The way we use cash has become a hot topic after the UK government launched a consultation into the role of cash and digital payments, which will close on 5 June.
Here’s a look at how our use of cash is changing.
What does the consultation mean for 1p and 2p coins?
The consultation does not ask specifically whether the 1p and the 2p coin should be ditched, but it does ask for opinions on whether the current denominational mix of having eight different coins and four banknotes meets current and future needs – and how it may change. After this sparked fears that coppers may be for the chop, the UK government then signalled that 1p and 2p coins are unlikely to be scrapped, with the consultation simply intended to enable a better understanding of the role of cash.
So why have coppers been put under the spotlight?
It’s thought that about 60 per cent of the overall amount of 1p and 2p coins are only used once in transactions, before they disappear out of the cash cycle. In some cases, this could be because they end up sitting in jam jars and piggy banks, or piled up on sideboards. But in 8 per cent of cases, it is believed they are thrown away. To make up for so many disappearing coppers, in the past, this has meant over 500 million 1p and 2p coins have had to be produced each year to replace those rolling off elsewhere.
What about banknotes?
At the other end of the spectrum, the £50 banknote is believed to be rarely used for routine purchases. There is also a perception among some people that £50 notes are associated with criminal activity, the consultation says.
Will some denominations disappear?
Some have raised concerns that if copper coins were ditched, this could be the start of a more dramatic move towards a “cashless society”. Paying digitally for goods is not a suitable option for some people. Meanwhile, other groups raised concerns about the potential impact on charities, and there have also been suggestions that consumers could be hit in the wallet if prices were to be simply rounded up in the absence of the 1p coin.
How is our relationship with cash expected to change?
Recent years have seen a surge in the use of contactless payments, when we once may have rummaged around our wallets for some cash. In fact, we’re so used to reaching for plastic nowadays that by the end of this year, debit cards are expected to have overtaken cash as the most frequently used payment method. Industry body UK Finance says it expects this landmark in our spending habits to happen some time around the last three months of 2018.
Are we going to be a cashless society?
Some people are already living a largely cashless life. In 2016, 2.9 million people used cash once a month or less often. But, at the same time, a similar number were mainly reliant on cash. About 2.7 million people relied predominantly on cash for their day-to-day spending. UK Finance forecasts that cash will still be the second most frequently used payment method in the UK in 2026, accounting for a fifth of all payments made in the UK. So it looks like we may still have use for those piggy banks for a while yet.