This article was first published on the Positive Money website, under a Creative Commons license.
You may have been following our social media series the #12DaysofCash over the Christmas period. If so, you’ll know that cashMoney in physical form such as banknotes and coins. More is under attack on two fronts: banks are making it harder to access cash, whilst retailers are making it more difficult to use.
4,514 UK bank branches have closed since 2015, 736 of those in the last year alone, and hundreds more are already planned for 2022. Branches are a vital access point for free cash withdrawals for people across the country, but banks are closing them en masse to cut staffing costs and avoid the fees they have to pay to the Link ATM network.
Meanwhile, one in three shoppers were refused service during the start of the pandemic when trying to pay with cash. This rejection of legal tenderMoney that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More has been justified on the grounds that cash could transmit Covid, despite no evidence to suggest that it’s any less hygienic than card terminals or PIN pads.
Banks aren’t the only private players who stand to gain from the disappearance of cash. Payments companies, like Visa and Mastercard, become unrivalled in a cashless society; free to raise card fees unchecked. Retail giants, too, are able to fully automate the payments process if no physical moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More is exchanged – eradicating any need to pay human staff.
Cash is our last defence against potential authoritarian surveillance from the state – or an abusive partner, as the women’s charity Refuge found – and it prevents the financial exclusion of millions. One of our senior economists, Danisha Kazi, summarises:
Cash is relied on by millions, and particularly by already marginalised groups. Payments are an essential service and must be kept in public hands, not handed over to big banks, tech giants and card companies.
The marginalised groups in question cover an enormous cross-section of society, from elderly citizens to people with disabilities, homeless people, refugees, migrants, people of colour, sex workers and low-income households.
A report from Age UK last year found that one in five people aged over 65 depend on cash for their everyday spending – around 2.4 million people. The CEO of Age UK London, Abigail Wood, told us why access to cash is essential to this group:
Difficulties with accessing cash are not just an annoyance or an inconvenience, for thousands of older people, especially those on the lowest incomes, it is tantamount to being excluded from society. Protecting access to cash remains fundamental to making our communities more age-friendly. The majority of people aged 75 and over say that cash is their preferred way of paying for things but older people are facing multiple exclusions when it comes to accessing cash.
Then there are those for whom even getting a bank account is extremely challenging. The “unbanked” make up over one million adults in Britain. People who fall into this category have no alternative means of paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More to cash. Mark Dunn, a Destitution Casework Coordinator at Hackney Migrant Centre, explains why the right to use cash must be protected for this reason:
‘Access to cash is essential for migrants, particularly those without status. The hostile environment bans migrants without status to open bank accounts; for many people, this means their livelihood and survival is built around having access to cash and having access to services that accept cash payments – whether being able to buy food from local markets, having your hair cut and styled by a local hairdressers/barber or eating at a local restaurant or café. A significant amount of people we support simply can’t access any services that are card-only and this puts significant barriers in place of their daily survival.
For people on low-incomes, cash is likewise an essential means of budgeting and money management. There’s no better example of this than the 4,000+ requests that the ATM company Link have had for free cash machines, mostly in deprived communities.
Mick McAteer is a Campaigner & Co-Director of the Financial InclusionA process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. While it is recognised that not all individuals need or want financial services, the goal of financial inclusion is to remove all barriers, both supply side and demand side. Supply side barriers stem from financial institutions themselves. They often indicate poor financial infrastructure, and include lack of ne... More Centre – a non-profit research group focused on households who are excluded from, face discrimination in, or are underserved by financial markets & services. He told us why the fate of cash can’t be left to the private sector:
Without safeguards, fintech and digitalisation of the banking sector will cause greater financial discrimination and harm local economies and marginalised groups who still rely on cash. Banking is a critical utility and protecting access to cash cannot be left to the market; financial regulators must be given the power to compel our major banks to maintain meaningful access to cash.
Fair By Design is a similar organisation, committed specifically to ending the “poverty premium”: the extra costs people on low incomes pay for goods and services. We spoke to their Head of Corporate Engagement, Carl Packman, about the importance of cash:
Being able to use cash is a way to keep control of your own money. But people are often charged extra for using it. For example this is due to a lack of access to free-to-use cash machines. When 1 in 7 of us relies on cash and over one million people in the UK don’t have a bank account, this is simply not fair. People need to be able to easily access and use cash – and not to be penalised for doing so.
It should be clear by now that the current banking system is failing too many members of society, and cash is a lifeline for millions to whom mainstream financial services are inaccessible. Two members of the Black Economists Network – an organisation that supports black economists and challenges the lack of diversity in the field – explained how the banking system is set up to fail black communities:
Fundamentally the banking system does not serve disadvantaged black communities as it’s utilitarian foundations mean banks will only lend to individuals who are collateralised (generally homeowners) and at a risk premium (interest rate) that compensates lenders for how risky they think lending to the individuals in question is (which can have a degree of subjectivity, if a banking institution is institutionally racist or if the data says black people are more likely to default on their debt then the algorithms will set a higher interest rate for black lenders). All together poor black communities are attacked from all sides by a cocktail of low levels of homeownership, financial literacy (a societal issue that disproportionately impacts the poor), low earning power whose buying power is being constantly eroded by inflation, spiralling costs of living. On top of this financial institutions offer payday loans and by now pay later schemes, trapping these communities in a debt spiral that is hard to see the end of and limits the prospects of future generations.
~ Dr. Phillip Bokang Ball (quoted in a personal capacity)
The banking system excludes individuals from disadvantaged backgrounds which makes it hard for the individuals to raise up from their backgrounds.
~ Zoe Akinbodunse
The relationship between money and mental health can be a vicious cycle, with poor mental health making it hard to manage personal finances, and poor finances having a negative effect on mental health. Conor D’Arcy, Head of Research and Policy at the Money and Mental Health Policy Institute, described how the pandemic has exacerbated this problem:
For many people with mental health problems, access to cash can be hugely important. It can help us to budget, stay in control of our spending or to allow a carer to offer support with managing money. It’s vital that access to cash is protected, especially at a time when so many people are feeling the strain on their mental health and finances.
Having established the scale of the war on cashThe expression refers to various policies by governments and campaigns run by other stakeholders, including providers of alternative payment instruments, aimed at reducing or at abolishing the use of cash altogether. This includes for instance the withdrawal of high‐denomination banknotes or restrictions on cash transactions as well as spreading misinformation on the usage and properties of cash. More, it would be remiss of us not to point out that it’s not too late to save it. We need laws ensuring that universal access to cash is protected, mainly by stopping banks shutting down free cash machines, and laws preventing retailers from refusing to accept cash payments. You can ask your MP for such legislation through the Post Office’s Save Our Cash campaign.
The Post Office also happens to be protecting access to cash through shared bank branches called BankHubs, with popular public support leading to expansions of these countrywide, and widespread staff support for such ideas within the Communication Workers Union. We need a Post Office BankHub on every high street to safeguard access to cash, and we need updated guidance to retailers to stop them perpetuating myths about cash being unhygienic.