Is it finally time to say goodbye to cash?

A year ago, the government promised to protect cash, the use of it, and the millions of people who still rely on it. But 12 months on, after thousands of ATMs have been got rid of and hundreds more bank branch closures completed or on the horizon, little has been done to slow the decline.

In last year’s Budget, just weeks before the first national lockdown, Rishi Sunak said legislation to protect access to cash would be introduced for the section of the population who, for one reason or another, cannot get by without it.

It came after a two-year investigation into cash ended and a report was published by the Access to Cash Review, headed by the former chief executive of the Financial Ombudsman Natalie Ceeney, in March 2019.

This report revealed that more than 8 million UK adults rely on using notes and coins every day and suggested recommendations for protecting their finances. But despite the millions of people affected, the government is yet to take any action.

The problem isn’t going anywhere either. Almost two million people use cash alone for nearly every transaction they make, 22 million of us use it as an essential back-up to spending on cards, while seven million say they would struggle without it, according to recent data from Which?.

The consumer group has called for parliament to give financial regulators the power to safeguard access to cash and to introduce laws forcing banks to provide this access, but despite continued pressure the government appears to have forgotten about last March’s commitment.

In the last year, 3,300 free-to-use ATMs have closed and 431 bank branches have been shut down, according to Which?. It says the number of ATMs in the UK has fallen by almost 20 per cent in the past three years, while the number of bank branches is down 40 per cent, from 9,900 to 6,000, since 2015.

The pandemic meant the pace of closures slowed in 2020, but it is set to increase this year; Debbie Crosbie, chief executive officer of TSB, is already set to axe 164 branches, while 56 closures from Lloyds which were planned for 2020 are going ahead next month.

These shutdowns are nothing new, but has the coronavirus pandemic hastened the move away from using physical cash and is an end to it inevitable?

If the Royal Mint decided tomorrow to stop creating notes and coins, would it really matter? Would we all just learn to adapt to using contactless payments and online spending and look to cash as a thing of the past?

While many people would cope quickly, millions would be excluded from being able to carry out everyday activities, from paying for groceries to collecting benefits.

It’s not just individuals either; many small businesses rely on trading with cash and wouldn’t be able to continue without being able to access it.

Natalie Ceeney explains: “Contactless cards, online shopping and smartphones can allow millions to lead a cashless existence. That’s great for them but is not everyone’s experience.

“There are millions of people who still rely on ATMs and bank branches. There’s a trap in thinking that just because we are happy to go digital, so should everyone else.”

To look at the consequences of ending access to cash, we have to look at the groups of people who rely on it. The popular view is that it’s mainly older people or those who aren’t online or savvy with modern technology, but this is too simplistic.

There are lots of different groups of people – of all ages – who are impacted, from those living in rural locations without online access to the most vulnerable people in our society, such as those with disabilities, the homeless, and housing association tenants.

There are many reasons why someone might be prevented from opening a current account, from those with a poor credit history to those who are unemployed or homeless. It’s estimated that 14 million people are predicted to face financial exclusion from high street banks and 6.9 million have restricted access to financial services.

The total number of the “unbanked population” is expected to be around 1 million, according to the government’s financial inclusion report of 2019-20. The soaring numbers of people being made unemployed because of the pandemic is also likely to shine a light on this issue.

For September to November the UK’s unemployment rate was 5 per cent, according to the Office for National Statistics (ONS), which equates to 1.72 million people. This number is predicted to reach 2.6 million by the middle of 2021, according to the Office for Budget Responsibility (OBR). As a result, the unbanked population is expected to increase to 1.1 million.

For those who use cash for everyday spending, the pandemic has made things a lot more restrictive. Since the start of the first national lockdown, one in three people have tried to pay for something in cash and have been unable to do so, according to Which?. This is despite the risk of catching the virus from handling cash now acknowledged to be very low.

But because there is no legislation in place to force businesses to accept cash, or any way of tracking which companies are changing to contactless-only payments, it’s impossible to measure the scale of the problem.

We do know that cash transactions are decreasing and between 2014 and 2019 the number made fell from 46 per cent to 23 per cent, according to UK Finance. However, that’s almost a quarter of all payments still being made with cash.

Last year there was a 37 per cent decline in ATM transactions and a fall in the amount withdrawn to £81bn, from £116bn in 2019, according to Link, the UK’s cash machine network. But despite the pandemic UK adults still took out an average of more than £1,500 each from ATMs last year.

A year ago, the government proposed that the Financial Conduct Authority (FCA) would be given the power to oversee protection of access to cash. This hasn’t happened and groups including Which? say that even when it does, the measures won’t go far enough.

Earlier this year it wrote to eight of the UK’s biggest banks asking them to publicly confirm they would continue to support two voluntary schemes, from Link and the Post Office, to protect access to cash until legislation is introduced.

It says while the banks praised the schemes, they stopped short of explicitly committing to either until the legislation is introduced.

Jenny Ross, Which? Money editor, said: “The government urgently needs to set out its long-term plan for cash.

“This must include a time frame for when its promised legislation on protecting access will be in place, so that cash users are able to withdraw the money they need locally, as well as making the financial regulator responsible for tracking acceptance levels.”

Ceeney echoed this call for action: “We were promised legislation at the last Budget to protect cash for those who need it.

“We urgently need that legislation now before the cash infrastructure collapses, leaving millions behind.”

As we edge closer to the next Budget on 3 March, all eyes will be on Rishi Sunak to see if he confirms a plan of action based on the commitment made a year ago, or if the topic is again thrown into the long grass, leaving millions of people at risk of financial and social exclusion.