There has been an unexpected jump in the number of people who mainly use notes and coins for their daily spending, despite the UK moving closer to becoming a cashless society, a report has found.
The volume of contactless and mobile payments increased last year, while the number of cash payments resumed a downward trajectory after enjoying a brief comeback in 2022, the banking body UK Finance noted in its annual report on the UK payments market.
However, there was a 66% increase in the number of people who prefer to use cash for their everyday spending.
The estimated number of “mainly use cash” people has fallen every year for several years and stood at 900,000 in 2022, but it leapt to 1.5 million last year – the highest figure since before the coronavirus pandemic.
UK Finance said the increase may reflect those people who have gone back to using cash to help manage their finances during the cost of living crisis.
Last year there was a rise in interest in a budgeting trend called “cash stuffing” – or the cash envelope system – made popular on social media. This involves dividing cash into envelopes labelled into different categories such as groceries, bills, a rainy day and Christmas shopping. The idea is that it helps cash-strapped households keep track of their spending and saving.
A UK Finance spokesperson said it would monitor the situation regarding people who mainly used cash to see if this was the start of a trend or merely a “statistical blip”.
People on lower incomes were more likely to favour notes and coins, but the cohort also includes well-off individuals, the spokesperson said. A lot of it “is personality-driven”, and those in this category were relatively evenly spread across all age groups, they added.
These people are not necessarily ideologically opposed to banks or worried about privacy: UK Finance said most of them had debit or credit cards, and many paid their regular household bills using direct debits or standing orders.
While the core of people who mainly use cash has increased, so, too, has the number of people who live “largely cashless lives” – defined as either using no notes or coins at all, or using them only about once a month. The number of people in this category nudged up to 22.1 million in 2023.
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Some campaigners say the chaos caused by the global IT outage last week underlines the risk of moving towards a cashless society. Responding to the UK Finance data, the ATM network Link said cash “remains vital for millions of people. Even if the data forecasts that cash will represent only 6% of payments in a decade’s time, it’s critical if other systems go down, as we saw with the outage last week”.
Separately, the Financial Conduct Authority has published full details of the new powers granted to it by the government to protect access to cash for consumers and small businesses. Under the regime, set in motion by the last government and taking effect on 18 September, banks and building societies will need to weigh up if local communities lack access to cash services such as branches and ATMs, and will have to plug significant gaps.