Britain, it's time to go cashless

Woman paying using her phone
"The mojitos are on me"
"Debit cards now account for 42.6% of all transactions, putting them ahead of notes and coins"
  • | by Emily Bater

Can you remember the last time you used cash?

The last time I took money from a cashpoint was to pay my way at a real ale festival on a racecourse in Warwick. 

I handed over my £5 notes to the old men behind the bar in exchange for my halves of pale ale, and felt like I'd travelled back to 1977.

Cash-only anything is rare these days; we pay by contactless, bitcoin, on our phones, or our watches.

It used to be that the Queen didn't carry cash - now it's all of us.

Visa recently announced that it's considering offering incentives to UK businesses to go cashless, following a similar scheme in the US.

The payments company is offering 50 small businesses the chance to receive $10,000 if they only use cards. They must explain how going cashless would affect them and their customers in a bid to get the cash.

But is the UK ready to go card-only?

Card payments have already overtaken cash as the most popular form of payment, according to a report detailing transactions in 2016 by the British Retail Consortium. This wasn't predicted to happen until the end of 2018.

Debit cards now account for 42.6% of all transactions, putting them ahead of notes and coins by a small amount - just 0.3%.

In its recent annual payments review, the BRC said that debit and credit cards had "firmly established their place as the dominant payment method in retail" and we're "increasingly displacing cash for lower-value payments".

Basically, this means that people are now happy to pay for a pint of milk or a chocolate bar with card instead of cash.

Countless contactless

According to Payment UK, the trade association for payments and now part of UK Finance, the growth in card payments is due to contactless payments, which tripled in 2016 and is forecast to account for one in four of all payments by 2026.

While contactless has been around since 2007, it's only in the past two years that the usage has exploded - now you can tap to pay everywhere and anywhere, from bars to restaurants to on the tube.

Today there are more than 108m contactless cards in use in the UK, but not everyone uses contactless. Some people worry that their card could be stolen and thieves could get easy access to their cash. The limit for contactless withdrawals remains £30, an amount that hasn't changed since 2015.

The growth in contactless has been facilitated by the number of retailers that have invested in the technology. According to the BRC, this drive was in part facilitated by the Interchange Fee Regulation (IFR), which was introduced across the EU.

The IFR introduced a cap on the interchange fee payable by retailers applicable to payment cards, and led to a significant drop in the cost to retailers and consumers.

Should we be worried then that Brexit could have an impact on the progression of digital payments?

Andrew Cregan, BRC Policy Advisor said, "The government should act to retain the benefits of the IFR for retailers and their customers after the UK leaves the EU and introduce further regulatory action to address the alarming increase in other card fees and charges at a time when the retail industry is facing acute cost pressures elsewhere."

Who gets left behind?

As with all technological advances, there are always people and groups who get left behind.

When we no longer carry spare change in our pockets, what happens to the money that goes to buskers, the Big Issue sellers, charity buckets and the growing homeless population in need of a hot meal?

India recently attempted to reduce the use of cash by eliminating two of its most widely used bills overnight. The Indian government was widely criticized for failing to take into account the impact of this move on the poor, who rely exclusively on cash - 97% of all transactions are made with rupees. But some have argued that a cashless society could help the poor; they point to Sweden, which has some of the lowest corruption and inequality in the world.

The United Nations believes that moving towards a digital economy could reduce poverty and drive inclusivity, but many argue that this is too far away and that in the meantime, many people may suffer.

Make sure your contactless card is backed up by an enticing interest rate when you shop around with Gocompare.com for your next current account.