Cash Usage Facing A Sharper Decline In The UK Than Other European Countries
COVID-19 hit us hard, spreading quickly across the globe. It changed the way we lead our lives, from work to grocery shopping. Schools, business offices, shops, and restaurants closed their doors, and everyone was forced to stay home.
When we did step out to buy the essentials, many wished for the least contact with anything, including cash.
Cash usage was already on a decline before the coronavirus with the younger generation preferring contactless payments and digital wallets like Apple and Google Pay. But, with the pandemic, is the UK bound to become a cashless society?
Payments before coronavirus
2019 was the year of credit card machines with card payments breaking a record. More than half of the country’s transactions were made in card with only 23% using cash, as reported by UK Finance. The trade association also forecasted only a 9% cash usage in the UK by 2028. This means, not just the young, but the older generation, too, is going for contactless payments with a reported 60% card usage by adults over 65 years.
So, how did the pandemic become the final nail to the coffin of cash payments?
COVID-19 in, Cash out!
COVID-19 entered our lives, bringing with it a storm of panic-buying and anxiety. People had little information on the disease spread. However, they were advised to wash their hands frequently and have minimum contact with outside surfaces.
In addition to carrying germs and dirt from everyday use, cash was now hit with the corona scare. So, how did the world react to the new reality?
- South Korea’s central bank stopped the circulation of cash for two weeks.
- China deep-cleaned its cash using UV rays and high temperatures and sometimes obliterating them.
- The US Federal Reserve chose to quarantine cash circulated across Asia before redistribution.
- In Paris, the Louvre Museum stopped accepting cash payments.
In the UK, we saw retailers with card machines and digital wallets overlooking cash payments. The UK’s card association and retailers made this transition easier by increasing the limit for contactless payments from £30 to £45 on April 1st, 2020.
A cashless future for the UK
The latest Accenture data shows a 50% decline in cash payments in the UK between 17th-25th March 2020 and a 40% more decline in the whole of 2020 than in 2019. This is 10% more than the 30% year-to-year decline in the rest of Europe.
Despite the spike in ATM withdrawals during the corona scare in March, cash-lovers are also seeking out contactless payments.
The increasing popularity of contactless payments
Accenture’s report also touched upon the increasing popularity of digital wallets that enable people to pay using their smartphones. As a mode of contactless payment, such wallets are easy to use and have no limit of £45 because of their two-step authentication. As such, the use of tokenized payments, currently popular with the younger crowd, will increase across the UK in the post-corona era.
So, what can businesses do when cash is on a sharp decline? Small retailers will need to invest in card machines and cater to customers who have abandoned paper money. Further, they need to embrace the contactless payment technologies so that their customer can pay in a method comfortable to them.