Over the last week or so, it’s been of continued interest to read further financial industry media articles proclaiming the ongoing “death of cash” and the apparent fast paced move of consumers to go completely to ‘cashless’. The most recent headlines reference a survey undertaken by Starcom in UK into consumer perception of cash use. One headline claimed that “A third of Brits expect cash to be extinct by 2031”. Delving deeper into this interesting research and cross referencing with other data highlights that eradicating cash in less than 15 years in the UK would require an unprecedented change to consumer behavior – particularly to all those who undertake the 2.8 billion cash withdrawals annually at UK ATMs that amount to almost £6,000 GBP every second!
The dash for cashless
When looking at the detail of the survey (which was of 1,500 UK consumers), 73% of respondents “don’t expect to be using cash in 5 years”. The majority think the 1p coin, 2p coin then £50 note will go at some point. As expected the younger generation, millennials, are less concerned about move compared to those older. Recent figures from Halifax in the UK also imply that consumers are moving in their droves to cashless. Cashless payments have increased to account for 83% of all consumer current account transactions, compared to just under 17% of transactions that are cash withdrawals. Faster payments still only account for 2.7% of the volume of transactions, though they are gathering pace.
Concerns remain about cashless society
It would therefore seem to be “full steam ahead” with banks and the financial technology industry and media on the benefits of cashless, when reading many of these articles. That may not be the case though. Even in the previously mentioned Starcom survey – 50% of those surveyed believe they will have less knowledge on how much they are spending if cash went away. Twenty-five percent of consumers also raised concerns as they feel more prepared and secure using cash. These figures are of interest also when considering the following points also to highlight how cash and cashless will likely exist together. Here’s some quick cash facts from the UK:
- Cash in circulation in UK is increasing at a rate of 5% p/a (Bank of England)
- 91% of UK residents withdraw cash from ATMs monthly (Payments UK)
- There are more than 70,000 ATMs installed in the UK – an all-time high (Retail Banking Research 2015)
- Every hour there are 320,000 cash withdrawals at UK ATMs totaling £21.4 Million (Retail Banking Research 2015)
- Each year almost £190 Billion GBP is withdrawn from UK ATMs (Retail Banking Research 2015)
The emotional attachment to cash
So why do concerns remain? Generally speaking, going cashless means a big shift in consumer behavior and asking people to change habits to conform to transacting exclusively in a way financial institutions want them to. An element that becomes interesting with use of cash is the emotional and physiological aspects associated with paper money.
This is highlighted by researchers from the University of Toronto, the University of North Carolina – Chapel Hill, and Duke University’s Fuqua School of Business, who recently published their findings in the Journal of Consumer Research.
These three academic institutions used the example of two friends each buying the same lamp for $150. The only difference is one paid in cash and one paid with plastic. The dollar amounts are the same, the purchased product is identical, but this study found that the levels of emotional investment in that lamp are very different.
“The form of payment clearly influences the subsequent value of the purchase to the consumer, even when the objective monetary cost remains constant,” concluded the study. “Using cash or check seems to increase the psychological ‘pain’ or sacrifice of the act and creates more affinity with the product or brand.”
Very interesting findings from the research, it perhaps backs up and provides reasons for what was published by Payments UK – cash remains a very commonly used payment mechanism in the UK and worldwide. Cash is highly valued by consumers from all walks of life for its familiarity, wide acceptance and speed of transaction. During 2014 over 18 billion payments were made in cash, accounting for 48% of all payments made in the UK, worth around £250 billion
So it seems, cash will actually be here to stay for some time yet. Secure, trusted, familiar and convenient, it clearly is still important for consumers and I’ll predict very unlikely to go the way of the dinosaur or the dodo bird and be extinct by 2030.