest in the proliferation of digital payments, it's a myth that cash <=> tax evasion and money laundering. 

A Finextra member
A Finextra member 15 May, 2023, 11:59Be the first to give this comment the thumbs up 0 likes

10.30..... To say Electronic payments are free and dont impact the world we live in, and that Cash costs us??  Does that mean that the whole VISA/MC/Amex/ Banking infrastructure runs for free (charity)... If you think cards payments are free then you dont understand the 4 party model at all. Merchants load card processing into their prices... Yes cash is more labour intensive - not necessarily cheaper or more expensive.

A Finextra member
A Finextra member 15 May, 2023, 13:19Be the first to give this comment the thumbs up 0 likes

Of course card payments cost and users pay. Merchants pay for acceptance, issuers and acquirers pay to card schemes, card holders pay to issuers who also earn interchange fees for risk and efforts. If cards become too expansive, alternatives will emerge as the commercial card schemes know and therefore balance their takings on the upper limit. Cash also costs for cash in transit services, strongboxes in merchant cash registers (cash guard systems and the like), interest loss to owners on cash in circulation, bank deposit fees, atm withdrawal operations costs, shrinkage in cash tills, government losses of VAT revenue and income tax revenue, theft/robbery and their consequences, cash insurance costs, black market crime impact on society...  The issue is that the cost of cash to all and indeed society is "hidden" or indirect while card payment costs are more visible. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 May, 2023, 14:151 like 1 like

The issue with "cash has hidden costs" narrative is that I can claim that some of these costs are also there in the case of digital payments but, since they're hidden, I can't tell you what they are:).

Before credit card, merchants used to give credit on their own. They used to have FTEs on their payroll for invoicing, accounting, chasing customers for payments, etc. All of their costs of offering credit were fixed. Credit card has variabilized those costs. 

By the same token, cost of cash is fixed, there's nothing hidden about it. (The very fact that we're able to name them means they cannot be all that hidden.) 

Ergo, what we have here is a a BUILD v. BUY debate, which has a very different resolution than a hidden v. visible argument.

A Finextra member
A Finextra member 15 May, 2023, 15:05Be the first to give this comment the thumbs up 0 likes

Choice is something you dont realise the value of, until its gone.....  Poor (underbanked or disadvantaged) people dont use cash to launder money, they use it to access services,  Money launderers use cash but without electronic transfers - they cant scale the operation....  Freedom to speak your financial mind, via , cash OR  digital  is as important to me as the freedom to speak your political mind..... I may not respect what you say (or spend) but i will defend, to the death, your right to say or spend it!   When every penny of your financial life is logged and tracked, your autonomy is gone...  If a bit of crime is part of that, so be it,  BIG FRAUD is being performed via bank accounts and digital media....  small fraud is the three card monte on london bridge.. thats cash.

Chris Davis
Chris Davis - Kyndryl - London 16 May, 2023, 08:28Be the first to give this comment the thumbs up 0 likes Access to Cash is critical for many and it is important that we look after those who want it. I am surprised that the food work being taken forward by LINK was not mentioned in this article. Cheers Chris