Armando Bordalo e Sá planned ahead before coming to London for a five-day trip this summer, exchanging euros for sterling at a good rate to pay for meals, tickets to events and other expenses.
But by the end of his short trip, much of it went unused, because so many places no longer accept cash, and he had racked up a series of unwanted charges from his bank in Portugal.
The UK’s rapid shift towards a cashless society ended up costing the 72-year-old from Lisbon dearly. When he tried to charge his Oyster card, his only option was to use a debit card, while the shops at Tate Britain and a number of other museums were cashless. When he tried to buy an £8 adapter from the vending machine of his hotel, it was card-only.
Returning to Portugal, he found his bank had charged him a 4% fee for “international services”, as well as additional taxes on any debit card transactions he had made because he was unable to use cash – adding up to €85 (£73).
It was a frustrating additional bill when he had money on him to pay. “I was only able to use currency at the restaurants, pubs and taxis,” he says. “It is indeed a fine way for banks to profit.”
Britain has been at the forefront of the switch to a cashless society – a trend which is even more pronounced in the capital, especially since the pandemic.
Figures from banking body UK Finance show that almost half of all payments were made with debit cards in 2021, with newer ways of paying set to almost completely eclipse cash within a decade. “We expect usage to continue to fall, with cash forecast to account for only 6% of all payments made in the UK by 2031,” it says.
But with the shift has come growing concern about groups who still want to use cash – including many older people, those on low incomes and people who want to keep tight control over spending.
But others, such as tourists, have also emerged as wanting a system where both cash and cards are accepted.
The Federation of Small Businesses says there are many like Bordalo e Sá who want to try to avoid charges added by banks.
“They don’t have the luxury of shopping online and, in any case, the allure of hand-picking souvenirs in store offers a personalised touch to their travels,” says FSB national chair Martin McTague. “Phasing out cash and eliminating tax-free shopping sends the wrong message about our readiness for business, and dampens visitors’ spending enthusiasm.”
Cash costs more
One of the problems with the shift towards a cashless society, according to critics, has been that it costs more for people who have to pay cash to do what they want to do. In the case of the Portuguese tourist, that price was £73.
Sian Williams, vice-chair of the Financial Inclusion Commission, says that taking part in activities important to you costs more. “And that is another aspect of the ‘poverty premium’ for millions of people every day in this country,” she says.
The commission, an independent body of experts, wants cash and access to cash to be preserved for as long as people need it. “We can see that it is a vital payment method for people in a range of vulnerable situations.”
A report last year from the Royal Society of Arts (RSA) found that more than 10 million people in Britain would struggle to live in a cashless society, with many losing control of their finances and seeing debts spiral.
Mark Hall, lead author of the “Cash Census” report, says there is a large group of younger people who like the security of cash. “It was often people on lower incomes, or with less stable incomes. We heard many say that they like to keep cash to budget because that way they can keep track of it more easily,” he says.
Another group, who had access to debit cards, went back to cash to more carefully monitor what they were spending.
“They weren’t just tapping their phone on a regular basis, and they were able to manage their cashflow more effectively,” says Hall.
Frustated generation
Older people are often highlighted as being prone to isolation in the shift towards the cashless society. In London, where an increasing number of services no longer take cash, many are frustrated, according to charity Age UK.
“In bigger cities, many are falling behind even faster due to the accelerated speed in which many businesses are progressing toward a cash-free model,” says Abigail Wood of Age UK London.
“Older people are constantly telling us how left behind they feel, and how much harder life is when they are unable to use cash.
“Many older people view cash as the most reliable and straightforward way to pay, as well as an effective means of managing their weekly budget when money is extremely tight – as it is for the majority now.”
Another group, “cashless sceptics”, tend to be older and have concerns about fraud and may find technology difficult to use, says Hall.
Keeping access
The UK is leading the shift towards a cashless society along with some Scandinavian countries, while Italy and Germany are still high cash users, says Graham Mott of Link, the ATM network.
Figures from the company show withdrawals in some parts of London slumped by 60% in the four years to last May.
There are limitations to how far cashless payments can stretch, however, as online payments can fail, he says. “Most people will go out with some cash, or at least have some at home as a contingency,” he says. “It is important that cash access remains.”
