In the first time in ten years, families are reverting to cash to navigate the rising living costs, leaning on notes and coins for budgeting.
In 2022, 6.4 billion transactions were made with cash, a 7% increase from the previous year, which represented 14% of all transactions. This rise interrupts the continual drop in cash use seen over the years.
The pandemic saw a significant 35% drop in cash usage in 2020 when compared to 2019 figures.
UK Finance commented, “Amid rising concerns about inflation and escalating living expenses, some individuals are reverting to cash to better control tight budgets.”
However, even with this resurgence, the banking association anticipates that cash usage will drop by 50% in the coming ten years, projecting that by 2032, only 7% of transactions will involve physical currency.
While card transactions, contactless payments like Apple Pay and Google Pay, and online banking are overtaking cash, it still ranks second, following debit card transactions, in the list of most common payment methods in the UK.
The decrease in the popularity of cash started before the pandemic, plunging from representing 61% of all transactions in 2007 to just 14% in the past year.
The increasing preference for digital payments raises concerns for groups heavily dependent on cash, like seniors, low-income individuals, and tourists who could encounter higher fees abroad.
Recently, new regulations were introduced, mandating banks to ensure customers can access cash without charges within three miles of their residences, in an effort to sustain the relevance of physical money.
Under new proposals aimed at ensuring easy access to deposit and withdrawal services, regulators will gain the authority to levy fines without any upper limit, ensuring that individuals don’t need to travel extensively for basic bank services.
Before considering branch closures, high street banks will now be mandated to establish alternate solutions for people to obtain notes and coins.
From January 2015, over 5,000 branches of banks and building societies have shut down. Another 206 are projected to cease operations by the close of 2023, as reported by Which?
The highest number of closures occurred in 2017, with the consumer group noting that 869 branches ceased operations, which averages more than 70 monthly closures.
According to UK Finance, the overall payments made in the UK saw an uptick to 45.7 billion last year from 40.4 billion in 2021. This significant increase can be attributed to a change in consumer shopping patterns.
The report stated, “Instead of a singular, large monthly shop, many consumers now prefer multiple, smaller trips to supermarkets. Consequently, this results in more transactions for equivalent shopping.”
The pandemic led to the postponement of some planned branch shutdowns, resulting in only 369 closures in 2020.
