New research from finance and banking trade body, UK Finance, has found that debit card transactions will surpass payments made with cash this year.
Meanwhile, the total amount of money being withdrawn from ATM’s is in swift decline; in 2016, people withdrew £6 billion less than in the previous year.
Emphasising the magnitude of the change, figures from the Bank of England show that the volume of cash in circulation is increasing at its slowest rate in 46 years.
An important driver of the trend towards digital payments is likely to be the rise of contactless debit and credit cards, as well as the ability to pay for goods using mobile phones.
Many of us are choosing our cards over cash for even the smallest of purchases, such as our morning coffee on the way to work, for example.
Figures from UK Finance show that the number of contactless payments has increased from 17.8 million in March 2014 to 469.6 million in June 2017 (the most recent month for which figures are available). This is equivalent to a 2,500 per cent increase over a period of just three years.
Over the same period, the value of contactless transactions has increased from £116 million to £4.3 billion.
Evidence of the drift towards digital is also corroborated by statistics from the industry body, showing a dramatic fall in the proportion of payments made using cash from 62 per cent in 2006, to 40 per cent in 2016.
Cash payments are expected to continue to fall into the next decade, dropping to 21 per cent by 2026.
However, while this might be welcome news for some, questions have been raised about the impact this trend will have on cash-reliant businesses and vulnerable individuals.
Speaking to the Guardian Lady Tyler, Chair of the House of Lords Select Committee on Financial Exclusion, said: “I’m really concerned about this move toward a mainly cashless way of doing things. These changes might suit people who are digitally competent, they might suit banks who can reduce their costs, [but] I really don’t think that more vulnerable groups are being properly considered.”
Some others working in the cash-handling business have refuted claims, however, that a cashless future awaits.
As part of the recent Spring Statement, the Treasury paper contained details of a consultation on the future of cash and digital payments.
It noted that the usage of 1p’s, 2p’s and £50 notes is seemingly in decline, with 60% of 1p and 2p coins used in a transaction once before leaving circulation, with coppers then either saved or, in 8% of cases, thrown away.
It is estimated the Royal Mint has needed to produce more than 500 million 1p and 2p coins each year to replace those falling out of circulation.
Meanwhile, the £50 note is rarely used for “routine purchases”, the Treasury said. It added: “There is also a perception among some that £50 notes are used for money laundering, hidden economy activity and tax evasion.
Consequently, as the trend towards cashless payments increases, it may not be cost effective to continue to produce certain denominations.
The idea was met with stout opposition in the days following and at time of writing, Downing Street had responded to confirm that there are no plans to scrap copper coinage.
Theresa May’s spokesman said: “The call for evidence is simply intended to enable the government to better understand the role of cash and digital payments in the new economy.”
“One thing HMT were seeking views on was whether the current denominational mix of coins meets the public’s needs. From the early reaction, it looks as if it does.”
Many were concerned that scrapping coppers would have a detrimental impact on the charity sector, in particular; restricting already tight fundraising conditions for those smaller organisations heavily reliant on traditional collection methods such as tins or buckets.
Mandy Johnson, chief executive of the Small Charities Coalition said: ““If they remove the opportunity for people to give their pennies in the traditional way, they’re raising the cost of fundraising for small charities.”
However, as less and less people opt to use cash as their default method of payment – many businesses, charities and retailers are finding ways to adapt.
George Hay Partner and charities specialist Toni Hunter said: “There is no doubt that if coppers were to be scrapped, this would have a substantial impact on those charities reliant on more traditional methods of fundraising.”
“That being said, I think we have to recognise that, despite the Government safeguarding these denominations for a little while longer, we are rapidly heading towards a time when public reaction may not be enough to sway them.”
“When it costs more to produce and distribute a coin than the coin itself is worth, it’s place in our society must be questioned. Many charitable organisations are already focusing their administrative resources and fundraising efforts on digital forms of giving, such as text donations and direct debit.”
“For some smaller organisations, a cashless future may seem daunting but adapting to remain competitive is key. With the plethora of banking platforms, phone apps and software available today, getting paid faster has never been easier and both businesses and charities alike should be taking advantage of this.”
“Exploring cashless transactions can benefit you and your customers; quicker payment for you and flexibility for them. Often there are costs associated with implementing alternative systems, but the benefits nearly always outweigh these.”
The call for evidence will close on 5 June. The Government welcomes responses from “anyone with an interest in the questions raised”.