In a surprising turn of events, the number of people primarily using Cash for daily expenses reached a four-year high in 2023. This is the first rise since 2019, according to recent UK Finance research, despite the ongoing cost of living crisis.
The research reveals that approximately 1.5 million adults in the UK predominantly used Cash in 2023, a significant increase from the previous year’s 900,000. Adrian Buckle, UK Finance’s head of research, suggests that this uptick is likely a reflection of people using Cash to better manage their limited budgets during tough economic times.
This trend contrasts sharply with the majority of young people who have embraced digital payments. Nearly three-quarters (72%) of 18- to 24-year-olds regularly use their smartphones or watches for contactless payments, a stark difference from older generations. Only 27% of those aged 45 to 54 use mobile contactless payments frequently, with the figure dropping to just 8% for those over 65.
Despite the current generational divide, Buckle predicts that older age groups will gradually adopt mobile contactless payments in the coming years. Mobile payments offer several advantages over traditional cards, such as enhanced security features, including fingerprint technology, which eliminates spending caps and provides protection against fraud.
However, the rise in mobile payments has also brought new challenges. The risk of thieves “shoulder surfing” before stealing phones is a growing concern, particularly in urban areas. Statistics show that thieves steal a phone in London every six minutes, underscoring the importance of vigilant and strong security measures.
While there has been a steady decline in cash payments over the past decade, driven largely by the convenience of contactless cards, Cash remains the second most popular payment method after debit cards. An estimated three million people in the UK still rely on Cash for their transactions.
The cost of living crisis, which has forced many to keep a closer watch on their budgets, is to blame for the recent increase in cash usage. In 2022, the sharp rise in prices and squeezed finances led to a temporary increase in cash payments, although the overall trend has been towards a cashless society. Last year, cash payments accounted for just 12% of all transactions, with 22 million consumers primarily using other methods.
Recognising the importance of Cash for millions of people, the Financial Conduct Authority (FCA) has introduced stricter rules to ensure access to Cash. These rules require banks and building societies to provide alternatives, such as banking hubs, ATMs, and Post Office facilities, when considering branch closures.
Economic Secretary to the Treasury Tulip Siddiq emphasised the significance of these measures: “Cash continues to play a vital role in the lives of millions of people and businesses across the country, so I welcome the FCA’s new rules. Our commitment to roll out 350 banking hubs will also help provide local communities with access to the critical banking services people rely on.”
The resurgence of cash usage in the UK highlights the ongoing challenges posed by the cost of living crisis. While digital payments continue to grow, particularly among younger generations, Cash remains an essential payment method for many. As the financial landscape evolves, ensuring access to Cash and balancing the adoption of new technologies will be crucial to supporting diverse consumer needs.