Andrew Crook restarted his fish and chip shop in Chorley, Lancashire, earlier this month after a coronavirus-induced lockdown, but his till remained closed. “I have taken no cash since I opened — and I love it,” he said.
Mr Crook is one of many high street operators from corner shops and takeaways to launderettes and hairdressers that have long relied on hard cash to keep their businesses running. However, spurred by government guidance that recommends contactless card payments rather than cash as businesses reopen, this is changing fast. And the shift may outstay the virus.
“It’s much more hygienic and easier accounting wise without,” he said, adding that card transactions had been steadily growing since he started taking them seven years ago. “I can’t see how offering cash-only transactions can be viable for any business after this.”
The effects are being felt through the banking system. ATM transaction volumes fell as much as 62 per cent year on year at the start of the UK lockdown, according to data from Link, which runs the UK’s cash machine network.
Volumes have picked up slightly over the past week as more businesses began to reopen, but Link chief executive John Howells said there would not be much more of a bounce back.
“We will probably end down about 30 to 40 per cent,” Mr Howells said. He added that many reluctant consumers were “learning how to use digital alternatives” and were happy with the change.
There is a similar trend in many European countries, where cash use has declined significantly during the pandemic. The daily value of cash withdrawals from ATMs fell 40 per cent after the Irish government introduced lockdown measures. The decline in the UK was not as precipitous as some countries — cash volumes in Spain dropped as much as 90 per cent — although withdrawals in the US and Russia spiked amid signs of cash hoarding.
Tellingly for the future, bankers said cash volumes have not bounced back to pre-Covid levels in countries such as Austria, which has been among the first to reopen consumer-facing sectors such as bars and restaurants.
“We all knew there was going to come a point where society was virtually cashless and we’d have to work really hard to include everyone,” said Natalie Ceeney, a former civil servant and banker who led an industry review into the future of cash last year.
“When we finished our review a year ago we thought it would be in 10 to 15 years; Covid might have accelerated that to next year.”
A decade ago, more than 60 per cent of payments were made using notes and coins. But debit cards overtook cash in 2017. Before the pandemic, bank lobby group UKFinance predicted cash would make up less than 10 per cent of payments by 2028 — now such estimates are being revised.
The virus has fuelled trends that already had momentum. Notably the shift to online retail, as people stayed at home, and relied on internet shopping to get them through the crisis.
The lockdown in response to coronavirus hit areas of the economy that traditionally account for much of cash payments: retail, pubs and restaurants, and travel. Even as businesses in these sectors reopen following the easing of the lockdown, bank executives predict cash will remain scarce.
The UK government has told businesses to encourage people to pay by card rather than hand over notes and coins to help prevent the spread of the virus. Some retailers said the move would be a necessity anyway: while early concerns about the risk of spreading coronavirus through handling notes has been played down, retailers report that there is still a reluctance among customers to use cash.
Some village stores have even reintroduced a ‘tick’ system, where people pay for their goods at the end of a month based on an electronic ledger — methods that have not been used for decades since shopkeepers kept large thick bound ledgers of what was owed and by who.
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“The pandemic has accelerated already detailed discussions about maintaining the role of cash for those that need it,” said Stephen Jones, chief executive of UK Finance, pointing to how this would shape the infrastructure around wholesale cash distribution and cash access.
Cash machines do not need to be refilled as frequently, he said. Vans that had been booked to transport cash around the country have instead been offered to help deliver resources for the pandemic response.
“Banks and financial institutions have worked hard to keep cash stocks at the right level to meet demand during this period,” said Mr Jones. “It’s too early to understand what the full impact of Covid-19 and lockdown will be on the use of cash. But there will always be a role for this method of payment — it will continue to be needed.”
The shortfall in cash volumes also poses problems. Mr Howells said the sudden drop in usage could make it unsustainable to continue providing access to cash for the millions of consumers who still depend on it.
“When you suddenly halve the volumes, that means the business models of 40 or 50 companies can’t possibly stay the same — it’s just economically not possible,” said Mr Howells. “We are going to have changes; Link’s concern is if there isn’t some degree of co-ordination then what will happen is the quieter and more remote places will lose access.”
The UK’s cash infrastructure costs about £5bn a year to run, according to a 2019 review of the sector, with high fixed costs such as dozens of warehouses used to store and distribute coins and notes.
Ms Ceeney said the government guidance over contactless payments also risked excluding some of the most vulnerable members of society. “Cash acceptance has been a minor part of the debate up to now but will increasingly be a focus . . . there is no reliable data in the UK on cash acceptance but anecdotally we can all see around us an awful lot of shops saying ‘contactless only’.”
Banks and ATM providers have been locked in a dispute over how to fund the cash machine network since before the pandemic hit. Marc Terry, managing director at Cardtronics, the world’s largest ATM operator, said: “It’s a bit of a self-fulfilling prophecy that we’re moving towards cashless when in fact what’s happening is we’re creating it by depriving people of the ability to make a choice.”
Customers will ultimately have their say about whether the likes of Mr Crook and the fish and chip industry can limit options on cash payments. Older people in particular will typically want to feel notes and coins in their pockets, bankers said.
Mr Terry said some small businesses that initially reopened from lockdown without accepting cash were already changing course after finding some customers refuse to use cards.
“As the lockdown has eased they realised they’re leaving money on the table . . . shops rely on every single pound that comes through the door.”
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