Could physical money become extinct soon? Industry expert on her five-year deep dive into the world of cash

Five years ago Natalie Ceeney, independent chair of the Access to Cash review and chair of Cash Access UK, wrote a piece for This is Money on how the demise of coins and banknotes could unfold.

In it, she wrote in depth about how the cash infrastructure works and why commercial providers faced additional costs. Much of what she said was eerily accurate.

Since October 2018, when the piece was published, we have had a pandemic where cash usage has plummeted. But this year there are signs that the number of people using physical money again is increasing.

Here she provides an update on cash and banking and where we are now, split into two parts. You can read the second part here.

Five years ago, I started delving deeply into the fascinating world of cash and our transition to digital payments.

I was asked to become chairman of one independent assessment into the future of cash and to answer the question 'is Britain ready to go cashless?'

Working with a panel of consumer, business and payments experts, we embarked on a journey that led to conversations with thousands of individuals and small businesses across the UK, visiting countries that were already more cashless than us to learn lessons (Sweden and China) and a huge amount of data analysis.

But we didn't just want to understand the issue, we wanted to identify the action that industry and government should take as Britain became a cash-strapped society, to ensure no one is left behind.

At the time, I had no idea that this would become a campaign and then an occupation that would last me for the next five years.

I became hooked on an issue that became more interesting the longer I looked at it, and was of great importance to both individuals and society. I began to realize the risks to millions of people if nothing was done.

When I started this work in 2018, about a third of all payments were made in cash.

In fact, it wasn't until 2017 that cash stopped being the most popular payment method and was overtaken by card for the first time, but it was a huge drop from just a decade earlier, when more than two-thirds of all payments were made in cash.

In 2018, people scoffed at the idea that cash could disappear, but according to the latest figures published by UK Finance, only one in seven of all payments would be made with cash in 2022.

Five years ago it made headlines when a pub in Suffolk stopped accepting cash. Now I often find myself greeted with surprise when I ask to pay in cash.

So what happened? Is this a big conspiracy by the government or the banks? Over the past five years I've heard almost every theory imaginable, but I really don't think there's a huge conspiracy to move everyone to digital.

For most of us, digital payments are simply convenient. Why carry cash when you can tap with a card, your phone or even your watch.

The problem is that digital payments don't work for everyone.

Five years ago, we foresaw a continued transition from cash to digital payments.

What we didn't expect was a global Covid-19 pandemic that would force most of the UK population indoors, with strong encouragement to shop online.

Unsurprisingly, cash use plummeted, as even people who preferred cash were left with no choice but to order food and other necessities with their cards.

Cash use recovered very slightly after lockdowns were eased, but figures from LINK, the ATM network, show that ATM use has fallen by around 40% so far since the start of the coronavirus crisis. It's no surprise.

Places that previously never accepted cash payments started getting card machines, which meant we needed even less cash.

And many people who overcame their fear of digital payments found it easier to continue using them and became accustomed to the convenience of online shopping.

However, a new problem found its way into the mailbags of MPs and charities, with the rise of shops and services refusing to accept cash. Many forgot that even though the use of cash had declined, it was still needed by millions of people.

What did I learn from the review? Firstly, cash is still very important and is not only used by the elderly.

Most of us can operate quite easily without visiting an ATM or bank branch. But there are still millions who cannot.

Not everyone can afford the technology or has good connectivity.

Not everyone is confident or able to use digital payments.

There are still more than a million people in Britain who cannot get a bank account, who have no choice but to use cash.

Cash is still considered by many to be more effective than digital as a way of budgeting, as you can literally take a week's worth of money out and put it in jars for food and essentials.

I often hear people say that “eventually everyone will learn to use digital and cash will die.” This is nonsense.

Evidence suggests that the cost of living crisis has caused many people to switch from digital payments to cash as they seek greater control over their spending.

And let's not forget illness – unfortunately, my very intelligent father-in-law, who was very savvy with online banking, has become dependent on cash again over the past five years as his Alzheimer's disease progressed.

The use of cash is also highest among the less fortunate. ATM use fell by as much as 60 percent in parts of the country during the pandemic, but if you look at some of Britain's poorest constituencies, cash withdrawals fell by just 15 percent. Increasingly, those who use cash do so out of necessity rather than choice.

When I started my review, my assignment was firmly “cash.” But what I discovered was that when I talked to people, everyone talked about bank branches in the same breath.

For cash to survive, it is not just about 'getting' cash, but also about 'depositing' cash.

Retailers who accept cash need to be able to deposit it into their account, and they really don't want the risks and insurance premiums that come with keeping cash in the cash register overnight.

People who are paid in cash, including taxi drivers, cleaners and many others, need to get that money into their bank account before the bills are sent.

But because most people now bank online, more and more empty bank branches are closing rapidly –

Consumer organization Which? say about 50 close per month. So while there are obvious concerns when ATMs close or move to charge access, the lack of bank branches has an equally big impact on access to cash.

Enabling deposits is as crucial to the survival of cash as withdrawing cash.

And let's not forget that it's impossible to withdraw €7.35 from an ATM, but if you only have €7.35 in your account, that's what you need to be able to withdraw, and you can only do so through a counter.

I am often asked: 'Why are banks closing so many branches?' The answer is simple: economics.

We have all seen the high street change in recent decades, as more and more shopping is done online and retailers can no longer survive.

Over the past decade we have seen the failure of iconic brands, from HMV to Debenhams. The same pressure applies to banks.

Keeping a branch open five to six days a week is extremely expensive, especially in smaller towns where there are few customers.

It's also easy to see why there might have been a rush for the door, considering it's the last bank in town to get all the flak for closing.

A cynic might say that closing before everyone else is the easiest thing to do. But this has left many communities without the essential services they need.

Many had assumed that if the branches closed, people would switch to another bank or go online.

Some did. But many didn't. We found that people who rely on cash and these services will travel, often at great expense and difficulty, to another branch several miles away.

Few consumers ever change banks. Merchants who want to accept cash from their customers would also have to travel, often during business hours, unless they choose to simply stop accepting cash.

The lack of access to cash on the high street began to cause real harm to both vulnerable consumers and entire communities.

I've heard of people describing three-hour bus trips with disabled family members just to pay cash before a bill came out, and of retailers choosing between moving, going cashless, or paying higher insurance costs as a result of being left behind. of money in the cash register, because the only place to deposit local cash was only open between 10am and 3pm on a weekday.

TOMORROW: Read part two of Natalie's column on why Britain can't go cashless