Recent research revealed that cash withdrawals around the world have increased. Why do you think that is?
Mobile, wearables and the Internet of Things mean we have more digital control over our payments than ever before. Yet, ATMs have also seen a surge in cash withdrawals. They say that in 2014, there was a 7 per cent rise to 93 billion withdrawals and that by 2020 it could reach 128 billion worldwide.
In the first place, cash is simple, easy to use and well understood. This means it’s a hugely useful as a budgeting tool during times of economic uncertainty – and since it has been on the rise since 2008, there’s little doubt that part of the reason for its surge in popularity is due to cautious spenders during the global financial crisis.
Cash also avoids the hassle of cheques that might bounce or cards that might be rejected. So for sellers it’s often been the preferred payment method. It’s instantaneous, cheaper for them to handle, and easier to manage, whilst also incurring no transaction fees for the spender.
It’s also a liquid asset that can be useful in a crisis if kept in reserve, so for small businesses and entrepreneurs it’s a very useful tool for staying in the game if not ahead of it during a financially turbulent period.
In the UK, there has also been a surge in free-to-use cash machines in lower socio-economic areas as well as retail areas, encouraging more people to take cash out for their more spontaneous purchases.
It seems so incongruous with the other statistics that have recently been released. Could it be that both cash and non-cash payments are growing without detrimentally affecting one another?
It might seem a paradox but I’d argue it’s only to be expected.
Look at the book industry. Only five years ago the popularity of e-readers and rise of online retailers seemed to hail the end of the hardcopy and the bookstore. However, recent reports show that e-books and hardcopies have now reached a balance.
There is nothing to say that we won’t see a similar relationship between cash and non-cash payments.
Modern life means that we are now all hybrid readers, hybrid spenders.
We take enjoyment from going to shops and splashing the cash as well as getting a great bargain online. We appreciate having all the options for all the different occasions that arise – whether that’s keeping control of our budgets through counting pennies in our purses or double checking our balance through mobile banking.
Having multiple options and finding the best deals is key to the modern shopper.
It’s not just cash that is on the rise, the number of ATMs in the UK was also on the rise last year – is this increase a reaction to cash demand or its instigator?
Cash machines have been on the rise for a while now, with the last slump in numbers occurring in 2006-8. Now, not only are the more cash machines, however, there are more free-to-use ATMs in place too. They now make up about 74 per cent of the total cash machine estate.
This is significant and is largely because of the rise in independent providers working with LINK, whose Financial Inclusion Programme subsidises machines in economically deprived areas, adding over 950 machines across the UK.
So whilst there’s no doubt a little bit of a chicken or egg situation behind the increase in ATMs, there always has to be demand for an ATM before it is placed.
There have to be people who want to use it.
The difference is that LINK’s work has meant more machines are free for consumers, which is key since statistics show people are more likely to travel further to use a free machine than accept a charge.
Installing an ATM is also the result of research. It’s crucial to know whether it is commercially viable for a provider like ourselves to set up in a particular area, after all it is not inexpensive to install an ATM, nor to maintain one. Many convenience stores and garden centres have ATMs now. They receive a lot of foot traffic and customers will take cash out if given the opportunity.
What are your cash predictions for 2016?
2016 will likely see a coming of age for many new payment technologies. However, many are still very much in their infancy in the public mind and therefore in terms of uptake. Mobile payments, for example, are still more exception than rule. Many similarly remain outliers – partly because there’s no single app or platform for easy roll out, and partly because the tried and tested ways of paying – cash and card – come with no additional risks or fees.
For cash, this means that behaviors will continue to change in terms of withdrawal, use and spending but those changes are not likely have a huge impact in 2016.
Instead, I think there will be a continued uptrend in cash withdrawals and cash use throughout the year.
This will be driven by the continued increase in free-to-use ATMs and ATMs in more convenient areas such as retail zones and business areas – which are two targets of many independent ATM providers.
Cash will continue to be popular for spontaneous payments as opposed to regular payments like bills and rent. And also as a budgeting tool. Over the Christmas period it was found that over half of Britons prefer to keep on top of their spending using cash at Christmas and that areas that favoured cash over credit were better off in the New Year.
I think cash’s resilience and safety will also become more prevalent as security threats continue to barrage online and mobile systems. News of data breaches and hacks are almost everyday news now but this cannot affect cash.
I also suspect some of the most cashless societies – particularly the Nordic states – are likely to reveal less than positive results in the next year as a result of inflation rates and societal skepticism.
When do you think cash will finally start to lose popularity – is its current resilience merely the final peak before the inevitable fall?
Cash is going nowhere.
It has too many benefits. For consumers – there’s transparency, familiarity, wide acceptance and speed of transaction. There’s also a reduced fraud and security (which is only set to increase with ATM innovations and the polymer note), and an understanding of value of money that comes with using cash. There are times where you might be in a complete fix – where computers and cards fail and you need the ease and integrity of cold hard cash.
And despite being less common for businesses than consumers, even for entrepreneurs and small businesses it’s considered cheaper, safer, and for payments incurs minimal costs.
This is why it remains the most commonly used payment mechanism in the UK. It might be less than half of payments but the other half is usually fragmented across card, mobile, online etc.
Of course, cash payments are expected to decline in the future. That’s inevitable. Debit card usage rates are likely to continue to increase, especially as SMEs increasingly accept card payments and even contactless. The latter here is particularly significant as it will likely herald a rise in spontaneous payments via card instead of cash.
Saying this, even in ten years time, cash is still likely to comprise around a third of payments. This is lower than today’s ratio but I think this will be the point where a plateau or balance is reached between different payment options.
Having all the different options is something that is hugely beneficial to individuals and to society at large, and that is why I believe cash will prove resilient and not topple in the face of technology.
About Jenny Campbell:
Jenny Campbell is an ex-career banker turned business owner and entrepreneur. She is the owner and CEO of YourCash Europe, a pan-European business that provides cash machines to the retail market. Today YourCash handles over 77 million ATM transactions, while processing over £3 billion in cash value across the United Kingdom, the Netherlands and Belgium, with new territories set to open in the future as well as the innovation developments on the ATM to combine m-commerce payment services with cash. She is also Vitalise Business Woman of the Year 2014.
As the countdown to Christmas begins, Jim Wadsworth, managing director at Accura, pinpoints five ways businesses can prevent fraud and avoid targeted risks.
Payment terminals have stayed the same over the last 10 years, with steady advances in contactless and mobile wallet transactions. Retailers and brands are making a conscious effort to get closer to consumers.
Insurers went online a long time ago, but one of the major challenges has been creating an online experience that can handle the relatively complex insurance “form-filling” process. Jonathan Attwood, CEO of Fospha, explains how his company's toolset can help insurers more accurately track their customers' behaviour.
In this guest post, Lee Britton, commercial director of Prepaid Financial Services, contrasts the fortunes of fintech startups that choose to scale with the backing of major banks with those that opt to go it alone.