“What is the future of cash in the UK? Less cash but not cashless

Sarah John, Chief Cashier of Bank of England (one who signs the banknotes) in this speech looks at this question most central bankers are asking: What is the future of cash?

….standing at the crossroads in my cash landscape today, I feel confident in saying that cash will remain a critical part of the UK payments landscape for some time to come. But we are clearly bridging to a new world, with lower cash usage, and we need to start preparing now in the UK to ensure that in that world
people continue to have choice in how they make their payments. The Bank of England is committed to supporting cash as a viable means of payment for as long as the public still wants to use it.

We will do that by helping to create a new wholesale cash distribution system that is efficient, resilient and sustainable, and that is fit for purpose in a lower cash usage world. And we will also work to ensure our efforts are co-ordinated with the cash industry and other authorities in the UK. It is only by doing so that we can continue to support people’s ability to choose how to make their payments as the landscape evolves, and importantly, make sure that no-one is left behind.

In another speech,  Charles Randell, Chair of FInancial Conduct Authority points out how branches are disappearing and cash usage is becoming less. Yet, we need to be careful:

All bankers should watch ‘It’s a Wonderful Life’. It captures the range of feelings people have about bankers. George Bailey is the good banker who has the interests of Bedford Falls at heart. Henry Potter is the bad banker who comes to town with a plan to drive Bailey Building and Loan out of business so that he can exploit the town’s citizens.

But if there’s a remake of ‘It’s a Wonderful Life’, the plot needs to change. Today’s issue isn’t banks coming to town, it’s banks leaving town.

A couple of weeks ago I visited Burslem, a town of 22,000 people, one of the 6 that make up Stoke-on-Trent. It’s the mother town of the Potteries, once home to Royal Doulton and Wedgwood, and home to many magnificent examples of Victorian civic architecture.

Burslem’s also been in the news as the first town of its size to have no bank branch and no free-to-use ATMs.  3 banks have closed their branches and the nearest ATM to the town centre charges 95p for withdrawals. The local MP, Ruth Smeeth, took me round to show me the impact that the lack of free access to cash has on her constituents.

Burslem’s a beautiful town, but it’s one with economic challenges. Local manufacturing jobs have dwindled. It’s a low wage and low income area, on average. Food bank and high cost credit usage – legal and illegal – spike during the school holidays when free school meals aren’t available. We know that people on lower incomes are disproportionately high users of cash(link is external), partly because they find it useful to budget with cash: you can’t spend what isn’t in your wallet. Now that Universal Credit is paid directly into bank accounts – which may result in fewer people being completely unbanked(link is external) – it does mean that to budget in this way you have to take cash out.

So there’s a big cash economy in Burslem, in the pubs, hairdressers, cafes and takeaways. At the twice yearly Burslem fair, which funds local charitable activities. At the Swan Bank Church, which is one of the other ties binding this community together. 

LINK, the ATM operator network, uses a radius of 1 kilometre from the nearest free-to-use cashpoint to assess whether ATM operators should receive additional premiums for keeping ATMs open. And on a map, viewed in our office or in a bank’s headquarters in London, it looks like there’s a free-to-use ATM within 1 kilometre of Burslem town centre. But once you’ve walked past the one at the McColl’s store on the way in from Longport station, you realise there’s a steep hill up to town. If your mobility is impaired, if you’re elderly or pushing a buggy, it could be impossible to make the trip. And if you’re in Burslem enjoying the nightlife on which the town centre depends, it’s a long round trip to a free-to-use ATM. Of course, at night the only place in the town centre where you can take money out without a fee – the Post Office counter – is closed. And in the daytime there can be long queues and not much privacy in the Post Office.

 

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