Following Rishi Sunak’s Spring Budget, the contactless card limit will rise to £100 for major retailers. The announcement was unsurprising with digital payment solutions surging and cash being shunned to help stem the spread of the coronavirus. However, regardless of the pandemic, the financial services landscape had been changing long before Covid-19. The adoption of innovative, agile systems from cash-only payments and legacy systems continues to change the customer experience; in fact, the UK reigns as a leader of Europe’s fintech community.
Yet the prevalence of digital banking should not come at the expense of anyone in society. Unfortunately, we are already seeing people who rely on cash in society left out. Just recently, Which? revealed that millions have been told they can't pay in cash since lockdown began with supermarkets being the worst impacted.
Technology-driven innovations in financial services have completely changed how we shop, pay for services and products, send friends and family money, pay employees and much more. And according to data from Barclaycard, contactless payments accounted for 88.6% of total card payments in 2020, as the pandemic’s easing of the limit on contactless payments encouraged people to use the payment method.
There is a lot to admire about a cashless society, but in reality, we still have a long way to go until it totally overhauls cash. In 2019, Access to Cash found that over eight million adults in the UK (17% of the population) would struggle to cope in a cashless society. While the figure may have altered now since the pandemic, there will still be a significant number of people who rely on ATMs, traditional building societies and cash. And their needs mustn’t be ignored.
Look at society through a diverse lens
Vulnerable people in society will suffer if the financial services industry isn’t careful. Think about those that are often paid in cash, such as people on low-income jobs, the digital laggards or even those with learning difficulties that are struggling to move to cashless.
In addition, there’s still people based in rural areas who suffer from poor broadband and mobile signal. Elsewhere, there are older generations that may struggle with some digital payment services while the FCA estimates that 1.3 million UK adults are 'unbanked', meaning they do not have a bank account. Furthermore, 2.7 Million UK adults haven’t used the internet and therefore won’t have an idea how to use the likes of Monzo or Starling Bank.
So, while the infrastructure is pretty much there nationwide to support electronic payments, a significant disparity remains. The removal of cash, decline in ATMs and rise in cashless threatens a large proportion of society and it’s up to financial services organisations, as well as the government, to not to leave individuals that are likely already behind, even further behind.
Offline digital wallets
Many individuals retain physical cash because they are excluded from the world of electronic payments through their inability to meet the criteria necessary for many financial services, for example creditworthiness, reliability of income or permanent address. Some individuals also want to maintain the basic human right of anonymity – they are not criminals, but they have legitimate concerns about how financial transaction information about them could be used improperly.
For these individuals, digital wallets have been extremely successful in replacing physical cash in certain countries – for example in India - where multiple services have been widely adopted and are easily obtainable by the ‘unbanked’. These services are secure, can fully replace cash and for low-value/low-volume transactions offer a level of anonymity acceptable to both government and individuals.
With the rise of crypto currencies such as Bitcoin, many national banks are now considering offering similar digital versions of their own currencies. For example, the Treasury and the Bank of England are examining a "digital pound" for both businesses and households as part of a drive to make the UK's finance sector more innovative. These digital currencies have the potential of being securely stored in a digital wallet on physical assets such as a mobile phone, making the possibility of fully off-line transaction (phone-to-phone) a reality, just as it is with physical cash.
It’s now up to financial services and government regulatory bodies to look at society through a diverse lens. They must understand that different customers want different things - whether it’s digital wallets, digital pounds or cash - so must ensure that they are flexible and adaptive enough to support everyone in society using technology.
Access to cash is the priority
This doesn’t mean innovation should halt, far from it. The financial sector – regulators, companies and governments alike – must collaboratively work together to meet the needs of all. Ultimately, a cashless society has great benefits, but ensuring digital currencies are easily accessible must be the main priority.
In principle, it’s likely that over time, as consumers age, today’s generation will become more comfortable in relying on digital services and using physical money less. Yet until that point is reached, there is no guarantee that cash will disappear completely. Only with a thorough understanding of society – and therefore the ability to educate those at risk of being left behind – will consumers of all ages become more comfortable in using digital apps and payment services.
In increasingly crowded markets, financial services that can put the customer at the very heart of everything will triumph. Technology enables change, but it should never be at the disadvantage of some members of society.
