The UK has slowly been moving away from using cash over the last decade. London is also the fintech capital of the world, so it’s not surprising that more and more people are exposed to and becoming comfortable with digital payments. From contactless cards to contactless payment rings, even before the global pandemic having cash in your wallet was becoming a thing of the past.
Skip forward to today and COVID-19 has severely reduced cash transactions. Due to the current lockdown situation, the use of ATMs has seen an unprecedented drop by nearly 80% in some countries and the UK is no different. People are concerned about accessing ATMs as these have been linked with an increased risk in contracting COVID-19 – remove the contact and you remove the risk. When was the last time you used an ATM? Additionally, since people are forced to stay indoors, there’s been a significant drop in cash exchanging hands, even in the ‘grey’ and ‘black’ markets.
Better off cashless
COVID-19 might not be the final nail in the coffin for cash, but there is no doubt it is making us move ever closer to a cashless society, and that is a good thing for both the public and fintechs alike. The benefits of a cashless society in the UK are many but include tax, crime, hygiene and convenience. It’s much safer to monitor payments, cheaper to regulate, and limits the spread of viruses. But most importantly, it keeps pace with constantly evolving technology. Put simply, a failure to go cashless limits innovation in the fintech sector. The fintech industry is there to build better financial services for the consumer, this is a lot more achievable when consumers are in a cashless society.
Although COVID-19 may get us a step closer to ‘going cashless’, we are still restricted by technical innovations to make the final leap. Payments companies need to ensure that the move to cashless doesn’t disadvantage sole traders or entrepreneurs. Recently the UK Payment Services Regulatory highlighted that acquirers were failing small businesses, particularly in terms of acquiring services, point of sale terminal contracts, and the difficulty for merchants to compare prices.
The crisis has made it clear that more action is needed around making digital banking solutions available to all individuals. All high-street banks now offer contactless payment cards as standard, and while those of us in the fintech industry may view cheque books as ancient artifacts, the issue of inclusion cannot be overlooked.
Many people, especially older generations, still rely on cash for everyday living and more needs to be done to ensure that those still depending on cash aren’t excluded. Many programmes (digital banking solutions as well as crypto) are working to help make banking more financially inclusive. However, if there isn’t buy-in from all involved, then there is a risk of a cashless economy becoming financially exclusive to certain demographics.
The fintech industry was pleased when markets like the UK saw cash usage drop by 40% YoY due to the pandemic. Cash is the nemesis of electronic payments after all. While we in the fintech industry revel in the possibility of a cashless society, we must not forget that technology accelerates at lightning speed and we can’t leave those that are vulnerable or financially excluded behind.
This article has also been published on FinExtra titled ‘How COVID is turning the UK cashless‘