Cash accounted for more than half of all transactions in the UK in 2010, but by 2020 was used in just 17% of payments, according to the Bank of England.
Overtook by cards, and later contactless payments, along with the rise of digital payments and eWallets, it’s looked for a long time like cash has had its day as king.
But perhaps reports of its demise have been published too soon.
That’s because the number of cash withdrawals has spiked for the first time in 13 years according to a recent report from Nationwide.
Withdrawals increased 19% by the end of 2022, compared to the previous year according to the bank.
Buy why?
Do these numbers really represent a direction shift in people’s attitude to physical money? And why exactly are cash withdrawals on the rise again?
There could be multiple factors in-play. But here are a few reasons why people might be moving back to cold, hard cash…
The cost of living crisis
Times are tough. People are becoming more concerned about their income and outgoings with every passing day.
The cost of living crisis, fuelled by spiraling inflation, has left a lot of people stuck in panic mode when it comes to their finances.
Because prices of everyday items are increasing, there’s a real possibility people are actively withdrawing cash in an attempt to prevent overspending on their debit and credit cards.
With ‘Tap-and-go’ contactless payments now the norm, it’s never been easier to spend so much in such a short space of time.
But with physical cash, people could be choosing to budget based on what they’ve actually got in their pockets, rather than what they see on their phone screens.
Lack of trust in banks
It’s safe to say the UK financial market has been pretty unstable lately.
With the value of the pound plummeting just a few months ago, it’s no surprise some people are worried about who’s taking care of their pounds and pennies.
Given the unpredictable nature of it all, it could be that people have become disillusioned with banks. Plus, many customers still harbour memories of the 2007-08 financial crisis and could believe we’re heading down the same road.
Which could naturally lead to people wanting to have ultimate control over their cash.
Are we on our way back to the good old-fashioned days, or will these numbers prove to be a simple bump in the road?
Quick borrowing
Cad transactions might be the easiest way to send money quickly, but they’re not always the most ideal.
When it comes to borrowing money, specifically small amounts of money, plenty of people still opt to reach into their purse or their wallet for a fiver or a tenner. It’s easy and it’s convenient.
25% of people in the UK borrow money from friends and family to get by, according to statistics from Moneyage. These statistics also show only 54% of people who borrowed paid the money back.
Plus, if someone requests their money back in-person, a cash-in-hand transaction there and then will be the likely result.
But the cost of living crisis will also be taking effect.
Take young people, for example.
According to recent polling, a quarter of young people have been forced to borrow money to buy food. The ease at which friends and family can grab a quick note or two from their pockets might take the sting and some of the embarrassment out of this kind of request.
How much money have people withdrawn in recent years?
One of the reasons why this new rise in cash withdrawals is so shocking is due to the sharp decline we’ve seen for several years now.
Back in 2014, Nationwide reported a total withdrawal amount of £51.41m, compared to £30.2m in 2022.
However, despite the recent rise in cash withdrawals, it could be considered a drop in the ocean when compared to the overall decline in cash withdrawals we’ve seen over the past decade.
They’re nowhere near the same level they used to be, and they’re probably never going to reach those heights again.
Of course, the coronavirus will have impacted this number. But the cause of the overall drop is more likely due to developing technologies in shopping, spending and banking.
Why have cash withdrawals been going down for so long?
As digital technology has evolved, the banking industry has followed suit. It’s easier to access, transfer and spend your cash than ever before.
Banking apps, online shopping and contactless card payments have seriously impacted the need for physical cash.
It’s not “obsolete” yet, but you’d be forgiven for thinking that’s where we’re heading.
Businesses that aren’t taking advantage of the digital cash revolution are falling behind the competition.