For the past several years and post-COVID 19, the UK like many other countries have become increasingly dependent on digital payments, but are those who have not been as quick to adopt these methods in danger of being left behind?
Kevin Carson, Senior VP of Global Business Development at Freedom Pay, writes for Payment Expert on why banks, financial services and the incoming Labour government should look to provide equal opportunities for cash and cashless payment methods.
A quick tap when taking the tube, grabbing a coffee or buying office lunch has become the norm for most Brits in 2024. Many are unsure of the role notes and coins will have in the future – if any.
While recent data from Link reveals a significant shift away from physical money, with consumers three times more likely to leave their homes without cash compared to 2019, the reality is more nuanced.
Brits are still withdrawing a staggering £209m a day from ATMs, and many still carry a small cash reserve for emergencies or budgeting purposes, highlighting a lingering reliance on traditional payment methods.
However, the march towards a cashless future is undeniable, with nearly half of UK adults believing a cashless society is inevitable within their lifetime.
Alternative payment solutions fuel the switch to cashless
Both physical bank cards and their digital counterparts are pushing the need for cash into the past. During the pandemic, contactless and digital wallet usage skyrocketed due to restrictions on physical contact.
In the years since, we expected this trend to plateau, but instead it has continued to grow, reflecting an increasing demand for convenience, speed and personalisation. Consumers, empowered by omnichannel shopping experiences, crave seamless transactions, integrated loyalty programs, and personalised offers.
Contactless payments are now neck-and-neck with traditional card transactions, with digital wallets proving a firm favourite. Research by FreedomPay suggests that by 2033, digital wallets could account for a significant 40% of all retail, leisure, and hospitality spending in the UK.
Buy Now, Pay Later (BNPL) schemes are further strengthening cashless options, offering consumers greater financial flexibility and opening doors to new customer segments. Digital payment systems can further benefit a business by legally and responsibly gathering payment and customer data, enabling businesses to refine their business models to best serve their customers.
Furthermore, innovations like open banking, which allows for financial data to be shared between banks and third-party service providers, are also gaining traction, adding another layer of complexity and opportunity to the evolving payments ecosystem.
Navigating the regulatory complexities of BNPL, open banking and other digital payment methods requires significant expertise, highlighting the growing importance of knowledgeable payment partners for businesses wishing to cater to evolving audiences.
The enduring role of cash
The decline of cash usage in the UK is obvious, with thousands of ATMs being decommissioned in recent years. However, cash is unlikely to disappear entirely as it still holds an important role for certain demographics of the population.
For example, recent research by FreedomPay shows that not all Brits are equipped for the shift to digital, with one in five (18.6%) reporting that they don’t trust using smartphones and wearable devices for payments. A key barrier to widespread adoption is the sizable knowledge gap, as only half (49.0%) of UK shoppers say they understand how digital wallets work.
The concerns of decline in cash, such as accessibility for older people, are being recognised in Parliament, with recent debates taking place over legislation to protect cash payments.
Although older respondents represent a smaller cohort of shoppers, there is a social responsibility for providers to build trust and knowledge regarding digital wallet use to avoid financial exclusion.
Payment preference should be personal
What does all this mean for businesses? Cash may be receding, but it’s far from total abandonment. Brands and retailers need to be prepared to accept the method of payment that the customer prefers – whether this is digital, card or cash.
Offering a diverse range of payment choices is no longer optional; it’s essential. Ignoring the shift in consumer behaviour and clinging solely to traditional methods will hinder growth, whilst steamrolling ahead in digital risks alienating customers.
The future of payments in the UK should reflect both traditional and innovative threads. Businesses that embrace this dynamic landscape and cater to evolving consumer preferences will be best positioned to thrive in the years to come.
