• James Powell

Pass Go, PayPal £200: the dawn of the cashless economy

Those who were disturbed when it emerged that the new £5 notes would contain trace amounts of animal fat can breathe a sigh of relief: it looks like they won’t be around for much longer. Not because of any newfound Veganism on the part of the Bank of England, but because cash itself is increasingly on the way out. The authors of Access to Cash – originally published in March 2019– have again warned that the UK’s cash system is ‘close to collapse,’ and that the government must take action in the upcoming Budget.

On the one hand, this seems like a fairly natural development as technology improves and digital money management becomes ever easier. Despite the more cynical takes on this situation (like this 2018 piece from the Guardian), the rising convenience of cashless payments is undeniable. A bank card or smartphone can stand in for unwieldy coins and notes, chip and PIN replaces rifling through your pockets for change, and paying a tradesman – which might once have required a trip to the cash machine and a roll of notes – takes a few seconds on PayPal.

Further, digital banking services have evolved to muscle in on other areas where cash would once have been the medium of choice. Quick-transfer apps are now used for everyone to chip in for a takeaway (which is then paid for via a delivery app, to boot), whilst contactless payments mean even the smallest transactions can be carried out with a simple tap. Cafes, shops, and pubs, businesses which previously might have had a minimum transaction value to even accept a bank card, are increasingly becoming ‘cashless stores’ and eschewing physical currency altogether. Even the classic saving technique of putting your change in a jar is being co-opted for a cashless economy, with many banks offering to round up your debit card purchases and squirrel the difference into a savings account.

But the march of progress has a habit of leaving people behind, and there’s a reason why the authors of the Access to Cash Review are urging the chancellor to take steps towards ensuring cash remains available to those who need it.

Many individuals and families in the UK, especially the less advantaged in society, still rely primarily or exclusively on cash for day-to-day living. Side-effects of the move to a cashless economy are likely to hit these people the hardest: fewer bank branches and cash machines means difficulty accessing funds, whilst being unable to make over-the-counter payments will leave people struggling with essential services, such as utility bills. The effect is particularly pronounced for the elderly or those living in rural areas, for whom online banking is either undesirable or inaccessible. At the most extreme end, people with no bank account at all (some 1.2 million, according to the most recent data) are paying a significant ‘banking poverty premium’ due to being locked out of the best deals (discounts for paying via Direct Debit, for example), per research carried out by digital current account provider Pockit.

The question of how to allow progress for those who want it, whilst maintaining a level playing field for everyone, is as old as civilization. From scythes to streaming services, advances in technology have always required us to adapt over time. The difference when discussing the rise of the cashless society is the stakes. For those frozen out of the system life will become exponentially, even impossibly, harder, with a real and genuine danger that some individuals may find themselves on the streets (and this article hasn’t even touched on the effect of a cashless economy on the country’s vulnerable homeless population).

This is at the heart of the recent demands towards the chancellor – to make sure his first Budget includes provisions for ensuring cash can be both accessed and used by those who depend on it – proposals with which I heartily agree. Whilst the benefits of today’s technologies are clear, and becoming more valuable every day, they should not – cannot – come at the expense of the most vulnerable in our society.

You can read Pockit’s full report on the banking poverty premium here.