Switch to contactless makes cash too costly

The logistical cost of coins and notes will soon be unsustainable, warns banking trade body

BRITAIN’S cash infrastructure is becoming unsustainably expensive to maintain, latest figures have shown, as consumers turn away from coins and notes.

The latest statistics from UK Finance, the banking sector trade body, show that 11 billion transactions were conducted using cash in 2018, down from 22billion a decade earlier.

With the average value of each transaction put at £13.56, Britons collectively spent £149 billion in cash last year. But what the Treasury calls the “fixed costs of cash distribution” have risen to an estimated £5 billion, or 3.35 per cent of transactions.

With the value of cash transactions expected to fall again by almost twothirds in the next decade, to about £50 billion, one pound for every 10 spent will then be required to prop up the UK’S cash network – essentially moving and securing notes and coins around the country.

“The challenge now is to develop a cash distribution infrastructure that is efficient and sustainable for a future where we are using cash less than we do now,” said Adrian Buckle, at UK Finance.

A senior executive at a major retail bank said that “for banks the situation is not sustainable as cash usage drops”. It comes as the government’s emergency taskforce, the Joint Authorities Cash Strategy Group (Jacs), prepares to publish its first assessment of the UK’S cash crisis.

Jacs, which was set up in June to

‘We need to develop a cash distribution infrastructure for a future where we use less cash than we do now’

counter criticism that official oversight for cash was too fragmented, has a committee from the Treasury, Bank of England, Payments Systems Regulator and Financial Conduct Authority.

It has met twice according to Treasury sources, and will release its initial findings in the next couple of weeks.

Among its top priorities will be addressing what it calls “the resilience and cost effectiveness of the UK’S cash infrastructure”. Insiders suggest there is optimism that it can be made “fit for purpose to move a lower amount of cash around the country”.

Access to cash is a concern, particularly in rural areas. Banking industry insiders responsible for the issue say that distribution at post offices and increased “cashback” in shops may offer a solution, while UK Finance is working on mapping all the locations where cash can be accessed for free.

The formation of Jacs marks an about-turn for the Government. Eighteen months ago, in his spring statement as chancellor, Philip Hammond appeared to be hastening the end of some denominations by announcing a consultation on the future of coppers and £50 notes.

The consultation noted that 1p and 2p coins are used on average only once before being stored or, in 8 per cent of cases, simply thrown away. Such has been the impact of inflation, that the Royal Mint has been forced to blend copper with steel in the manufacturing process to ensure the coins are cost effective to produce.

The Treasury consultation was quickly dismissed by No10, and in May this year Mr Hammond announced that cash was “here to stay”.

Since then, however, hundreds of cash machines have continued to close every month, particularly in the poorest areas.