Despite all the hype around a cashless society – and paranoia from conspiracy theorists about government control through Central Bank Digital Currencies – there’s growing evidence we may have hit bottom in the decline of cash.
In its January 2023 report, the Bank of England (BoE) said it had observed a reduction in the rate of decline in cash use, with cash accounting for 15 percent of all payments in the UK.
Moreover, an estimated 73 percent of consumers said they used cash in January 2022, a notable increase from only around half of consumers in mid-2020.
Cash use in the UK is now higher than at any time in the last thirteen years, with the Post Office attributing the growth in the use of cash to more Brits choosing to holiday at home and using cash as a means of budgeting in a time of high inflation, which peaked at 13 percent in October 2022.
More generally, working families, Millennials and young adults are now said to prefer cash over cards or digital wallets for budgeting during difficult times.
It may also be that the dire warnings of conspiracy theorists that governments intend to surveil your every purchase via online monitoring is having some effect.
However, it’s hard to square these warnings with the provisions of the UK’s Financial Services and Markets Bill, due before Parliament this Spring, part of which enshrines in law the right to use cash.
In passing this bill, the UK is following Sweden and Norway, both of which have made it illegal for merchants to refuse cash as a means of payment in physical transactions.
The wide variety of reasons given by officials for the uptick in cash use suggests that, in truth, no-one really knows what’s going on.
All of the reasons cited are plausible – as is the possibility that people are increasingly aware of being monitored in the digital environment, and uncomfortable with that monitoring.
While some in the tech sector may not like it, we should expect to see paper money remain a significant factor in the payments sector for at least the next decade, not least because it is easier for the elderly and other groups to understand and handle.
As we’ve said before, the death of cash is much exaggerated, and recent legal moves to protect its status will only enhance its viability as a payment method.Cashless Society