Cash is still king for so many of our businesses - Rashmi Dube

Money makes the world go round, as Liza Minnelli sings in Cabaret, but the look of money has changed over the years. Whilst we have been used to dealing with hard currencies, what we found with the introduction of the internet and mobile phones, people have changed the way they handle currency.
Rashmi Dube, partner at GunnercookeRashmi Dube, partner at Gunnercooke
Rashmi Dube, partner at Gunnercooke

We have seen a move to the digital use of currency, thereby removing hard cash. Prior to the pandemic, retailers globally had observed a reduction in cash transactions.

The pandemic saw a number of smaller shops refusing to handle cash. In line with this, the high street banks in the UK continue to close their branches and current estimates are that the local branch will disappear by 2032.

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This seems a logical move by the banks if they are thinking of moving into a new digital currency arena, but what of local rural businesses that still trade very much in cash and are having to travel miles, either for a branch or a cash machine? The coronavirus crisis has catapulted transitions further down the road than would have naturally evolved without the influence of the pandemic. The impact on the reduction of the use of cash was naturally going and we could see a bystander also be impacted – namely the use of the ATM.

According to Finextra (January 2021) “…in total £81bn was withdrawn from cash machines in 2020 compared to £116bn in 2019, a fall of 30 per cent. Additionally, consumers visited ATMs less frequently with 1.6bn transactions in 2020 compared to 2.6bn in 2019, a 37 per cent drop.”

The “…average was £660 less in 2020” per adult transaction. There was of course also the need to close some of the ATMs because of social distancing. The banks have two issues to consider here.

The need to look to the future and consider the possibility of issuing digital currency as a future replacement for cash and the need to still have access to cash and the facilities an ATM can offer; all this with the backdrop of what feels like the forgotten, the rural areas, who tend to be left to fend for themselves.

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John Howells, the CEO of LINK, stated: “The sharp decline in ATM use brings significant problems. Cash machines are by far the most popular way of accessing cash, yet a 37 per cent year-on-year drop in transactions places enormous strain on the cash infrastructure.

“As our data shows, despite the rapid decline in cash, millions of people still rely on it and aren’t ready or able to go digital. The good news is that the Government has said it will be bringing forward legislation to protect access to cash, but this is needed urgently.”

The access to cash that Howells refers to is only one need the businesses have but the ATM provides other services as well. There is also the issue that larger businesses in Yorkshire still complain about the lack of connectivity, not so much the lack of desire to take advantage of digitalisation.

The Government indeed has identified this issue and The 2019 Access to Cash Review did lead to amendments on the Financial Services Bill by allowing consumers to withdraw cashback from more retailers. But this does not address the issue of rural businesses who are still heavily reliant on cash. If we had greater connectivity, maybe the possibility of a replacement to cash can be considered. Currently, cash sits in a physical or digital form and no alternative works as a substitute, or at least one that has a competitive edge.

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The likely outcome is that the use of physical cash will continue to decline. Help is needed now though to support businesses that are still heavily dependent on cash for all or most of their business transactions.

The assistance they need is how to transition from a cash transaction to become digital. No doubt connectivity will be part of this transition. The race is on. The high street banks are preparing to forge ahead with a new type of currency, but how many businesses will be left behind?

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James Mitchinson

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