The impact of Covid-19 on cash

In recent years the UK has witnessed a sustained and significant decline in the use of cash. Over a long period, consumers have increasingly been turning away from cash in favour of using debit cards instead.

This trend has accelerated over the past five years as contactless payments have surged in popularity.

In 2010 over half of all payments in the UK were made using cash with around one in six payments that year made using debit cards. By the end of 2017 however, the rising use of contactless payments had helped debit cards to overtake cash as the most frequently used payment method in the UK, accounting for over a third of all payments.

This trend was already strong before we reached 2020 and the global Covid-19 pandemic. This crisis, and the associated periods of economic lockdown and social distancing requirements, further accelerated the move away from cash.

Parts of the UK economy were closed down for significant periods during 2020 and people were encouraged to stay at home and maintain social distancing. Many shops were shut and the entertainment, hospitality and travel industries largely ground to a halt. Since these were sectors for which cash was a relatively important method of payment, this had a knock-on impact on the number of cash payments made during 2020.

Even among those consumer-facing businesses that remained open, there was a tendency however to encourage customer to pay by card instead of by cash, with a preference in particular for contactless payments, as a way of aiding social distancing to be maintained.

Further still, the use of online shopping expanded during 2020 as bricks-and-mortar shops remained closed, again reinforcing a move away from cash and towards card payments.

As a result of all these factors, the reduction in cash usage accelerated once again, resulting in cash being used for around one in six payments (17 per cent) in the UK in 2020. One in four people used cash just once a month or less frequently.

It is not clear if all the change seen in 2020 will constitute a permanent shift in behaviour. Some people who have been prepared to use cards when requested during the pandemic may prefer to return to using cash once the economy reopens. However, it is clear that the pandemic has provided some with the opportunity to try payment methods that they may not otherwise have tried and some may find that they prefer to continue using those methods in future. UK Finance will continue to monitor developments and to work with the industry to ensure that access to cash is maintained.

More insights into how the way we pay for things changed during 2020 can be found in a free summary of the key findings from our new publication UK Payment Markets which can be downloaded here.

 

Area of expertise: