Our latest report, Cashing Out, hit the internet this week. If you can’t read the whole thing, the best explanation is by the author himself, Fred De Fossard, in Wednesday’s City AM.
As I argue in Forbes, cash is in terminal decline, with over half of Britons carrying less than £10 in cash on them at any one time. Less than a quarter of retail payments are made in cash; cashpoints are disappearing from the high street; and a wave of small businesses are turning against handling cash altogether.
Handling cash costs British businesses on average over £3,000 per year. Cash is a faff. As Annabel Denham explains on Medium, “it needs handling, insuring, and transporting physically – and it will always be a target for thieves.”
In response to the rise in card-only businesses, major US cities have banned cashless businesses, and senior British politicians have called for their abolition in the UK. This reaction is understandable – but it’s not the right one.
It’s understandable because Britain still has 1.23 million people in the UK without a bank account. The so-called unbanked are largely the poorest people in our society. But as is all too common in politics, the ban is a cover for a larger public policy failure.
Perhaps ironically, it’s technology that is offering a real way forward.
As Fred argues, “instead of preserving cash indefinitely, the government should encourage innovation to improve financial inclusion by expanding access to digital finance.” And in a forthcoming article for CapX, Sam Dumitriu explains: “Open Banking-enabled fintechs are addressing the problem. For instance, apps like Pockit are directly catering to the unbanked and Monzo now allows you to open a bank account without a fixed address. Better data, including from rental payments, will allow the unbanked to build credit quicker and access finance.”
The government had a role to play as the enabler behind Open Banking, and schemes like the government-backed Rent Recognition Challenge, a £2 million competition to develop applications that help renters boost their credit scores, access credit and get on the housing ladder, are in the right spirit.
Abolishing card-only businesses would be a retrograde step which would harm a new wave of entrepreneurs, who have embraced the opportunities of the digital economy, and are responding to customers who want quicker, efficient, electronic payments.
The UK economy turns on electronic payments. The key is to give as many people access to new technology as possible, rather than trying to preserve the declining use of cash. It is only by embracing technological innovation in banking and improving the provision of financial services that financial inclusion can be meaningfully increased.
Come write with us
Fred approached us with the idea for Cashing Out. If you are a researcher or know of any other researchers who would be keen to write for us, get in touch. As we scale, there will be increasing opportunities to contribute.
Access all arrears
Talking of research, we are just getting started on a project looking at access to finance for SMEs – not a small subject! This aims to feed into the 11th March Budget and inform our policy work for years.
We already have plenty of ideas – many of which came from entrepreneurs in our network. But let me know if you have any burning issues you think we should be dealing with, and if you would like your business to be used as a case study for why we need that change.
We already have improvements to SEIS/EIS, R&D Tax Credits, Innovate UK, bank lending, EMI, StartUp Loans, crowdfunding, venture capital and the New Enterprise Allowance in our sights.
Right Said Fred