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Cashless Britain - not coming to a town near you soon

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2015/03/04
Gareth Lodge
There have been a number of reports in the UK since the beginning of the year heralding a cashless Britain, suggesting that cash “dies” this week. Of course, I'm being somewhat tongue in cheek, but it was suggested that February 2015 would be the last month that cash was king. That's true in many ways - the share of cash on a total transactions basis will drop below 50% for the first time in the UK this year. But that doesn't really tell the whole story. Firstly, "not cash" isn't a single payments type of course. There are debit and credit cards, ACH payments, still (shudder) some cheques. Fact 1 - by volume of transactions, cash is by far the most dominant, as at 50% share, it's obviously the same size as all the other payment types …combined. So cash isn't dead, and not even mildly under the weather! Secondly, the decline isn't quite as dramatic as it may first seem. There are lots of new payment occasions being created (iTunes, mobile phone subscriptions, cable TV etc) that are electronic only. And conversion from cheque to direct debit generally sees an increase in payment volumes (ie quarterly cheques becoming monthly direct debit). Fact 2 The net result is significant growth in the overall size of the pie, biased to electronic payments - yet the share of cash has only decline by a few percentage points rather than the significant drop implied. This is particularly important to remember in the coming months. Early indications suggest a significant increase in contactless is coming. Fact 3 It's a migration from Oyster that will drive massive contactless growth this year, rather take-up of contactless. This is important as Oyster had already forced a conversion from cash, with individual cash transaction (ie for each journey) into a single top-up transaction. The switch to contactless is unbundling this back into individual transactions, albeit applying a daily cap. We're not saying that contactless isn't going to grow impressively, just we mustn't simply look at the headline numbers and draw conclusions. It's not all negative. That Oyster habit converted to cards will help create a contactless habit which will spread. Coupled with the raising of the limit of £30, and with many cash payments being below that value, there is the possibility to see some levels of cash replacement that could move the needle. Cash is far from dead but we are certainly moving into a LessCash rather cashless world.

コメント

  • Tom,
    Whilst we've not done our own survey, most surveys do seem to suggest that cash is "cheaper". The British Retail Consortium and the European Commission (http://ec.europa.eu/competition/sectors/financial.../presentation_results_en.pdf ) studies conclude that point. But I'd also say that there is a perception about a surveys usefulness depends on it's design, and who designed it. Both these are actively being used to say cards are too expensive. I'm not saying that there is a bias, but both sides of the argument have been vocal in claiming that there is. This argument has been going on for at least ten years, and I see no end in sight yet.

  • Jeremy,
    Many thanks for your comments, and unsurprisingly, I'm in violent agreement! I was trying to highlight two points - #1 cash isn't dead, and #2 you can't take the numbers at face value and draw simplistic conclusions.
    Cash *is* declining, and there is no argument there. By value, it was over taken years ago by numerous transaction types. By volume, I don't see cash disappearing in my working lifetime. But it probably will be overtaken.
    Contactless is absolutely growing. I was more pointing out that Oyster may give those not close to the numbers false impression of the growth. My rough estimates also suggest they'll top a billion this year - 400m of that will come from Oyster, 300m from core growth. That's still a very impressive growth. I'd also say that the growth isn't just coming from cash either - some of the volume has switched form factor (i.e. EMV to contactless) for example.

    Gareth

  • I agree, reports of the death of cash have been greatly exaggerated. A leading retailer recently told me that they had carefully measured the cost of different payment types and even when the so-called 'hidden' costs of cash are factored in, it's still the lowest-cost payment method. This is a bitter pill to swallow for someone who's spent his life working in electronic payments! But it does seem that in many sectors, the push for replacement of cash is coming more from those with an alternative to sell than from dissatisfaction of those who use cash today.

  • Gareth

    You should look at the maths. There are about 22bn UK cash txns p.a. (Payments Council data). Assuming payment txns grow in line with GDP, UK cash txns should grow by about 500m txns in 2015. However, contactless txns are growing consistently at 200% - 300% p.a., and have been since long before they started replacing Oyster. This year they could top 1bn txns at this rate. Therefore, when the Payment Council stats come out next year, I expect to see a decline in cash of around 500m txns in 2015 since 2014. Even an unchanged figure would show that cash in the UK is in fact declining.

    Jeremy