Making a cashless society accessible to all

The UK is heading towards a cashless society at a rapid rate. Changing public habits, the coronavirus pandemic and the increasing cost of handling cash are all accelerating the transition. Handling cash costs retailers an estimated £1.6 billion a year and as a whole the UK cash distribution system £5 billion a year. The threat of COVID-19 has seen many retailers refuse to handle cash and the contactless payment limit lifted to £45. And while only three out of ten transactions are currently in cash, the above will only hasten the move to cashless.

But while this move appeals to a large section of society, particularly those who thrive in the ‘tap and go’ culture, not everyone is so enthusiastic. The 2019 Access to Cash report revealed that almost one fifth (17 per cent) of the UK population felt they would struggle or not be able to cope if society went cashless. The rate of the transition to cashless is too fast and could leave a large part of society behind, the report added. The vulnerable, including the unbanked, are at risk – and measures to support this group must be considered.

Action needs to be taken collectively by regulators, merchants and financial institutions to create an inclusive transition to a cashless society in the UK. A lasting, successful transition will call for the delivery of appropriate initiatives, as a group, in a coordinated manner. No one part of industry can do this alone. The following four cases outline existing and emerging opportunities that can be leveraged to enable this successful transition:

Drive the right industry behaviour through regulatory frameworks and legislation

Despite being overshadowed by the financial response to the coronavirus pandemic, the March 2020 UK Budget called out clear indicators on the direction of travel to support the most vulnerable cash users in society. The aim is to bring forward Access to Cash legislative changes and maintain the UK’s cash infrastructure in the long term, while ensuring the industry continues to meet the changing needs of cash users.

Currently, merchants have the power to decide how payment is taken. But providing access to cash is useless if there’s no ability to spend it, and we’ve already seen cash usage decline in the wake of social distancing measures.

In response, we believe the government’s Joint Authorities Cash Strategy Group should explore amendments to regulatory frameworks to ensure that retailers, in these exceptional circumstances, cater for the vulnerable by accepting cash. While it may seem counter-intuitive to advocate access to cash as an advancer of the cashless society, it will only be through ensuring the cash option remains that we can start making a significant move towards a cashless society.

Offer incentives and develop a network of digital change champions to encourage the uptake of digital payment methods

Getting an understanding of banks’ and merchants’ customer data is key. When used within the boundaries of local data and privacy laws, this information can help inform a structured, targeted approach to engaging candidates for digital adoption. Meanwhile, user research can identify the incentives (e.g. retailer discounts) that will convert those yet to embrace digital.

A network of ambassadors and change champions, who either choose to join or are approached directly through their bank, can lead the way in communicating the benefits and spread awareness of these through their communities.

These incentives, and the use of change networks by banks and merchants, should be focused towards those that may have the capability, but not the confidence, to move away from cash.

Improve network infrastructure in isolated areas and encourage banks to reduce the cost of going cashless

Poor external network infrastructure has been a barrier to the UK’s move away from cash. Areas with poor connectivity have been reliant on cash and more vulnerable to its decline. Initiatives to resolve this are ongoing, including the expansion of bandwidth in rural communities to increase the availability of different payment options.

Internal infrastructure remains expensive for many merchants when accepting non-cash payments. Disruptive market entrants are reducing these costs by offering alternate payment options for low prices. Options such as cards, wallets, instant bank transfers, cash payments and other alternative payment methods, via single application programming interfaces (APIs), are reducing the costs of integration into the cashless system. Notably, amidst the coronavirus pandemic, agile operators have offered services to small businesses at a reduced price to minimise the risk of transmission, which has accelerated the move away from cash.

Established banks offering payment solutions to customers must be responsive to the product offerings of more disruptive players, and should push to compete, partner, or acquire these players to gain market share and support the cashless transition.

Encourage the adoption of new payments offerings

There are many reasons people believe it’s easier to pay each other in cash; the worry of transferring to the wrong account, an obligation to pay in full, or simply not having the technical capability. However, new services in the market, such as Confirmation of Payee and Request to Pay, are addressing these concerns. Confirmation of Payee reassures users they’re sending funds to the intended bank account, while Request to Pay uses trusted channels, such as SMS, to allow users to request funds without the need for additional payments infrastructure.

Banks and payment providers should focus on offering such solutions quickly, either by developing in-house functionality or adopting offerings that’ll be available with the New Payments Architecture in the UK. These solutions will increase the adoption of account-to-account payments and reduce the need for people to pay each other in cash.

These initiatives show that technology, regulation and user research can be used more ingeniously to unlock a positive cashless future, where vulnerable members of society are included and can adapt to the changing payments landscape. From our combined experience working with regulators, payments infrastructures and technology providers, we believe the solution will come from an adoption of all forces working collectively.