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Written evidence submitted by UK Finance
About UK Finance
UK Finance is the collective voice for the banking and finance industry. Representing more than 300 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.
We welcome the opportunity to respond to the Treasury Select Committee’s (TSC) call for evidence on Acceptance of Cash.
Executive Summary
Cash access nationally is good and well regulated, following recent legislation. While there is no legal requirement for businesses to accept specific forms of payment in the UK, there are significant legislative protections already in place to ensure consumers and businesses can access cash services (more detail below).
UK Finance members are committed to maintaining comprehensive cash access coverage across the country and continue to work with Cash Access UK and other participants in the cash supply chain to ensure that cash remains a viable option for consumers and businesses alike. Most retailers in the UK continue to offer customers payment choice and accept cash payments.
We believe cash acceptance should not be mandatory as this creates undue burden on small businesses and financial institutions and could have unintended economic crime consequences related to cash-based money laundering. We recognise there is an important task to promote the value of digital payments and access to digital financial services and make these accessible, whilst preserving access to cash.
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Economic Secretary Tulip Siddiq MP has said: “it is for each business to decide on the forms of payment it chooses to accept.”1 UK Finance agrees. It is right that businesses choose the forms of payment they accept. Both consumers and businesses benefit from being able to use and accept a range of payment options.
1. What is the current state of, and recent trends in, physical cash acceptance in the UK? Any forecasts on physical cash acceptance would be welcome.
Whilst cash remains an important part of UK society, second to debit cards as the most frequently used payment method in 2023, its usage continues to decline. In 2023 cash was used to make 12% of all payments in the UK in 2023 (by number of payments made), compared with 14% in 2022 and 51% in 2013.2 This is due to a trend towards digital and card payments, according to customer preference data.3 Most businesses, however, continue to accept cash.
In 2023, a survey of independent retailers by the British Independent Retailers Association (BIRA) and the Independent Retailers Confederation (IRC) found almost all (97%) of businesses that replied accepted cash. Results were consistent across geographical areas, including Greater London and the Southeast, which might have been expected to have seen less cash use.4 This is consistent with FCA data which found that 98% of small businesses surveyed would “never turn customers away if they needed to pay in cash”.5 Cash therefore continues to be widely accepted across the UK by a variety of independent businesses, with strong support for offering cash as one of a suite of payment options for consumers.
This is unlikely to change. Almost 90% of businesses surveyed by BIRA and IRC said they were unlikely to stop accepting cash in the future. Only 5% thought that they might stop accepting cash in the next five years. When asked what, if anything, would cause a business to stop accepting cash, the most common reasons given were the closing of the local bank or Post Office, an increase in their fees, or if fewer customers
1 UK Parliament Written Questions Money: Question for Treasury (Nov 2024)
2 UK Finance Cash and Cash Machines Report 2024 pp.7-9. (Available on request).
3 See FCA Financial Lives 2022. Almost 9 in 10 adults (88%) banked online or using a mobile app in 2022 – up from 77% in 2017 p. 181.
4 UK Finance A View from Independent Retailers on Customer Payments: Research from BIRA and IRC
(2023) p. 1. (Available on request).
5 FCA Cash Acceptance within SMEs (2020) p. 5.
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wanted to pay in cash.6 With sustainable cash access and a resilient wholesale cash market, businesses and customers will continue to have the freedom to choose whichever payment method they prefer to use.
2. Are there groups in society which disproportionately rely on businesses and public services accepting physical cash?
- What challenges do they face? Frequent cash users
While UK Finance does not have data to correspond directly to reliance on businesses accepting cash, the UK Cash and Cash Machines Report November 2024 has relevant findings on consumer cash use.
Around 1.5 million people, representing 2.6% of the adult population, mainly used cash for their day-to-day spending in 2023. Whereas 28.9 million people used cash once a fortnight or less frequently and 22.1 million people used cash once a month or less frequently, representing 52% and 39% of adults in the UK respectively. Many consumers therefore take a ‘pick and mix’ approach to making payments, using different payment methods in different situations.7 Given the small cohort size of those mainly using cash for day-to-day spending, it is difficult to confidently establish a link between region, income or age and an individual’s preference for using cash.
UK Finance reported very few of this category are unbanked and the vast majority have access to other payment methods such as debit and credit cards. Likewise, when the FCA looked at the reasons for someone being a heavy user of cash, only 2% of adults who pay for everything or most things in cash reported that this was because they don’t have a bank account.8 What distinguishes this cohort then, from other consumers, is a preference for using cash in their day-to-day spending. Many, however, use non-cash methods of payment to pay regular bills each month.9 This is important context for distinguishing the difference between individuals preferring cash
6 UK Finance A View from Independent Retailers on Customer Payments: Research from BIRA and IRC
(2023) p. 2. (Available on request).
7 UK Finance Cash and Cash Machines Report 2024 p. 9, 10 & 20. (Available on request).
8 FCA Financial Lives 2022 p. 209.
9 UK Finance Cash and Cash Machines Report 2024 p. 10. (Available on request).
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as opposed to relying on it, suggesting many cash users do not rely on the acceptance of physical cash as their sole payment method.
Yet, reliance on cash can be seen in certain contexts. In many ways, age is the most accurate predictor of cash use. Looking at Chart 1, a lower proportion of those aged 65 or older are classified as rare cash users than other age groups. However, 1 in 4 people of retirement age do already lead largely cashless lives, suggesting considerable variation within age groups.10 Caution is therefore needed when generalising about case preferences for whole age groups as it fails to recognise the considerable diversity in peoples’ preferences when it comes to using cash.
Cash also remains important for individuals on low incomes and for budgeting. Amidst the post-Covid re-opening of the economy, rising inflation and cost-of-living crisis, some turned to cash as a tangible means of budget management in 2022, resulting in an increase in cash payments for the first year in a decade. While this trend proved short-lived, consumers express a preference for paying in cash when managing tight budgets.11 The FCA reported that 50% of adults who pay for everything or most things in cash said this was for budgeting reasons, namely, to help them budget (38%) or to avoid getting into debt (31%).12 Meanwhile, UK Finance data suggests that consumers on high incomes are more likely to rarely use cash than consumers on lower incomes. Among those who had a yearly income of £65,000 or more, 54% rarely used cash in 2023, whereas among those who earn £20,000 or less a year the share of rare cash users was 31%.13
Challenges and digital opportunities
While UK Finance does not monitor the challenges faced by regular cash users, we note the FCA found that just over half (52%) of heavy cash users had found it more difficult to withdraw or deposit cash in the past two years due to the closure or reduced opening hours of their local branch, Post Office or cash point.14 The industry has invested heavily in the creation of Cash Access UK to ensure that gaps in
10 UK Finance Cash and Cash Machines Report 2024 p. 21. (Available on request).
11 UK Finance Cash and Cash Machines Report 2024 p. 15. (Available on request).
12 FCA Financial Lives 2022 p. 209.
13 UK Finance Cash and Cash Machines Report 2024 p. 21. (Available on request).
14 FCA Financial Lives 2022 p. 210.
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provision are addressed as firms respond to changing customer behaviour and the transition to digital services.
Industry is also evolving and innovating to meet the needs of all consumers in the digital space. UK customers have a wide and ever-increasing choice of ways to pay. For example, the UK has a mature card market that serves consumers well, and a range of other payment methods suited to different scenarios, including Faster Payments Service (FPS) for real time incidental payments and Bankers' Automated Clearing System (BACS) for direct debits and salaries.15
We recognise there is an important task to promote the value of digital payments and access to digital financial services and make these accessible, whilst preserving access to cash. While cash continues to be a vital payment method in the UK, consumers and businesses benefit from being able to use and accept a range of digital payment solutions. Customers and businesses should be supported to use digital payments where it works for them.
3. Should the Government require parts of the economy to always accept physical cash?
- Are there individual sectors of the economy where physical cash acceptance is particularly important, and should be protected?
In line with previous arguments made by UK Finance in its response to HM Treasury’s Access to Cash Call for Evidence (2020), we believe cash acceptance should not be mandatory. Given the good levels cash provision nationally, to impose requirements on businesses to accept cash would be unnecessarily prescriptive and risk undermining the Government’s ambition to support UK businesses and growth mission.16
Growth and Innovation
We believe business owners know their customers best and should choose the payment methods they feel will best drive their business forward. The few businesses
15 For more see UK Finance response to Bank of England DP on Innovation in Money & Payments (2024) p.18.
16 HMT Cash Access Policy Statement (2023). “The distribution of cash access is broadly comprehensive”.
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that do not accept cash, do so for pertinent reasons. This includes the time needed to handle the cash, the use of self-service check outs and associated costs for enhanced insurance and physical security measures, which are simply outside of scope for some small businesses.17 There is an increased cost to businesses when holding cash. Businesses would have to source cash and ensure their facilities are secure to meet the increased security risk of accepting cash. This added financial and practical burden could potentially affect the ability for small and growing businesses to scale.
The government should also be promoting the important role digital payments play in economic growth and innovation, with positive effects on the wider economy and customer benefits. This includes more seamless transactions and easier recourse for fraudulent transactions, in comparison to cash. According to a study by Moody’s, greater usage of electronic payment products added $245 billion to global GDP over the course of 4 years.18 A 2024 study by the Bank for International Settlement (BIS) found digital payments use is associated with increases in the growth of GDP per capita of 0.10% over a two-year period, and a decline in the share of informal sector employment of 0.06% percent over a two-year period.19
Looking at UK Finance data on consumers’ use of cash there does not appear to be an obvious part of the economy or sector where physical cash acceptance needs to be protected. Most consumer cash payments (73%) are made in the retail sector, with an additional 21% made for travel and entertainment purposes (see Chart 2 for consumer payments by sector). Moreover, many cash payments are for low-value transactions, with 36% of consumers’ cash payments being spontaneous payments for a value of £1 or less, compared to only 3% of regular bill payments.20 This suggests that cash is mostly used for convenience-type purchases. Given the strong support amongst businesses for offering cash as a payment option for customers, it seems unlikely that the sectors with the most cash spending would stop accepting it. Most businesses have shown a willingness to accept cash from customers that prefer
17 UK Finance A View from Independent Retailers on Customer Payments: Research from BIRA and IRC
(2023) p. 1. (Available on request).
18 Moody’s Analytics The Impact of Payment Cards on Economic Growth (2021) p.4.
19 BIS Digital payments, informality and economic growth (2024) p. 10 & 12.
20 UK Finance Cash and Cash Machines Report 2024 p. 16. (Available on request).
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to use it, particularly for the elderly, the young, those on low incomes and those in rural areas who are more reliant on cash transactions.21
It is important, then, not to mandate cash acceptance, but to make sure cash acceptance remains viable and accessible for businesses. UK Finance members are committed to maintaining broadly comprehensive cash access coverage across the country.
4. What are the practical challenges that businesses might face from having to always accept physical cash? How do these challenges differ between large and small businesses?
Please see response to Q3 paragraph 2.
5. What would the costs to private firms and the public sector be from any imposed requirements to always accept physical cash?
Financial costs would depend on who and what is mandated. There would be added cost to business, implementation and economic crime consequences. For example, costs of depositing cash in a branch or post office are higher than digital transaction methods so there could be a higher transactional cost for businesses. There are also increased costs from businesses who may need to transport cash from their business to a branch or post office.
For businesses that collect cash, they also need to have the infrastructure that stores it correctly and safely until they can get to branch or post office to deposit it. For businesses that don’t currently accept cash, they will have increased costs linked to the above.
6. How might any requirement for certain firms and public services to always accept physical cash affect financial services firms, especially those related to the provision of physical cash?
Cash access is already well regulated, following recent legislation.
21 FCA Cash Acceptance within SMEs (2020) p. 5.
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While there is no legal requirement for businesses to accept specific forms of payment in the UK, there are significant legislative protections already in place to ensure consumers and businesses can access to cash services. The Financial Services and Markets Act (FSMA) 2023 sets out existing protections on access to cash, meaning that the larger banks and building societies are already required to provide access to cash services, including accepting cash deposits, across the UK. It also provides for the Bank of England having a role in overseeing the provision of wholesale cash services in the UK, helping to ensure a sustainable and resilient market for merchants relying on wholesale cash services.
Further to this, in July 2024, members welcomed the FCA’s access to cash regulation which formalised former voluntary agreements and aims to ensure cash access is available for those who use it.22 The FCA’s rules have regard to HM Treasury’s Cash Access Policy Statement which sets out their understanding that, on a national level, the distribution of cash access services is “broadly comprehensive”, and a “substantial redistribution or large-scale introduction of additional access points” is not required. 23 Access to cash levels is good and demonstrates that firms facilitate the use of cash for those customers who choose to use it. A new legislative or regulatory requirement for financial services firms to always accept physical cash would therefore only duplicate substantive existing cash protections.
Impacts on digital-only institutions
For those firms out of scope of existing access to cash legislation, any mandate to accept cash would create a significant burden and increase in costs. For digital-only institutions and smaller retail banks and building societies with limited to no high street presence to accept cash, any requirement to accept cash would require agreements via a high street bank to provide a clearing function, or via Post Office arrangements. Given the number of bank branches closing, this creates a reliance on an-already under pressure Post Office from a banking capacity perspective (currently considering offloading 115 branches across its national network) and other banks to act as clearing vehicle.
22 See FCA Policy Statement PS24/8 Access to Cash (2024).
23 See HMT Cash Access Policy Statement (2023).
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Unintended financial crime consequences
Mandated cash acceptance also conflicts with initiatives to address cash-based money laundering. Money Laundering regulations and requirements makes the depositing of cash in banks more challenging for businesses, as banks must scrutinise any cash deposits to ensure they can adequately assess the source of funds. In addition, many banks are setting cash deposit transaction and annual deposit limits to adhere to the regulations and encourage customers to transact in a more digital way. A move to accepting cash by legislations could conflict with these messages.
Cash based money laundering remains one of the biggest economic crime threats within the UK. £12 billion of criminal cash is generated every year in the UK, which then seeks to pass through the legitimate financial system.24 This understanding is driving forward much of the current economic crime public private activity, which is set out under the Economic Crime Plan 2. As part of our dialogue on system prioritisation, UK Finance are working closely with HM Treasury, Home Office, National Crime Agency, law enforcement and the FCA to agree and design action plans to tackle our biggest economic crime threats, including Cash Based Money Laundering. This is focused on criminal cash consolidation, cross border movement and deposit into the UK banking system e.g. through the Post Office. We cannot therefore have mandatory acceptance of cash introduced in a way that opposes the spirit of these public private priorities and goes against the controls and limits that have been put in place to try and control the rate and pace of cash-based money laundering.
Financial services firms involved in the provision of cash should be allowed to continue and evolve their services and infrastructure as demand dictates. As already mentioned, the industry has invested heavily in the creation of Cash Access UK to ensure that gaps in provision are addressed as firms respond to changing customer behaviour and the transition to digital services.
24 National Crime Agency National Strategic Assessment 2024
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7. Are there any other areas or particular sectors where a decline in cash acceptance would cause problems?
Please see response to Q3 paragraph 4.
December 2024
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Annex Chart 1.
Source: UK Finance Cash and Cash Machines November 2024 p. 21.
Chart 2.
Source: UK Finance Cash and Cash Machines November 2024 p. 16.
