Cashing Out

A new report by Fred de Fossard with The Entrepreneurs Network looks at the rise of cashless commerce and its implications for SMEs, the high street, and financial inclusion. It finds:

  • Cash is in terminal decline. Over half of Britons carry less than £10 in cash on them at any one time. Less than a quarter of retail payments are made in cash; cashpoints are disappearing from the high street; and a wave of small businesses are turning against handling cash altogether.

  • A worrying trend has emerged in recent years, as major US cities have banned cashless businesses, and senior British politicians have called for their abolition in the UK, in the interests of financial inclusion.

  • The British government has committed to preserving cash in the economy for the foreseeable future. However, usage shows that cash is in terminal decline throughout the western world, and regulators would be wise not to fight yesterday’s challenges.

  • Handling cash costs British businesses on average over £3,000 per year. Cash is expensive, cumbersome, and dangerous. Today, cash accounts for only 22% of retail transactions, and it is increasingly associated with crime, and the underground economy.

  • Abolishing card-only businesses would be a retrograde step which would harm a new wave of entrepreneurs, who have embraced the opportunities of the digital economy, and are responding to customers who want quicker, efficient, electronic payments.

  • The market in electronic payments has been invigorated by recent innovation and competition, offering small businesses access to fast, cheap, and seamless payments, at a fraction of the cost compared to ten years ago.

  • Around 1.23 million people in the UK do not have a bank account, many of whom exist on the poor, precarious margins of society.
    Many politicians have understandable and admirable intentions in their criticism of card-only businesses. However, abolishing card only businesses increases costs and risks borne by small businesses, and does little to materially help the poor and financially precarious.

  • Regulators would be wiser to embrace the productivity and innovation of electronic payments, and focus on the advantages offered by Open Banking and financial technology to our economy and the financially- excluded alike.

  • The UK economy turns on electronic payments. The key is to give as many people access to new technology as possible, rather than trying to preserve the declining use of cash. It is only by embracing technological innovation in banking and improving the provision of financial services that financial inclusion can be meaningfully increased.

You can read the full report here.