Will Britain really become a cashless society?

Contactless payments had already overtaken cash as the most popular way to pay, but the pandemic has seen card usage soar. We investigate whether this could sound the death knell for cash and how some people are now paying with rings and fingerprints

Contactless payments have become the norm across the UK as customers have shifted to tapping to pay rather than using cash during the pandemic.

Around 66% of all transactions in the UK are now contactless, with 45% of people saying their use of cash has decreased during the crisis, new data from Mastercard shows.

Globally, the UK’s preference for contactless payments has outpaced other countries.

Some 59% of people in the UK say they prefer to pay via contactless debit or credit card – 15% more than the global average of 44%, according to a recent survey of more than 11,000 people by survey and data platform Dynata.

But does this rapid increase in contactless payments spell the end of cash in the UK?

Before the pandemic took hold, card payments were already rising.

Debit card payments overtook cash payments for the first time in the UK in 2017. 

There were 1.6 billion transactions on debit cards in February 2020 alone, 9.2% more than in February 2019, according to the latest data from banking industry body UK Finance.

Nearly 5.4 million people almost never use cash, and by 2028 cash is expected to account for just 9% of all payments.

Not completely cashless 

Despite the rise of contactless payments, the UK is far from a cashless society.

There are more than £70 billion worth of notes in circulation – roughly twice as many as a decade ago –according to data from the Bank of England. That works out at around £1,000 in cash for every person in the UK.

Cash remains the second most frequently used payment method in the UK and accounted for 28% of all transactions in 2018.

Why do we still need cash?

An estimated 2.2 million people in the UK rely entirely on cash for their day-to-day transactions, according to research by Access to Cash Review.

The independent review investigated consumers’ requirements for cash in the UK over the next five to 15 years and found that cutting back on cash could see vulnerable communities suffer.

“If the UK moves too fast towards being cashless without including all parts of society, millions could be left behind. Our research conducted last year showed that over eight million adults would struggle to cope in a cashless society,” says a spokesperson.

“Poverty is actually the biggest indicator of cash dependency, not age. And for many, the lack of universal broadband and mobile connectivity simply means that digital payments are not possible.”

Sarah John, chief cashier for the Bank of England, adds: “We are committed to cash. Although its use is declining, many people, including vulnerable groups, still prefer to use cash. It is important that everybody has a choice about how they make payments.”

A survey in May by consumer group Which? found that half (51%) of those doing grocery or other shopping for someone else had been given cash to pay for it.

It reports that latest figures from leading UK ATM machine operator Notemachine show that cash withdrawals have gone down by 45% since lockdown began –though people are taking out 13% more.

Is cash safe to use during a pandemic?

As Covid-19 spread, fears over whether cash could transmit the disease heightened. Researchers claim that the virus can live on surfaces for anything from a few hours to a few days.

However, The Royal Mint says that cash poses no greater risk of spreading the coronavirus than any other communal surface.

“The risk posed by handling coins is no greater than touching other common surface such as public handrails or door handles,” a spokesperson says.

“In line with general health guidance, using hand sanitiser or washing hands after touching communal surfaces is advised.”

Legislation needed to protect cash

In the March 2020 Budget, the Government committed to several initiatives to ensure cash would be available to those who need it.

Chancellor Rishi Sunak pledged to start a new joint cash strategy group, which aims to provide an oversight of the entire cash system in the UK. The group will be headed by the Treasury and will also include the Bank of England, the Financial Conduct Authority and the Payment Systems Regulator.

The Chancellor also committed to maintaining all current cash denominations and safeguarding against counterfeit coins. He promised to improve the UK’s cash distribution system and ensure that cash will be dispersed equally across the nation.

Politicians are now calling for the Government to go a step further. In May, 37 cross-party MPs signed a letter to the Chancellor, urging him to protect the nation’s cash system and access to free ATMs.

“Cash is a lifeline for many at the best of times and an important budgeting tool, particularly for the hundreds of thousands of vulnerable people that depend upon it to go about their daily lives,” they wrote.

This need for legislative protection is echoed by Access to Cash Review.

“We believe the only way to manage the cash system is for the Government to legislate and give regulators the tools that they need to protect cash access,” the review argues.

“We propose legislation to put an obligation on banks to provide suitable cash access to their customers. This would allow the UK to move forward into a digital future without the risk of millions of people being left behind.”

Enabling more retailers or pubs to offer cashback services – even without a purchase being made – could help reduce the strain on the UK’s cash system and ensure that more people have access, it argues.

New ways to pay

As the use of contactless payments has risen, new technology has emerged to make paying even easier.

Rather than having to take out your card to pay, you can now do so by tapping your phone, using jewellery and clothes or even your fingerprint.

Paying by phone

There are several mobile payment apps that you can use to make payments on your phone, including Apple Pay, Google Pay and, more recently, Samsung Pay.

They allow you to store credit, debit, loyalty and gift cards in a digital wallet. To make a purchase, all you have to do is tap your device at a contactless payment terminal.

The number of people using digital wallets will increase from 2.3 billion in 2019 to nearly 4 billion worldwide by 2024, according to new data from Juniper Research.

Wearable payment technology

Payment devices that you can wear have also taken off.

VIPs at the Isle of Wight festival in 2011 were given Mastercard wristbands that they could make contactless payments with. Barclaycard introduced similar wristbands in 2014. Apple Pay was launched the following year in the UK, allowing users to pay using an Apple watch.

Tovi Sorga, a Gloucestershire-based accessories brand, designs contactless bracelets and key fobs.

The bracelets retail between £75 and £120, while the fobs cost between £75 and £80. They contain a hidden chip, which is powered by payment app Pingit.

If your bracelet or fob goes missing, you can stop payments through the app.

London-based company K Wearables has a range of payment rings that allow wearers to make a contactless payment by tapping one on a payment terminal.

“Contactless payments have really gathered pace and it has been an interesting time for the wearables sector in particular,” says Nigel Palmer, partnership manager at K Wearables.

“We wanted to make a product that was simple and easy to use. Paying with a ring mimics the gesture you would make when handing over cash. It is a very natural movement which eliminates the need to reach for a card or even twist your wrist to tap a watch or other device,” he says.

K Rings cost £99.99, are waterproof and are fitted to the customer’s ring size to ensure that they fit securely.

The rings are powered by Mastercard and must be topped up like a prepaid card online via debit card or bank transfer. Payments can be blocked if a ring gets lost or stolen.

K Wearables donated 300 rings to the NHS during lockdown to help key workers make payments as easily as possible.

“We wanted to do something to help. Those working for the NHS really are heroes,” says Palmer.

For fashion-conscious men who like high-tech innovation, DressCode (Dresscodeshirts.co.uk) has recently launched a range of contactless payment shirts for men.

The Cambridge-based start-up sells a range of tailored shirts, called CashCuff, with patterns that reflect today’s “digital, eco-caring and high-tech world”. 

Each shirt has a small chip embedded in the cuff, which can be used to make contactless payments.

“CashCuff is hidden away out of sight, but always there when you want it,” says chief executive Andy Boothman. “Our customers have one less thing to worry about; they have money available on demand, no wallet, no phone, no problem. It is perfect for going about your daily routine safe in the knowledge that you have cash on hand whenever you need it,” he says

CashCuff shirts are connected to a Mastercard prepaid card account.

Using an app called MuchBetter, customers will have to verify their identity by uploading a photo of their driving licence or passport. They will also need to scan their face using the camera on their smartphone. You can switch off and reactivate payments through the MuchBetter app.

The CashCuff chip is removable and should be taken out before the shirt is washed or ironed to prevent damage. Shirts retail for £135.

Biometric payments

Biometrics allows you to approve a card payment using your fingerprint.

While it may sound like something out of a science fiction movie, banks have already started trialling these types of payments.

Royal Bank of Scotland (RBS) conducted a trial with 250 customers using a biometric payment fob that uses fingerprints to verify transactions.

The fob, which is similar to a standard key ring, could be used at existing contactless and chip and PIN terminals.

“Our customers who took part in the biometric payment card trial were really positive about the experience. They really benefited from not having to remember a PIN and also from the added security the biometric fingerprint sensor offered,” a spokesperson from RBS says.

“We are always looking at how we can make payments easier for customers and as part of that we are further exploring biometrics to see how they can be used to achieve this.”

RBS has previously trialled a biometric bank card, which allows customers to verify purchases using their fingerprint.  

Evolution of paying by cheque

The first British cheque was issued on 16 February 1659 for the sum of £400.

For centuries it has stood the test of time as a payment form for the nation.

As with cash, cheque payments have declined as people moved to digital forms of payment. Roughly 342 million payments were made using cheques in 2018, down 15% on the year before.

By 2028, UK Finance predicts that the number of payments made by cheque will more than halve down to 135 million.

However, as banks have developed new technology to make banking easier, cheque payments are beginning to evolve too.

Several banks now offer mobile cheque deposits, which allow you to pay a cheque into your account from home.

All you have to do is log in to your banking app and select the option to deposit a cheque. Enter the value of the cheque and scan the front and back using your mobile phone camera.

See the table above to find out which mainstream banks currently offer mobile cheque deposits.