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Poorest to be worst hit by a cashless society, warns Which?

Exclusive research from Which? finds UK not ready for a world without cash

Lower-income households and older generations will be hardest hit by bank branch and ATM closures that threaten their vital access to cash, as these groups use cash more frequently than average, new research from Which? reveals.

More than three quarters (78%) of consumers in the two lowest income households groups rely on cash, using it at least two or three times a week. This group are less likely than average to use a credit or debit card – in fact, just over a quarter (26%) never use card payments.

Cash usage is high among over-65s – the group perhaps most at risk of social exclusion when bank branches and ATMs disappear – with four in five (80%) reliant on cash, using it at least two to three times a week.

The findings come amid concerns that consumers’ access to cash is under threat, due to a severe reduction in bank branches on Britain’s high streets and changes to the funding model of ATMs that is seeing 250 disappear every month.


Cash: is anyone still using it?

In its online survey of more than 2,000 adults, Which? found that almost everyone uses cash (98%), with almost three-quarters (73%) using it frequently to pay for goods and services. Only one in 20 (5%) say they rarely use cash.

Card payments are the second most common payment method – used by four in five (80%), with six in 10 (63%) using contactless or card payments frequently.

According to official figures, use of cash is huge, though falling. Statistics published by UK Finance, the body that represents the banking industry, found that cash was used for a third of all payments made in 2017. This is down from 61% a decade ago, although the report acknowledged that 2.2 million people still spend predominantly using cash.

UK Finance also found that ‘during the last quarter of 2017, debit cards overtook cash for the first time as the most frequently used payment method in the UK,’ which happened earlier than expected due to the rise in popularity of contactless payments. It predicted that cash usage will fall to 16% by 2027.

Much has been made of the rush to digital payments in cities, yet only one in 10 (11%) Londoners said they rarely use cash, which may suggest many consumers in the capital still consider it an important payment method.

Concerns about a cashless society

While just over half of the people surveyed (54%) said they were not worried about moving towards a cashless society, more than two in five (41%) said they did have concerns.

Many expressed fear over the increased scope for scams with credit and debit cards and, following a series of IT collapses at the major banks, the reliability of electronic payment systems.

In 2018 alone, most of the major banks have suffered IT glitches, blocking customers from accessing their accounts. The worst of the was TSB, whose customers endured months of problems when the bank introduced a new IT system.

Meanwhile, bank account fraud has reached epidemic levels – last week, it was revealed that £500bn has been lost to bank account fraud in the first six months of 2018.

Are businesses ready for card-only payments?

The survey also found six in 10 (57%) had experienced a time when they could only pay by cash in the last three months.

Four in five (82%) said this was because cash was the only method of payment accepted by the vendor. Along with consumer demand, this highlights the importance of cash for businesses that often rely on it as their primary payment method. In fact, over half (52%) of respondents in the survey preferred to be paid in cash for goods or services they had provided.

Consumers are also keen to cling on to cash for low-value transactions, as two thirds (67%) felt it was important to be able to use cash for purchases less than £5, while just over half (52%) said the same thing for purchases between £10 and £20.

Why are ATMs under threat?

More than 2.2 million people rely on cash in the UK, yet the decline of ATMs could leave communities without free access to cash. Two in five (41%) survey respondents expressed concern about the decline of the ATM network over the last decade.

Recent research shows ATMs are shutting at a rate of 250 a month, compounded by the closure of close to 3,000 bank branches in the past four years. While the move to electronic and card payments is one reason for this, the ATM network has been threatened by a change in the way free-to-use cashpoints are funded.

Every time you use a free-to-use cashpoint, the bank or building society that issued your card has to pay a fee to the cash machine operator. So, if you use your HSBC card to get cash out from a Santander machine, HSBC pays Santander a fee (known as the ‘interchange’ fee).

However, on 1 July the interchange was cut by around 1p – initially the first of four annual changes that would have resulted in a 20% reduction overall.

Link has decided to postpone some reductions to the interchange fee while it carries out a review of the future of cash.

But Which? still believes measures aimed at preserving free-to-use machines in remote areas, which are excluded from the interchange fee reductions and in some areas can charge higher fees, and overall commitment to protect access to cash is failing.

Which? is calling for the Payment Systems Regulator to urgently step in to review the Financial Inclusion Programme and push LINK to publish its details. We believe that overnment should also place a statutory duty on the PSR to monitor and protect access to cash, and for the regulator to conduct a review of competition in the payment sector.

You can read Which?’s response to Link’s review here.

Survey details: Populus, on behalf of Which?, surveyed 2076 UK adults online between the 7th and 9th September 2018. The data were weighted to be demographically representative of the population.

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