A new report by Access to Cash Review predicts that the UK cash system is in danger of collapsing, but the country is not yet ready to go cashless.
Cash Infrastructure in the Brink of Collapse
According to The Guardian, a new report finds that British cash system is “on the verge of collapse,” but citizens are still not ready to go cashless. The report also predicts that in the next 15 years observers might see a drop to just ten percent in what accounts to cash being used as a payment method.
Although Britons have been turning to digital payments over the last decade the review noted that more than eight million UK citizens would have serious difficulties to deal with a cashless society.
The report was independent and was commissioned by cash machine network Link which is comprised by Natalie Ceeney, the former head of the Financial Ombudsman Service, along with Richard Lloyd, the former executive director of the consumer group and other members.
The Rise of Digital Payments
In the last decade, the UK has seen a considerable increase in the use of digital payments. With this rise, many companies simply stopped accepting cash payments while other companies still don’t recognize this possibility. As a consequence, bank branches and ATMs are closing at an alarming rate, which led the Access to Cash Review to advise that companies dealing with “essential” services should continue to offer a pay-by-cash method enabled.
2018 was officially the first time that Bebit cards surpassed notes and coins as the preferred payment method in the country:
The volume of cash removed from ATMs is also dropping fast, with an estimated 300 cash machines around the UK closing monthly. British banks are also being hit by security failures that prevent customers from making payments at least once a day, which is becoming unsustainable.
The Unsustainable Cost of Cash Infrastructure
The cost of running the country’s cash infrastructure including ATMs and cash-sorting centers touches nearly $6.5 billion a year, most of which is ultimately paid by consumers. As a result, the income to cut these costs is declining quickly, and the UK’s cash infrastructure is fast becoming unsustainable according to the report.
This may become a crisis as the report concludes:
“Companies may consider exiting the market as its profitability declines – leading to the risk of disorderly collapse. Without an effective wholesale cash infrastructure, ATMs won’t get filled, cash deposits won’t get counted, and we won’t trust the value of money.”
According to the 2017 Global Cryptocurrency Benchmarking Study, cryptocurrencies are on the rise in the UK. Given the number of wallets downloaded every day in the country, its use as a payment method is also increasing. But while the cash infrastructure is slowly collapsing could cryptocurrency replace cash in Britain?
While some cryptocurrencies offer privacy features, many crypto-replacements can’t operate as cash as they could easily be subject to tracking due to blockchain’s traceability features. At this point, full adoption is unlikely to happen as cryptocurrencies still need a lot of work to operate as a suitable cash replacement.
17% Using Cash for Day-to-Day Transactions
The Access to Cash Review report stressed the fact that the UK is “not ready to go cashless,” and while digital, mobile, and many other payment methods are on the rise, there is still a huge portion of the population currently using cash for all their day-to-day transactions.
The report stated:
“17% of the UK population, over 8 million adults, would struggle to cope in a cashless society.”
The report also claimed the government, saying that regulators and banks should act soon or risk losing millions. Following the report, the economic secretary to the Treasury, Jonathan Reynolds, said the Labour Party was calling on the Treasury to study its recommendations.