Cash Use Ticks Up As Consumers Budget Their Money

08

March 2022
Cash Use Ticks Up As Consumers Budget Their Money (1)

Cash Use Ticks Up As Consumers Budget Their Money

Reports of cash’s demise have been greatly exaggerated, as some consumers facing tight budgets turn back to the coins and notes they shunned during the pandemic, the UK’s ATM network found.

A new report from LINK, the country’s biggest cash machine network, examines consumers’ attitudes toward and experiences with cash during the coronavirus crisis over the last two years. It reveals how fears of handling cash and using ATMs, as well as the shuttering of many physical retailers, sent cash use plummeting during the first months of the pandemic. 

For many consumers the shift from cash use was permanent, although withdrawals from LINK’s connected machines increased in early 2022, as Brits faced the tightest squeeze on incomes in decades.

“We monitor ATM use across the UK on a daily basis, but these studies add another layer. After two years of research, we now have a detailed picture of how people are using cash and why throughout the pandemic,” said Graham Mott, director of strategy at LINK.

LINK’s first survey was conducted during the first week of March 2020, when just 118 cases of COVID-19 had been identified in the UK and few anticipated that the country would soon be placed under a strict lockdown. 

At that point, 80% of people had not changed their behaviour with regards to cash. Just 4% said they were avoiding cash and using contactless payments and debit and credit cards more. More than three-quarters (77%) didn’t expect the pandemic would change their use of cash in the next six months.

That prediction turned out to be false, as Brits were ordered to stay in their homes just days later on 23 March. During the country’s first and strictest lockdown, ATM transactions cratered: average volumes were down as much as 65% across the country, with the steepest falls in deserted city centres and transportation hubs, Link said. 

Link attributed the reduction not only to consumers staying inside but also to the closure of traditionally cash-heavy sectors such as leisure and hospitality and the shuttering of many sites hosting ATMs, including cinemas, pubs, and shopping centres.

However, the decline in ATM transactions was less acute in smaller towns and areas with higher levels of deprivation, LINK said.

By the summer of 2020, when some lockdown restrictions were eased, consumers’ habits had permanently shifted. More than 75% of people reported that they were using less cash since the start of the pandemic and 80% said they would restrict their cash use in the future. 

But cash had certainly not disappeared. 53% of people reported that they had used cash in the previous two weeks with 22% using it in convenience stores, 17% in supermarkets, and 12% to pay friends and family.

However, some retailers were still refusing to accept cash. In August 2020, Link found that 25% of consumers had wanted to use cash where they could not. 13% of consumers had walked away as a result.

Over the next year, cash use shifted as various restrictions were imposed and lifted. But the use of coins and notes gradually increased: by the summer of 2021, 67% of people had used cash in the previous two weeks, up 14% from the summer before. 

However, the percentage of people using less cash overall was virtually unchanged (72% compared to 75%). And a high percentage (69%) anticipated that they’d use less cash in the future.

At the end of January 2022, as the government announced the end of Plan B measures, Link once again polled consumers about their use of cash. It found that 73% of consumers had used cash in the previous two weeks - the highest level recorded since the beginning of the pandemic.

Link found that ATMs were on average 20% busier compared to January 2021. But this varied widely, with ATMs in town centres seeing 50%-60% more transactions and those in airports 200% busier - reflecting a return to shopping and travel. The use of cash machines in convenience stores was virtually unchanged, likely because people continued to use them throughout the pandemic.

After two years, half of UK consumers (50%) say they are using less cash than they did before the coronavirus crisis. One quarter (25%) report that their cash use is unchanged and 4% were using it more frequently.

“LINK’s view is that ATM use will never return to pre-pandemic levels and that people who perhaps were using less cash generally are now entirely comfortable using their phones or contactless. That being said, we’re still seeing £1.5bn withdrawn from ATMs every week. That’s still a lot of money and there are a lot of people who rely entirely on cash,” said Mott.

One important finding in the latest survey: 8% of people plan to use cash more in the future to budget and save because of rising living costs.

“We understand that people are far more comfortable using technology, but importantly, not everyone can use digital and perhaps there’s no better way to budget than notes and coins,” Mott said.

Sources