Key findings from our latest payments research

Last week we had the pleasure to welcome Graham Mott to join an Enryo Consulting Half Hour Briefing to talk about the use of cash in 2023 (catch up here). We’ve been working with Graham and LINK Scheme Ltd since early March 2020, running regular surveys to understand consumer spending behaviour. Following the event, we published a short report that provided insights into our latest survey, which took place in March 2023. In this blog, we provide analysis on what we think are the top 3 most interesting findings. They are:

??Most people still use cash, so the ‘cashless society’ is way off.?

??The youth don't like shops not accepting, or discouraging, cash.

??A high level of cash in people’s homes is causing a headache.

You can find the full report here. Have a read and if you think there’s something that deserves to be in the top three, let us know.

*Disclaimer. All surveys were carried out online and are representative of all UK adults aged 16+.*

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① Most people still use cash at some point, so the ‘cashless society’ is way off.?

Since July 2020, our surveys have asked people ’where, if at all, have you spent cash in the past two weeks?’ with a selection of options to choose from, as well as ‘other’, ‘don’t know’ and ‘not applicable, I don’t use cash’. If we subtract the latter and ‘don’t know’, we come to an overall figure that provides an indication of how many people are regularly using cash.

As you can see in the chart below, in March 2023 71% of people used cash to pay for an everyday item. This may seem rather high considering that overall cash transactions have been falling year-on-year for decades and the general consensus is that the ‘cashless society’ is around the corner. The former is correct; the latter, mistaken.?

There is however, a complexity to the number as not everyone is using cash to the same degree. According to the Bank of England, over 5 million adults rely on cash for day-to-day spending, the remainder are using cash a few times a week, once a week, less than once a week or once a fortnight or less. We can therefore attribute some of the 71% to heavy cash users and the remainder to less-frequent, even rare, cash users. This is not to diminish the value of the data, as it tells us something insightful about UK consumer payment behaviour in 2023: for the vast majority, there is an occasion that still requires a cash payment. This is why the cash infrastructure remains so vast, to ensure that even the person who would classify themselves as ‘cashless’ can still pay their window cleaner, shop for their elderly parents or pay their child’s sports club subs in cash. It also demonstrates why, to the frustration of technophiles, the cashless society is a long way off.?

The other interesting finding from the chart above is the impact of Covid-19 lockdowns on the use of cash. As we have mentioned previously, the lockdowns suppressed normal spending behaviour (point of sale transactions) and removed the opportunity for spontaneous payments, which combined account for bulk of cash payments. This is reflected in the survey data over time: overall use of cash jumped from 52% to 67% following the end of lockdown 1 and from 52% to 63% after the end of lockdown 2.???

② Quite a few shops are not accepting, or discouraging, cash payments - and the youth don’t like it.?

Since the Access to Cash Review in 2019 there have been a plethora of initiatives to ensure that people can conveniently access cash when bank branches are closing by the day. However, access is only part of the story with acceptance, arguably, being a more important matter. There’s no point in securing access if there’s nowhere to spend it. (Interestingly, the recent survey found that around 7-in-10 (69%) find it easy to access cash and only 1-in-10 (11%) found it difficult.)?

The survey found that nearly half of the adult population (45%) had been somewhere that had not accepted, or discouraged, cash payments. This is slightly lower than the 49% reported in the previous survey conducted in November 2022. At first sight this result seems high but it is likely inflated by the increase in the number of signs stating a preference for card payments that surfaced during the lockdowns, many of which remain in place. It also reflects the change in payment behaviour: some small businesses offering low-value items (e.g. coffee) have decided to move away from cash because they’re confident their clientele can use a non-cash payment method.?

Of those that experienced this, 45%, under half, said they were inconvenienced by it. Again, quite a high number, which demonstrates that a large proportion of the adult population is not comfortable with the move away from cash. What’s most interesting however, is that it’s not just the older generation that feels this way. As Chart 2 shows, the survey found that inconvenience was highest with the youngest group, with 52% of 16-24 year olds feeling inconvenienced. This suggests that the common view that it’s the older generation that are holding on to cash is incorrect. Perhaps this age group, also known as Generation Z, are used to a choice and see cash as part of that; or perhaps they are turning to cash to help budget, as recent research found they are in the US.?

③ There’s a high level of cash in people’s homes and it’s causing a headache for the cash cycle.

The age-old question asked by those involved with cash is ‘Where is all the cash?!’. How can there be ￡80bn in circulation, yet only c.6 billion annual cash transactions? We’ll go into that specific question in more detail in a future blog but for now, we can say from our latest survey that a quarter (25%) of the UK adult population are keeping cash at home for emergencies. In terms of coin use, a fifth (20%) said that they put all their spare change in jars or piggy banks to help them save.?

This type of information is useful as it’s impossible to account for every banknote and coin. What it demonstrates is that it’s likely that a quarter of all banknotes, and a fifth of all coin, is sitting dormant, which makes attempts to modernise the cash cycle to reduce cost, which is rising as its use as a payment method falls, very difficult. To address this, other countries, including the US, Hong Kong and the Philippines, have introduced ‘coin recirculation’ schemes to get the dominant cash back into circulation. Perhaps it's time the UK follows suit.?