Transition to Cashless Society Could Lead to Financial Exclusion and System Vulnerability, Study Warns

Transition to Cashless Society Could Lead to Financial Exclusion and System Vulnerability, Study Warns from Wolf Street

“Serious risks of sleepwalking into a cashless society before we’re ready – not just to individuals, but to society.”

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Ten years ago, six out of every ten transactions in the UK were done in cash. Now it’s just three in ten. And in fifteen years’ time, it could be as low as one in ten, reports the final edition of the Access to Cash Review. Commissioned as a response to the rapid decline in cash use in the UK and funded by LINK, the UK’s largest cash network, the review concludes that the UK is not nearly ready to go fully cashless, with an estimated 17% of the population – over 8 million adults – projected to struggle to cope if it did.

Although the amount of cash in circulation in the UK has surged in the last 10 years from £40 billion to £70 billion and British people as a whole continue to value it, with 97% of them still carrying cash on their person and another 85% keeping some cash at home, most current trends — in particular those of a technological and generational bent — are not in physical money’s favor:

Over the last 10 years, cash payments have dropped from 63% of all payments to 34%. UK Finance, the industry association for banks and payment providers, forecasts that cash will fall to 16% of payments by 2027.

In 2017, there were 13.2 billion debit card payments in 2017, compared to 13 billion cash payments, knocking cash down to second place in the rankings for the first time ever.

The number of LINK ATM cash withdrawals in 2018 fell 5% from 2017, the total value of cash withdrawn fell 3.5%. One obvious reason for this is that ATMs — or cashpoint machines, as they’re termed locally — are disappearing at a rate of around 300 per month, leaving consumers in rural areas struggling to access cash. Banks want to drive consumers toward alternative payment methods that are cheaper and easier for the banks to manage and offer more succulent fees than cash.

The decline in access to ATMs is just the tip of the iceberg. Lessons from Sweden and China suggest that the issue of cash acceptance by merchants and retailers represent an even greater threat than issues around cash access.

Use of contactless cards in the UK grew 99% in 2017, to 4.3 billion payments. It’s particularly popular among the 25-34 age group, as too are mobile payments. By the end of 2017, nearly 119 million contactless cards had been issued in a country of just 66 million people.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.