Cash is not what it used to be
At the end of September, the old paper £50 and £20 notes will no longer be legal tender. But is cash past its prime in general?
According to UK Finance, 56% of all payments were made in cash in 2010 and in 2015, the proportion had fallen to 45%. By 2019, the use of cash was continuing to fall, with the number of transactions in that year less than half the level of 2012. To further dent the use of cash, Covid-19 came along.
Cash use was hit by the pandemic in three ways:
- During lockdown, many shops shut and entertainment, hospitality and travel ground to a halt. In these sectors, cash represented a relatively important and regular method of payment.
- To minimise physical contact, paying by card instead of cash was encouraged during the pandemic. There was a preference for contactless payments, by which a quarter of payments were made in 2020.
- With the closure of the majority of shops, people turned to online shopping, which further reinforced the use of card over cash.
The net result for 2020 – the latest year for which figures are available – was that cash payments fell by over a third, accounting for just 17% of transactions. The winner from the downfall of cash was the debit card, which provided 44% of all payments in the year. It was only in 2017 that rising debit card use caught up with declining cash use.
So, what does this mean for the future of cash? During 2020, just one in four people used cash once a month or less frequently. If you are someone who rarely uses cash you may want to check for any unused notes in your purse or wallet, as £20 and £50 paper notes will cease to be legal tender on 30 September. After that date, only polymer £20 and £50 notes will be legal tender. Banks may still accept the old notes, but business will not. Whilst the Bank of England will exchange withdrawn notes, it is much easier to spend or bank the notes before the end of September.
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