The government cannot leave the cash system vulnerable to further damage. Our guest, Lord Holmes of Richmond, explains the action he’s taking.
This is a guest post by Lord Holmes. All views expressed are his own and not necessarily shared by Which?.
Is cash facing an existential crisis? The pandemic has accelerated an existing trend towards digital payments and increased discussion of a cashless society. Heavy cash users have traditionally been unlikely to switch to digital payments, but the pandemic has swept away much of that resistance and forced change.
The use of cash has fallen dramatically, and behaviour change has been driven by both consumers and retailers with a significant rise in online shopping as well as an increase in cashless retailers – including the House of Lords canteen.
ATM withdrawals are down 90% in London. Bank branches are shutting at a considerable rate, five hundred in the past year. Cash points are following fast.
The speed of change
I’m a huge advocate of fintech (financial technology) and support the growth of open banking and digital payments, but I am concerned about the speed of change and the real risk of exclusion. The majority may be happy with a move to a cashless society, but what about the minority who, for a variety of reasons, still rely on cash?
To go back to the data, ATM withdrawals are down 90% in London but just 43% elsewhere. Rural and isolated communities are far more likely to rely on cash. As are small business owners, some people with disabilities, some people on tight budgets or people without bank accounts.
There are millions who, for a myriad of reasons, still rely on cash. Which? reports that 1.9 million rely on cash for nearly every transaction, and eight million who would struggle in a cashless society.
Without protecting access to cash for those who need it, we will exacerbate inequality and turn this country and our communities into a place of exclusion.
A recent Access to Cash Review made five important recommendations; guarantee consumer access to cash, take steps to keep cash accepted, make radical change to wholesale cash infrastructure, move from a commercial model to more of a utility approach, make digital inclusion in payments a priority and finally have a clear government policy on cash supported by a joined up regulatory approach which treats cash as a system.
Government must act
I’m working hard to promote these recommendations in Parliament. During the passage of the Financial Services Bill the Government, accepted my amendment which enables customers to obtain cash without the need for a purchase.
This speaks to the first recommendation of the review: we must guarantee access to cash, not access to ATMs. There is huge potential for new ways of providing cash access which could both widen access and help keep the high street alive. I think the Post Office ‘bank hubs’ and other community cash access pilots currently underway can also play a huge role here.
The review was also clear that market forces alone won’t make this happen. We need leadership and the government must act
On Monday (19 July) in the House of Lords I will ask the government what plans it has to:
(1) to designate the United Kingdom’s cash infrastructure as critical national infrastructure, and
(2) to introduce a universal service obligation for the provision of cash.
I look forward to the government’s response. I welcome that one of the review recommendations focusses on digital inclusion in payments. Financial and digital exclusion all too often walk hideously hand in hand.
Currently, there is a risk that digital payments innovation could continue to focus on the 80% who are mainstream adopters, not the 20% with various barriers to adoption. Digitally include, financially include and we all benefit – the benefits are not merely economic but social, and psychological.
It’s a challenge, a mission for us all. Let’s play our part and transition together, enabling, empowering, and unleashing potential.
This was a guest post by Lord Holmes. All views expressed were his own and not necessarily shared by Which?.
Which? is clear that voluntary initiatives or public commitments can not replace government or regulatory oversight. We need a firm commitment from the Treasury on when legislation to protect cash will be introduced, as the system will continue to be under enormous pressure until it is brought forward.
Cash is a necessity millions couldn’t live without. You can help us protect it by signing our campaign petition.