The UK’s cash system is “on the verge of collapse” amid thousands of bank branch and ATM closures, according to a major report.
“Sleepwalking into a cashless society” would leave eight million people struggling to manage their finances, the Access to Cash Review suggests.
The report’s authors said that the government must step in because market forces will not be enough to ensure that vulnerable people will have continued access to cash.
Poverty was found to be the biggest predictor of dependence on cash, with lower income groups less likely to have access to the digital alternatives and therefore more likely to experience problems such as accidentally going overdrawn.
Around 1.3 million people in the UK do not have access to a bank account at all, according to the Financial Conduct Authority (FCA). People who have recently moved to the UK, are homeless or are in extreme poverty are particularly likely to be “unbanked”.
At the same time, the UK’s digital infrastructure is not reliable or comprehensive enough to provide consistent access to cash alternatives for everyone, the report found.
As part of the review, 2,000 people were surveyed, with 17 per cent saying that they did not believe they would be able to cope without cash. Extrapolating that figure would mean eight million people in difficulty across the UK.
Close to half of those polled said they would find living in a cashless society problematic.
Natalie Ceeney, independent chair of the Access to Cash Review, said moving to a cashless society could mean millions of people left out of the economy, facing increased risks of isolation, exploitation, debt and rising costs.
“There are worrying signs that our cash system is falling apart,” she said.
The review was conducted independently and funded by Link, the company which runs the UK cash machine network for its members.
It found that while many more people use online banking than did so just a few years ago, around 5.3 million people never use the internet.
The review urges the government, regulators and banks to act now to guarantee access to cash, a move that it says would be “sensible and commercially viable”.
Measures would include encouraging innovative ways of accessing cash, rather than just protecting ATMs or charging consumers for access.
The report said the shift away from cash towards digital payments is placing “significant strain” on the UK’s cash infrastructure, which costs £5bn a year to run.
The review gathered evidence from more than 120 organisations in a range of sectors and looked at overseas examples.
Nicky Morgan, chair of the Treasury Select Committee, said: “The complexity of this issue cannot be overstated, but the simple truth is that leaving the future of cash to be determined by market forces will not work.”
Gareth Shaw, head of money at Which?, said the consumer group has been warning of the risk of “drifting towards a society where millions of people who rely on cash face being cut off – so this review’s recognition that the system is on the brink of collapse should be an urgent wakeup call”.
Through its inaction on this issue, the government is allowing the future of payments to be determined by the interests of banks and card companies rather than the needs of consumers.
David Clarke, head of policy at Positive Money, called on the government to go one step further than the review recommends. “Only by establishing a single regulator with a specific duty to safeguard cash access will Britain’s cash crisis be resolved,” he said.