Payments: The evolution of cash


Kanika Saigal
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Cash will be around for a long time – but its role will change.

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How close are we to becoming a cashless society? Banks, fintech companies and the media would have us believe that we are very, very close. Countries from India to Zimbabwe to Sweden are on the cusp of a cashless revolution. And those that aren’t reckon that it is a goal they should be working towards.

On March 6, the Access to Cash Review was published in the UK by an independent panel led by Natalie Ceeney, chair of Innovate Finance, an independent membership association that represents the UK’s global fintech community. The review was funded by Link – the non-profit body which manages the UK’s ATM infrastructure – but Ceeney says that it is completely independent of the inter-bank payment system.

The Access to Cash Review believes argues that the UK is “sleep walking” into a cashless society – a society that would exclude 17% of the British population from the formal economy.


The country’s most vulnerable will be hit the hardest – the older generation, those that live in rural areas, people with mental health issues and the poorest in our communities. As such, the UK has to protect access to cash via ATMs and local bank branches, which are rapidly closing: between June and December 2018, 488 cash machines in the UK closed each month on average; and 3,300 UK bank branches have closed down since 2015.

This is something that we need to see addressed at policy level, says the review.

In the UK, the amount of physical cash present in the economy is actually increasing year-on-year according to the Bank of England. Bank notes in circulation in the country have actually increased from around £56 billion in 2014 to £69 billion today.


Data collected by the Federal Reserve shows a similar trend in the United States: in 2018 there were 43.4 billion notes in circulation versus 41.6 billion in 2017.

Why then, are we continually told that we are becoming a cashless society?

Banks argue that this change is down to the customer. Banks are closing because more and more people are turning to digital options. Meanwhile, banks and fintechs bombard us with messages highlighting the convenience and ease of a cashless society as it will save them money in the long term: digital wallets and cashless transactions don’t need people or bricks-and-mortar branches with high capital expenditure.

Convenience is winning. When it comes to day-to-day transactions, we are less likely to use cash given the convenient digital alternatives that are open to us: for small transactions, we are much more likely to use our smart phone or contactless credit or debit card. At the other end of spectrum, when it comes to a big ticket purchase, again, we are less likely than ever before to use cash. Booking a hotel or flight tickets is much more conveniently completed in the warmth of your home using a credit card.

So where then is all this cash now in the system being hoarded?


It is important to know what happens when the digital infrastructure that manages our digital cash transactions, which we put so much faith in, fails. Brett Scott, a journalist and author based in London, recalls conversations he has had with the Federal Reserve in the US where they found that the amount of money that is taken out of ATMs in the run-up to a natural disaster, such as a hurricane, spikes. The point he makes is that cash doesn’t fail when the power goes out.

This can be observed elsewhere. For instance, some charities and humanitarian organizations are increasingly turning to cash in conflict zones or following a humanitarian disaster. Of course, there are risks to this: money in cash form has (and will) go missing and can be misused, but cash is a much more nimble means of payment which avoids lengthy procurement processes in terms of sourcing food or fuel when the need is urgent.

For instance, one aid worker in a refugee settlement in Uganda said that it can take up to six months to negotiate a contract for women’s sanitary items because everything around the procurement process has to be run through the central aid organisation in Uganda’s capital, Kampala, before any decisions could be made. Meanwhile, women and girls in the settlement have been without adequate sanitary items this whole time.

Where refugee settlements become more like small villages, with shops and markets, allowing refugees access to cash and the ability to choose how they spend their money, it can save time and resources. Admittedly, these types of transactions may be better managed via a digital wallet eventually, but until then, cash will fill the gap.