Let’s Not Be Too Quick To Say ‘Cash Out’
Recent years have seen an increase in the narrative that we are moving towards a cashless society. While digital alternatives such as card payment or even the more recent introduction of mobile payments are altering the manner in which transactions are carried out, there is no indication that cash is on the wane.
Indeed, the significance of Small and Medium-sized businesses in the UK economy means that cash has never been more plentiful or more important.
The data bears this out. 2015 saw record withdrawals of £128 billion from LINK's network of over 70,000 ATM's. Rather than threatening to disappear from our society, cash seems to be cementing its position as a staple of the financial and business worlds.
Cash sceptics have often predicted that cash will ultimately become obsolete, owing to the digitization of our everyday lives, but it is precisely this estrangement from the realms of technology that makes cash such a crucial transactional alternative. People may predict its disappearance but cash remains and will continue to remain a cornerstone of our economy.
Contrary to projections, what we are actually seeing annually is a rise in the number of cash withdrawals from ATM's across the country. The result of this being that for every man, woman and child in the UK there is the equivalent of £1,000 of notes in circulation. What is even more remarkable is that this figure is lower than the rest of the Eurozone. The rise in value of cash is faster than that of the national income, dispelling the possibility that increasing wealth can account for the swelling reserve of cash.
For SME's and micro-businesses cash is not a choice or a luxury, but a necessity. SME's account for 99% of businesses in the UK and are the foundation upon which the UK economy is built. They are also instrumental in the continued need for physical payment as they are reliant on cash every day when dealing with bills, paying employees or handling customer transactions.
The length that digital payments can take to complete can deprive smaller companies of cash flow that is integral to their operations. Alternative to cash payments can take longer to process, incurring avoidable late fees. The process of converting cash into bank deposits comes with a train of potential baggage, including: fees, potential negative interest and substantial losses if the bank collapses.
For a smaller business the impact of this is keenly felt. In situations where SME's need to be quick to act, cash is invaluable as they seek to expand quickly or capitalize on opportunities without the hassle of loans.
In addition, the costs of setting up a new business mean that it is often impractical to simultaneously set up card payment of bank accounts as well. In a cashless world, starting a café or a bar would be an even more daunting task than it currently is.
As more and more SME's come into existence, all of whom are reliant on a readily available cash flow, a move to a cashless society would be not only counter-intuitive, but heavily detrimental - both to these companies and, by extension, the UK economy. Dismissing the needs of these companies would demonstrate flagrant disregard for entrepreneurship in Britain and could even threaten our economic security.
But this issue is not limited to smaller companies. As recently as September of last year the Bank of England made the decision to stock its cash vault, which is indicative of the importance they placed upon cash. In economic crises or in the face of bankruptcy cash can be a lifesaver by allowing businesses to clear legal fees or fixed expenditures before hunkering down without the threat of further cost.
In this regard, cash acts as a failsafe in the event that technology falters. If a digital payment cannot be completed or there are issues around a card provider and a business does not have the fallback of cash, they put their very existence at risk. Cash is the ultimate bailout when all else fails and can keep a business breathing in dire moments.
Despite all of this, technology continues to advance at pace and a decline in the overall use of cash seems inevitable in the coming decade. Cash is still expected to continue to account for a third of all payments in the UK, meaning it will remain central to the economy.
Innovation, advancement and improvement should all be encouraged and the moves to card payments, contactless and digitization of the financial world are to be applauded. We now live in a world where it has never been easier to make transactions to anyone around the world at any time.
But to assume this will eventually manifest itself in a move to a cashless society is premature and naïve. Cash will remain the great failsafe of businesses and the best opportunity for the poorest to change their situation through entrepreneurial endeavour. No part of society should be excluded from the opportunity to grow, better themselves and achieve and it is cash that makes this possible.
Jenny Campbell founder and CEO of YourCash Europe,
Post Date: March 10th, 2016