Has COVID Killed Cash?
The boom of the fintech industry over the past 5 years has seen online banking and cashless payments rise, and since the start of the coronavirus pandemic, cash is slowly being phased out.
Declining cash payments
The downfall of cash isn’t a recent phenomenon. According to the Bank of England, debit cards overtook cash as the most frequently used payment method in the UK back in 2017.
The 2020 UK Finance Report highlights the rapid decline of cash payments from 2016 to 2019, and whilst it remained the second most popular payment method of 2019 (used for just under a quarter of total payments), the forecast for cash after the affects of coronavirus is looking bleaker and bleaker.
In 2019 alone, cash payments declined by 15% to £9.3bn.
Other notable findings in the report include a steady rise in ‘faster payments and remote banking,’ with 10 million (18%) of the adult population registering for mobile payments through Apple Pay, Google Pay or Samsung Pay - and 79% of these recording a payment.
The focus on fintech
The ability to use smartphones to make payments is equally as lucrative as the companies utilising technology and developing apps in order to keep up with the ever-changing landscape of the fintech industry.
Fintech lenders are constantly developing more creative innovative ways to lend, with ‘buy now, pay later’ schemes leading a new generation of interest-free lending that eradicates the need for cash and works entirely online or through a dedicated app.
Services such as Klarna, Clearpay and Laybuy are partnered with countless high-street retailers, and offer alternative methods of payment such as the infamous ‘buy now, pay in 30 days’ or ’split your payments.’ This, whilst not directly affecting the retailers that consumers spend with, is something that physical cash payments can’t compete with.
Our recent survey highlights that over half (54%) of Millennial and Gen Z consumers use ‘buy now, pay later’ payment options up to four times a month (roughly once a week), which, unless the same consumers are shopping in-store as well, means that these customers aren’t using cash for up to four purchases per month at the very least.
Using cash to budget
Opposing the often frivolous and spontaneous spending habits related to ‘buy now, pay later’ schemes, is the ‘FIRE’ community that is gaining traction across a number of social media platforms.
FIRE stands for Financial Independence, Retire Early, and encourages those who want to reach this point of financial independence to look closely at their finances in order to do so.
Many FIRE influencers are supportive of cash payments as a way to control personal spending, and allocate cash envelopes to different aspects of a monthly budget such as entertainment, food, and an ‘emergency’ envelope. Those that use this method to focus on savings goals are keen on the use of cash as a tangible way of seeing how much they spend.
Coronavirus VS Cash
It’s clear that even if we weren’t living through a pandemic, the 15% drop in cash payments last year is a sign of the times, and that cash is slowly being overtaken by credit card, online, or even mobile payments.
The COVID-19 pandemic has of course, created a fear around the use of cash and its ability to spread the virus, but has equally made many of us realise that cash isn’t essential. For those who have, or may still be, self-isolating due to an underlying health risk or contraction of the virus, online payments offered a way to continue shopping for essentials, without having to leave the house.
So, what does the future look like for cash?
Like many things in the current climate, the future is extremely uncertain, and with online banking giants Monzo and Revolut experiencing losses due to customer fears around profitability - there’s no telling whether consumers will move towards cash as a comfortable and trustworthy way to pay in an unstable economy.
Evidently, the way we spend is an evolutionary, and even generational aspect of life that is somewhat unpredictable and dependent on the state of economically driven factors at the time.