Are we sleepwalking into a cashless crisis as firms go card-only?


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A new sign outside the Crown & Anchor, in Brixton, South London, reads: ‘We will only be accepting card payments. Apologies, but it is the digital age.’

The pub made the decision to go cashless in October this year, to deter burglars after several break-ins. It is one of a handful of cafes, pubs and shops across Britain to ditch cash entirely in recent months.

In some cases, retailers claim customers prefer to pay by card because it is faster and easier. 

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A major report published today reveals that Britain is in danger of sleepwalking into a cashless society within the next 15 years

But experts warn that rising bank charges and disappearing branches mean businesses are at risk of being forced to ditch cash before customers are ready, because it has become expensive and inconvenient.

A major report published today reveals that Britain is in danger of sleepwalking into a cashless society within the next 15 years.

The Access To Cash Review warns that going cashless too soon could mean millions of people are financially excluded and at risk of exploitation.

The elderly, disabled and vulnerable could lose their independence, as many give cash to carers, neighbours or friends to do their weekly shopping. 

Handing over their card and PIN would put them at huge risk, as banks would not pay out in the event of fraud.

People who use cash as a way of managing their budgets will face challenges, too, the report adds. If businesses drop cash altogether, cash shoppers will not have as much choice in the High Street, and as it is the poorer members of society who are more likely to use cash, it could result in a ‘poverty premium’.

Meanwhile, in rural areas, where broadband and mobile connectivity can be poor, card machines will not always work. 

And such reliance on technology could bring society to a standstill if there was a cyber-attack or an IT meltdown — as we saw during the Visa network outage earlier this year. Here we explain what’s driving the cashless revolution.

Rising fees forcing firms to ditch cash

Shops insisting on digital payment is the most likely cause of the ‘death knell of cash’, according to the Access To Cash Review’s research. ‘As one consumer group told us, there’s no point protecting access to cash if you can’t use it,’ says the report.

There is currently no obligation for retailers to accept cash, and increasing numbers of shops, car parks and buses are choosing to abandon it.

For years, retailers and other small businesses have preferred customers to pay in cash because they are charged a fee for every card transaction. But, according to the report, firms are now concerned about the growing challenges of accepting cash.

The Federation of Small Businesses says cash is becoming more expensive to handle. 

Figures from the British Retail Consortium show that the average cost of processing a cash payment rose from 1.29p in 2013 to 1.46p in 2016. 

Meanwhile, over the same period, the cost of accepting card payments fell — though it is still more expensive — from 8.83p to 5.55p.

In addition, research compiled for Money Mail reveals that cash deposit charges at some major banks have doubled in the past six years.

For example, in 2012, the maximum charge for depositing cash with Barclays was 85p, compared to £1.50 today. 

With Danske Bank, the maximum was 72p, but is now as much as £1.50. While Lloyds Bank’s maximum fees across its accounts have gone up from 89p to £1.

A spokesman for Danske Bank says this fee applies only to small business customers signed up to its digital account as an incentive not to return to face-to-face deposits. The fee on its regular small business account tariff has gone up by 10p, to 82p. 

A spokesman for Barclays says it provides free banking to new businesses and loyalty rewards of up to 50 per cent. ‘On average, many clients actually pay less to deposit cash than in 2012,’ he adds.

Mike Cherry, chair of the Federation of Small Businesses, says: ‘The decision to go cashless should be a proactive one for small business owners — it shouldn’t come about as the result of unreasonable banking fees.

‘The small business banking market has been dogged by lack of competition and scandals for too long. We’d urge small businesses to shop around regularly for the best small business banking deals.’

Dumping cash saved me a small fortune! 

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A 19th-century pub in a village with around 107 residents is hardly a place you’d expect to be a cash-free zone.

But landlord Mike Keen (pictured) claims The Boot, in Freston, near Ipswich, Suffolk, is the first pub in England to reject coins and notes.

Mike, 49, who has worked in catering for most of his life, first became intrigued by the idea when he visited a cashless cafe earlier this year.

Six months ago he re-opened The Boot, then derelict, ending a nine-year drought when the village was without a pub.

He says: ‘The banks charge a fortune for you to pay cash in. You queue for ages to speak to a cashier and then have to pay for the privilege of putting your money into your account.

‘By going cashless I save time having to deposit the cash, and also save time having to cash up at the end of the day. I just press a button and it’s done.’ If Mike had accepted cash at the pub, he would have had a 4.2-mile drive to his nearest bank branch in Ipswich.

He adds: ‘There are also fewer security issues. You don’t have staff walking around with £2,000-worth of notes, and you reduce the chances of the pub itself being robbed.

‘We even have lower insurance premiums because the risk of theft goes down.’

At first, Mike had concerns about how reliable the internet connection would be in an old building.

While there have been ‘a couple of hiccups’, Mike has now installed boosters to ensure the pub stays connected, as well as a dongle, a device that can be used as a back-up if the internet fails.

Now Mike’s regulars can spend as little as £1 on a lime and soda and tap their cards to pay. ‘I got a great reaction anyway because I was opening the pub after such a long time,’ says Mike.

Overall the pubgoers have been supportive of the move and ‘intrigued’ by such a modern business model taking place in a Grade II-listed property.

So far the landlord has only received ‘one angry email’ from someone claiming that by not paying in cash their movements could be tracked by the Government — or anyone who checks their bank statement.

‘I can definitely see a time where cash will become defunct,’ says Mike.

 

No banks left to drop off money

Closing bank branches means business owners must travel further to deposit their money.

Almost two-thirds of Britain’s bank branches have closed their doors over the past 30 years, according to consumer group Which?

A fifth of households are now more than 3km from their nearest branch, with rural communities hit especially hard. Cafe owner Mike Haggerton resorted to card-only payments in the summer, after the closure of an RBS branch meant he would have to take a two-hour, 60-mile round trip from the Scottish Highlands to Perth, just to deposit cash.

Mike, who owns the Habitat Cafe, says he had no option but to refuse cash payments because he had been left ‘without adequate banking facilities’.

Carla Taylor made her bar, Social 7, in Salford, Greater Manchester, cashless in September after realising that 93 per cent of its transactions were made by card.

Earlier this month, the bar faced a hiccup when technical problems meant its card machines didn’t work for around an hour. But Carla, 36, says she has now installed a back-up server in case the internet goes down again.

‘We’ve saved on management costs by cutting the time it takes to count money and sort change orders,’ she says. ‘We’ve had a great response from customers.

I am embracing the change, but I would say the banking industry has pushed me into this position 

 Carla Taylor, bar owner

‘I am embracing the change, but I would say the banking industry has pushed me into this position. By the time we went cashless, we were on our fourth RBS/NatWest branch after three had shut down.’

More and more businesses are now turning to their local Post Office to make deposits, but many have reported problems with large queues and the level of service. Some Post Office branches also only accept deposits of up to £1,000.

The Cheshire village of Lymm lost its last bank, Lloyds, in July last year. A Barclays branch closed its doors in 2015 and Cheshire Building Society shut in 2014.

It means that many of the village’s 12,000 residents now have to travel to nearby towns that are six or seven miles away to do their banking — though Lymm finally got a Post Office earlier this year, which has helped.

‘Lots of local businesses have been impacted and have had to get card machines, which they didn’t have previously,’ says councillor Graham Gowland.

Lymm business owner Stephen Shelmerdine says that 65 pc of purchases at his cafe, the Coffee House, are now made by card — the opposite of when the shop first opened seven years ago.

Stephen says: ‘The service at the Post Office is great, but there is a limit to the amount of cash you can deposit there.’

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The Access To Cash Review warns that going cashless too soon could mean millions of people are financially excluded and at risk of exploitation

Full tills tempt thieves

Businesses say they also incur security costs when keeping cash on their premises or when moving it to the bank or Post Office.

Michael Mulcahy, co-owner of modern convenience store The Hoarder, in Fulham, London, says: ‘Every week you hear of another independent shop being broken into, so going cashless keeps the business, and the staff, safer. We also don’t need to spend the time cashing up at the end of the night.’

Michael adds: ‘I think some retailers assume that, if they do 30 per cent of transactions with cash, they will lose 30 per cent of customers if they go cashless. But they won’t, customers just use their cards instead.’

Across town, all three branches of trendy London coffee shop The Watch House have gone cashless.

One of the sites was broken into three times in three weeks in 2017 — with cash stolen — and it was forced to go cashless after a till was damaged.

It made the owner, Roland Horne, realise the shops could remain cashless and eliminate the risk of any more break-ins.

He admits that in one of his shops he lost a quarter of customers at first, but maintains that it was the right decision.

‘It is progressive, it is safer, it is more efficient,’ he says. ‘The idea of pieces of metal and paper notes to pay for things is not required in this day and age.

‘In our shops in community and residential areas, it was more of an issue. Some people wanted to use cash and, if they couldn’t, they were off.’

Roland says it also meant no more trips to the bank, where he had encountered difficulties in depositing cash because, he was told, he did not have the correct type of business account. 

He adds that his shops remain ‘flexible’, however, and he has even given free coffees to customers who order drinks and then realise they have forgotten their card — or do not have one at all.

And he has taken precautions to try to avoid any technological issues. He says: ‘We were completely reliant on our Wi-fi working to be able to process payments, so we have doubled up and now have a SIM card terminal, too, just in case.’

With vanishing cash machines we have no choice

Vanishing ATMs are another reason customers are becoming more reliant on cards.

More than 200 machines are being removed — or swapped for ones that charge for withdrawals — every month, according to Britain’s largest ATM network, Link.

Remote areas are among the hardest hit, as their cash machines are used less frequently.

The Access To Cash Review says: ‘The earliest closures of ATMs and branches have been in remote and rural areas because activity levels and volumes tend to be lower than in busy urban areas.

‘This makes it harder for locals to access cash, and also increases the costs for local retailers using cash — which pushes them to digital only. 

This risks leaving pockets of consumers unable to access local services, and increased pressure on the margins of local merchants and retailers who choose to accept cash.’

The Northumbrian village of Otterburn does not have a single ATM. And, until a Post Office service returned to the village hall last month, the only way for its 654 residents to get cash was to take up to £50 cashback from the local shop.

This meant they were completely reliant on debit and credit cards.

If the shop was closed, they would have to travel to the next nearest village four miles away.

Gordon Moore, 58, who owns the Border Reiver Village Shop in Otterburn, says he thinks a cashless future may not be far away.

‘I wouldn’t be surprised if all our purchases were made by card in 15 to 20 years’ time,’ he says. ‘You have to move with the times.’

However, in some rural areas the internet connection is still not strong enough for card machines to work properly all of the time.

So, in many towns and villages and for many people, cash is still the only practical payment method.

A UK Finance spokesman says: ‘Customers and businesses are increasingly opting for the convenience of paying in a way that suits them, with debit card payments overtaking cash for the first time last year.

‘But the UK is far from becoming a cash-free society and, despite cash being less important than it once was, it will remain a payment method that continues to be valued and preferred by many. 

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Money, money, money: But the Abba Museum only takes cards

We ditched cash too fast: Sweden’s regret  

Sweden is expected to become the world’s first entirely cashless society, writes Louise Eccles.

Hundreds of traders already refuse to take cash, citing bank branch closures and high bank charges, as well as convenience and security. 

Around 85 per cent of payments are made by card compared to 34 per cent in the UK.

Last year Money Mail visited the Scandinavian country to see for ourselves how the cashless movement was taking hold.

We found that cash is now so rare that even market stalls, churches and homeless people accept card payment. But steps are being taken to slow down the pace of its cashless revolution amid fears the country could be creating a problem.

Earlier this year, members of the public were even urged by a Government body to keep cash at home in case of a crisis.

A leaflet entitled ‘If Crisis or War Comes’ was sent to every household in the country by The Swedish Civil Contingencies Agency. Among the advice was that everyone should ‘keep cash in small denominations’. 

Echoing fears that Swedes could struggle to buy goods in a crisis, it said people should be prepared in the event that ‘payment cards and cash machines do not work’, and that ‘mobile networks and the internet do not work’. 

The nation’s central bank, Sveriges Riksbank, is also concerned the country could be vulnerable to cyber-attacks and technology failures if it relies on card payments alone.

It also pointed out that by eradicating cash, banks are effectively in complete control of our money.

 If this development continues without the Riksbank taking action, we risk finding ourselves in a situation in which the payment market is completely dominated by private players

Launching a review this year, it said Sweden’s decline in cash had been ‘rapid’ and ‘dramatic’ and they were ‘practically alone’ in the world with regards to the unique challenges they faced.

The central bank is even examining the possibility of introducing its own e-currency, the e-krona, as well as ‘making card payments and withdrawing cash possible in an offline situation’.

A report said: ‘If this development continues without the Riksbank taking action, we risk finding ourselves in a situation in which the payment market is completely dominated by private players . . . Incorrectly handled, this could lead to monopoly situations.

‘There exists a risk for cyberattacks, which may increase in the future. I consider that Sweden’s preparedness will be weakened if, in a serious crisis or the event of war, we have not decided in advance how households and companies will pay for fuel, food and other necessities. 

Making it possible to make payments offline may also be necessary to ensure that payments can be executed in all parts of the country.’

In Sweden, most people have a mobile phone app called Swish which allows instant payments to be made securely between individuals.

Shops, hotels and restaurants are not obliged to accept cash as long as they have clearly signalled this to their customers, for example with a sign.

But a parliamentary committee in Sweden is looking into whether it should be mandatory for banks to offer cash withdrawals and deposits.

The proposal would also force banks to provide ‘reasonable access’ to cash, with Swedes having to travel no more than 16 miles to a cash machine.

Ron Delnevo, European executive director for the ATM Industry Association, says: ‘Many Swedes who would prefer to use cash are being hindered from doing so by a general banking policy of not handling notes or coins at bank branches. Faced with this massive inconvenience, it is hardly surprising that some Swedes have, reluctantly, given up using cash.’

The Access To Cash Review warns that Britain needed to learn from Sweden’s mistakes to stop people being left behind.

Notes and coins are still vital 

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Just over 30 per cent of all transactions are made in cash, half of what it was a decade ago

By Natalie Ceeney 

For  some people in the UK, real cash has become irrelevant. Direct debits pay their bills and contactless cards or smartphones mean they no longer need to visit the ATM or bank.

They can ask their Alexa to order goods online and soon their smart fridge will do the weekly shop.

For them, coins and notes are obsolete — 41 per cent of the UK believe they will see a cashless society in their lifetime.

Just over 30 per cent of all transactions are made in cash, half of what it was a decade ago.

Most of us still carry some cash because — well, it always works. Not everyone accepts card payments, and if bank or retail systems go down, we can still use cash.

Yet almost half of UK adults say that not having any cash at all in their lives would be problematic.

For many, there is not yet any real substitute to cash.

In rural communities, a lack of banking facilities and poor broadband connectivity puts people at a disadvantage.

Improving broadband and 4G coverage will help some. But the single biggest determinant as to those who favour cash is economic — the poorer the person, the more they rely on cash. 

For those in debt or on low incomes, cash can be the best way for budgeting. With cash, you can see exactly what you have to spend for the week.

Automated payments such as direct debits, on the other hand, can mean money leaves your account when you don’t have it to spare.

And conditions such as Parkinson’s and arthritis can make it hard to use touch screens. People who suffer mental health problems tell us that, at times of poor health, access to digital payments can lead them to clear their bank account in hours.

Disabled people who rely on carers to pay for shopping know that they really shouldn’t share PIN numbers or hand over contactless cards.

We need to shift the debate. The question we need to be asking is no longer ‘will Britain go cashless?’ but, as we move towards a lower cash economy, ‘how do we make sure no one is left behind?’

THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS

 

 

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