The decline of cash: As cash usage falls, how are small businesses adjusting?

  • 02 Nov 2021

The pandemic has accelerated the fall in cash use – but while many are happy to pay by other means, this does not apply to all. David Adams reports on how small firms are responding.

First Voice has been reporting on the decline of cash for years, as more consumers and businesses adopt card and other digital payment methods. However, the pandemic has accelerated these trends.

Lockdowns forced more business and retail activity online, led to higher limits on contactless payments and saw consumers asked not to use cash by some retailers. Another long-term trend – the closure of bank branches – has also continued, making it harder for businesses and their customers to withdraw or deposit cash. What are the implications of those changes?


Between 2017 and 2019, cash use fell by about 17 per cent per year, but 2020 saw a 35 per cent decline, according to financial industry body UK Finance. Cash was only used for 17 per cent of payments, compared to 45 per cent in 2015. 

More than half of all payments (52 per cent) were made by debit or credit card, with contactless cards alone accounting for 27 per cent – up from 19 per cent in 2018, and used by at least 75 per cent of people in every age group. Almost one in three adults (17.3 million people) were also registered for at least one mobile payment scheme by the end of 2020, with 7.4 million signing up during the year. 

“Customers have greater choice and are able to select the payment method that suits them,” says Adrian Buckle, head of research at UK Finance. “The important thing for small businesses is understanding how customers want to pay and supporting them in doing that.” 

Many people still like cash, though. UK Finance’s figures show that, even in 2020, 1.2 million consumers used cash for almost all payments. The trouble is, to use cash, you need access to a bank or ATM. The number of branches across the UK fell from 14,855 in 2010 to 7,675 in March 2020, according to the Office for National Statistics, and closure announcements continued in 2020 and 2021. 

Consumer group Which? says more than 3,000 free-to-use ATMs have closed across the UK since the start of 2020. At the start of 2021, the Financial Conduct Authority (FCA) called on the eight largest high street banks to reconsider branch closures because of the negative impacts on some customers and communities.

Every closed branch means a longer journey for small business owners, says FSB National Vice Chair, Policy and Advocacy, Martin McTague – “or standing in a Post Office queue – not acceptable if you’re holding £5,000 in cash”. 


Risky move

Some small businesses have responded by going cashless, with payments taken via card, mobile or online transfer. The payments move seamlessly into their bank account, and there is no need to visit the bank in person, with the security risks that entails. It works well for some businesses, but relies on the efficacy and reliability of the technology, from devices in retail stores to banking and payment apps, software and Wi-Fi or broadband connections. If the tech fails, the business may be unable to take payments at all.

There are also places where broadband connectivity is patchy or non-existent, restricting use of non-cash payments. “Most people in those communities will end up carrying cash, so small businesses in those areas cannot trade without having access to cash,” says Mr McTague.

Most consumer-facing businesses have some customers who simply prefer using cash. They are often from older age groups or less wealthy demographics. Some people on lower incomes have restricted access to digital financial services, while people with disabilities may find it difficult to use chip and PIN, contactless or other digital payments. Survivors of domestic abuse may use cash in order to evade their abusers.

Both Which? and FSB have expressed concern about this. As Gareth Shaw, Which? Head of Money, puts it: “The UK is sleepwalking into a cashless society without ensuring people who are reliant on cash are not left behind.” In spring 2021, the two organisations launched a campaign asking businesses to sign up to a pledge: to accept cash for as long as customers want to use it. Retailers, other consumer and trade associations and the Bank of England have all offered support. 


There is also an element of self-interest here. Mr McTague points to FCA figures showing that five million people in the UK “are dependent upon cash for most purposes – and businesses have got to trade with those people”. He adds: “We’ve also always felt that the card companies are more likely to keep charges low if they’ve got cash as a competitor.” 

Cashing up 

Nonetheless, some small businesses have stopped using cash. They include Campbells, which runs a bakery and two shops in Crieff and Comrie, Perthshire. Founded in 1830, the business is now run by a seventh generation of Campbells: Ian and his wife Ailsa. They were considering going cashless before the pandemic, to remove the burden of managing cash and travelling to and from the bank. When the shops reopened in June 2020 after the first lockdown, they did so without cash. 

Ailsa says there is no comparison between using apps and services from Starling Bank and the old way of working. “It’s all online, it’s easy to use, there’s no more counting cash: it just flows into the bank account,” she says. “We did get negative feedback from a few customers, but most people have bank cards and know how to use them – and with people using cards, average spend is up, too.”

There are downsides. “There is some cost involved, in bank charges and the cost of the technology,” she explains.

“You need someone in the business who can work with the tech.” She also regrets the shops no longer having charity collection boxes – she and other local businesses are investigating other ways to fundraise. 

Ben Simmons, owner of the Big Shots Café in Brighouse, West Yorkshire, has also observed a fall in the use of cash, but has no plans to go cashless. First Voice interviewed the café’s previous owner, Naomi Sleigh, about the decline of cash in 2019. She did not want to stop using cash, largely because some customers still wanted to use it; one in three transactions were still conducted in cash. Today, says Mr Simmons, it may only be one in 10. “I think eventually everything will go cash-free,” he says. “But there are always a few customers who still like dealing in cash.”

This is despite the fact that the last local bank branch has now closed. “I have to go all the way to Halifax or Leeds to do any banking, which is a huge inconvenience,” says Mr Simmons. But because the business now uses less cash, he only needs to do this about once a month. 


Access controls

With cash still useful, and sometimes essential, there is a need for policymakers to support access to it. The Government acknowledged this: it has been conducting an Access to Cash consultation, seeking feedback on proposed legislation to protect networks for cash withdrawal and deposit facilities, and considering whether a single regulator should be given overall statutory responsibility for cash. It will also introduce cashback without purchase in some shops, after adding this to its Financial Services Bill. 

Banks are backing initiatives to support cash access, including eight Community Access to Cash pilots running in locations across the UK. Some of the pilots featured Bank Hubs, providing basic banking services from locations such as Post Offices, and/or use of automated deposit-taking machines and ATMs. The pilots ended in October 2021, but UK Finance has formed an Access to Cash Action Group to develop further proposals. 

“The banking and finance industry has publicly committed to ensuring there is access to cash for those who need it,” says Mr Buckle. “However, we must recognise that cash is used less than it once was, so the challenge is to ensure an efficient and effective cash distribution system that is sustainable at lower levels of cash usage.” 

With caveats about reliability and connectivity noted, technology also has an important role to play. FSB members can access a range of payment services delivered via FSB partner Worldpay, including secure physical and virtual payment terminals, and real-time monitoring of payment data. Other fintech specialists continue to develop new tools – such as Incomeing, an app that enables and monitors payment requests for businesses, or Tomato Pay, which uses QR codes to enable instant payment via phones. Development and adoption of Open Banking should soon stimulate further innovation.

“People should have the freedom to pay the way they want,” says Mr Shaw. “An individual business can look at its customer base and say how it can best service them. Cash is still important to the economy, despite the decline in use. 

If we just rush into a cashless world, there could be serious consequences. That’s a good reason for everyone to care about this, even if your business is no longer using cash much.” 

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