12/09/2018 09:17 BST | Updated 12/09/2018 09:17 BST

Moving Closer To A Cashless Society Holds Significant Risks For The UK's Most Vulnerable

The third sector and those it aims to help are the immediate and most obvious casualties of a cashless society

Hoxton/Tom Merton via Getty Images

Economies around the world are increasingly moving away from cash as digital technology revolutionises commerce across industries. A growth of electronic payments and a decline in the use of physical money has ensued – so much so that we can expect as little as 21% of our transactions to be made using cash by 2026. The UK is rapidly adapting to an economy set on this cashless trajectory. However, the growth of the financial payments landscape is going to need to reflect the pace of digital adoption if we are to ensure that industries and parts of society do not become financially excluded.

The third sector and those it aims to help are the immediate and most obvious casualties of a cashless society. Findings from the Institute of Funding show that 70% of UK charities had seen a decrease in cash donations over the last three years. It’s a decline that is invariably going to continue as the UK heads towards a cashless future. Given that one and two pence coins alone amount to more than £300million in charitable donations across the UK, society’s transition to digital payments will be keenly felt by the third sector unless it can adapt.   

Looking at a near future dominated by plastic carrying donators, some charities are doing just that. Last year saw the advent of contactless donation boxes which the National History Museum has used with much success, increasing their visitor donations by 22%. With physical money on an inevitable decline, this offers an effective solution and we’ll see more and more charities adopt these devices in order to adapt to the dominance of ‘tap and go’ transactions. However, a single contactless donation box can cost anywhere between £250 and £400; a cost that can be accommodated for by larger charities but will pose an issue for those with smaller fundraising budgets. What’s more, contactless donation boxes will be redundant for charities that don’t have the benefits of popular visitor locations. An answer then will be for charities to work with local authorities to introduce these terminals in public spaces, such as train stations and shopping centres.

Those employed in the hospitality sector – in particular those in service based roles – face challenges of a different nature as the UK moves away from cash. Almost all UK restaurants now include tips and service charges on customers’ bills, avoiding the loss of revenue from cashless diners. This has however, left waiters and waitresses out of pocket as restaurant owners and managers cream off staff tips for themselves instead of distributing them amongst their employers. A government consultation into the underhand strategy used by restaurants was launched in 2016, with the findings still to be published, and is an example of how the steady march to a digital-only world of financial transactions impacts society’s most cash-dependent. It’s a march that is set to have an increasing effect on workers in the hospitality sector as more and more restaurants go ‘card-only’. The responsibility lies at the feet of the UK government who will need to be tougher with rogue bosses and introduce policy to ensure the 2 million people working in the hotels, pubs and restaurants across Britain are not financially worse off in an age of digital payments.

Whilst challenges for the UK’s most cash dependent sectors can be met, these solutions do little to address the problem that with the acceptance of cash in decline, the provision of physical money will also become increasingly limited. Driven by the combined popularity of contactless payments and the influence of the banking sector (who have a significant amount of skin in the game), ATM machines are closing at a rate of 300 a month in the UK. The ongoing tussle between the UK’s primary ATM providers and biggest financial institutions has resulted in a reduction in the fees paid by banks for each withdrawal. As a result, many store operating free-to-use machines in rural areas have been unable to keep cash points running at a profitable rate. Cash is still a vital form of currency for rural economies with local cash-only shops catering to an elderly generation of cash-only customers. At a time when rural bank branch closures are also gaining momentum, rural communities face financial isolation as the drive to a cashless society outpaces the means of local commerce. To suggest all is lost for the rural community would however, be an over exaggeration. Consumers at any UK bank can undertake basic transactions at local post offices, thereby helping to keep cash in rural communities. With accessibility to cash arguably declining faster than rural economies can manage, collaborative initiatives of this kind are invaluable and herald a likely future of access to physical money. 

Society is, and will continue to adapt to a cashless economy. However, the current rate at which cash is in decline presents immediate economic risks to some of the UK’s most vulnerable groups. The UK government and those within industry will need to act in order to ensure the financial payments landscape does not leave these groups behind as it propels towards a digital future.