Recent changes by LINK to its interchange rate means that thousands of free-to-use cash machines in the UK are threatened, potentially limiting access to cash for hundreds of communities. Its plans mean that the fee banks pay to ATM operators will be reduced gradually from 25p to 20p per withdrawal, ultimately making cash points less profitable.
A cashless society ‘is presented as futuristic progress rather than past history, a fashionable motif of futurists, entrepreneurs and innovation gurus.’[1] Visa’s 2016 ‘Cashfree and Proud’ campaign apparently ‘recognises and harnesses that sense of achievement people feel when they begin to use contactless and realise that they need no longer be dependent on cash for everyday purchases’[2]. The campaign was a step in the payment company’s long-term strategy to make cash ‘peculiar’ by 2020. Indeed, in 2017 cards finally overtook cash as the UK’s number one payment method[3].
This futuristic ‘utopia’ will leave many vulnerable people behind. 2.7 million people in the UK are still entirely reliant on cash[4]. Removing free-to-use access to cash could leave 9% of the population struggling to make payments, and 16% deterred from using outlets that accept cash only, placing a strain on local shops and services[5]. Bank branches are closing in swathes across the country, which only makes accessing cash harder. In addition, the Bank of England warned last summer that the popularity of contactless cards was helping to fuel the rapid growth in consumer debt[6].
LINK says that the reduction of the interchange fee will reduce the number of cash machines in areas where there are too many, and secure the future of free ATMs. However, the ATM industry maintains that it will make it significantly less profitable to operate free cash machines, meaning they will be forced to close ATMs no longer financially viable. Currently, over 100,000 people live in postcode districts with no cashpoint[7].
The emerging consensus advocating for the elimination of cash seems premature. The Chief Cashier and Director of Notes at the Bank of England, Victoria Cleland, believes that cash remains ‘very much alive and kicking’[8]. The demand for cash continues to grow, and the value of banknotes in circulation jumped from £67.819 million in 2016 to £73.198 million in 2017[9]; the fastest growth seen in a decade. In addition, ATM withdrawals have stayed relatively stable over the past 10 years[10].
Last week the BBC reported that the Treasury may be paving the way for the end of 1p and 2p coins. Surveys suggest that one in twelve 1p and 2p coins are thrown in the bin after being used only once. Despite this, The Charity Finance Group said that UK charities collect millions of pounds worth of coppers every year. Scrapping the coins would damage the smaller charities that rely on traditional bucket collections[11].
The issue is not about the nostalgia of cash. Rather it is about ensuring the people and businesses who rely on access to cash retain this access. It is not an attempt to stall progress, it is a call for the recognition of those who may be left behind.
Progress can be seen in the UK’s thriving Fintech sector. It offers exciting opportunities for the financial services of the future, such as apps which track people’s spending and allow them to set monthly targets. It has the potential to empower and support individuals and businesses to manage their finances. It gives the opportunity for increased speed, efficiency and reduced costs. But it must come hand in hand with a deep understanding of the nuances of financial inclusion.
Initiatives such as the Finance Innovation Lab’s Financial Health Fellowship encourage the transformation of financial services and offer new tools for money management for the most vulnerable. It supports innovations that understand the wider factors that drive financial ill health. Progress is essential and inevitable, as long as no one is left behind.
LINK’s plans must be scrutinised by the Payment Systems Regulator to fully evaluate the impact the proposed changes will have on customers. Access to cash for those who still want and need it must be protected, not dismissed as contrary to progress.
[1] http://tech.newstatesman.com/feature/war-on-cash
[2] https://www.visa.co.uk/newsroom/visa-europe-launches-cashfree-and-proud-campaign-1386958?returnUrl=%2fnewsroom%2fcash-free-and-proud-video-female-22806.aspx
[3] https://www.theguardian.com/money/2017/jul/12/cash-contactless-payments-uk-stores-cards-british-retail-consortium
[4] http://www.bbc.co.uk/news/business-43388662
[5] http://press.which.co.uk/whichpressreleases/which-reveals-consumer-reliance-on-free-to-use-atms-ahead-of-possible-reduction/
[6] https://www.theguardian.com/money/2017/jul/12/cash-contactless-payments-uk-stores-cards-british-retail-consortium
[7] https://conversation.which.co.uk/money/your-views-cashpoints-under-threat/
[8] https://www.bankofengland.co.uk/-/media/boe/files/speech/2017/insights-into-the-future-of-cash.pdf?la=en&hash=F13A0D0BDADDF3F981DDC2A1B81C01E42BEF806D
[9] https://www.bankofengland.co.uk/statistics/banknote
[10] https://www.bankofengland.co.uk/-/media/boe/files/speech/2017/insights-into-the-future-of-cash.pdf?la=en&hash=F13A0D0BDADDF3F981DDC2A1B81C01E42BEF806D
[11] https://www.theguardian.com/society/2018/mar/14/keep-the-pennies-they-are-worth-millions-of-pounds-charities-say