Will the UK go cashless?

By Nicolas Huber 

Paying in different shops and restaurants all around the UK, some may notice that almost everyone has adapted to accept contactless payment or even to outright not accept cash payments. This has made me wonder if the UK will go cashless in our lifetime? 

Cash has been in and around the UK for a long time, first being introduced at the start of the 16th century, at the end of Henry VII reign. At that point, there were pounds, shillings and pence. Pounds were worth the most, equaling 20 shillings, and pennies were worth the least, needing 12 to equal a shilling. The 1- and 2-shilling coins were brought out of circulation in 1990 and 1992 respectively. Throughout most of history bank notes were made of paper, but the British government have transitioned in recent years to polymer bank notes, first releasing £5 versions on the 13th of September and releasing the final £50 version on the 23rd of June 2021. Polymer notes are objectively better as they are less prone to being counterfeit due to their see-through window, are more durable due to the strength of the material, are better for the environment because of their longer lifespan and therefore less need for being replaced and are cleaner as their smooth surface is less prone to catching dirt. 

So why are card transactions going up just after the government made banknotes so much better? 

First off, bank cards save space. They allow you to carry a near unlimited amount of money on a single, thin plastic card. Even using the UKs largest bills, the £50 note, it would take up way more space. This makes it a lot more convenient to carry them on your person, where space is limited. Secondly, paying with them is a lot faster. Payments up to £100 allow the customer to simply tap their card on the card reader, while larger payments require a pin code to authorize the purchase. This is still faster than having to quickly fiddle to get the exact amount out of your wallet. Third, less germs are spread by tapping a card, instead of handing multiple bills to another person. This was especially highlighted in the Covid-19 pandemic, as contactless payments were highly recommended. Finally, card transactions are generally more secure than their cash counterparts, as card information is encrypted to ensure that sensitive data isn't accessed. The use of a pin also adds an extra layer of protection to bigger purchases, as it confirms that the cardholder is the owner. 

All these reasons make it easier to understand why the use of cash transactions fell from 38% in 2009 to 23% in 2019 to 14% in 2022. 

Personally, I think that we may very well see a transition to entirely card and digital based transactions in our lifetime. 

Sources: 

https://www.golivefaster.com/insights/contactless-payments-rise-in-a-post-pandemic-world  

https://www.financemagnates.com/fintech/payments/the-rise-of-contactless-payments-and-its-impact-on-consumer-behavior/  

https://www.bankofengland.co.uk/explainers/will-cash-die-out  

https://commonslibrary.parliament.uk/research-briefings/cbp-9453/  

https://www.bankofengland.co.uk/quarterly-bulletin/2022/2022-q3/knocked-down-during-lockdown-the-return-of-cash  

https://www.royalmintmuseum.org.uk/journal/curators-corner/shilling/#:~:text=The%20shilling%20as%20a%20coin,was%20known%20as%20a%20testoon.  

https://www.nottingham.ac.uk/manuscriptsandspecialcollections/researchguidance/weightsandmeasures/money.aspx#:~:text=Decimalisation&text=For%20many%20years%2C%20some%20of,in%201990%20and%201992%20respectively.  

https://en.wikipedia.org/wiki/Polymer_banknote  

https://www.bankofengland.co.uk/explainers/why-are-new-banknotes-made-of-polymer