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Cash use and ATM withdrawals have stabilised in the UK and Ireland after a pandemic-induced decline, while a significant proportion of eurozone merchants continue to prefer cash.
The Bank of England (BoE) has published a new report on the “partial” but “sustained” recovery of cash use following the COVID-19 lockdowns of 2020 and 2021.
In a study entitled "Knocked down during lockdown", the BoE found that cash use has stabilised following an accelerated decline during 2020 and 2021.
In January 2022, according to data from British ATM provider LINK, an estimated 73 percent of British consumers had used cash as a means of payment in the last two weeks, up from 53 percent in mid-2020.
Citing data from LINK, the BoE noted that the recovery in cash use can also be seen in the number of ATM transactions.
During the national lockdown of March and April 2020, ATM transactions fell by an average of 65 percent across the UK, but fell significantly more in city centres and transport hubs.
However, in January of this year, LINK found that on average its ATMs were seeing 20 percent higher volumes than one year earlier, although again with large variations depending on location.
Airport ATMs were around 200 percent busier and town centre ATMs were 50 to 60 percent busier, while convenience store ATMs had barely changed, due to consistent use throughout the pandemic.
All in all, the BoE concluded that cash use in the UK has been “largely stable” since mid-2020, hovering at about 30 percent below pre-pandemic levels.
“This suggests that, at least in the near term, cash use has stabilised,” the bank said.
A long-standing decline
Prior to the pandemic, the UK had experienced a marked decline in the use of cash to pay for goods and services.
Already, in 2019, only 23 percent of payments were made using cash, down from around 60 percent a decade ago, according to UK Finance.
In 2020, when the pandemic was in its early stages, this figure dropped to about 17 percent.
Noting that cash use had been declining at a rate of about 15 percent per year since 2017, the BoE said the 2020 drop represents an “acceleration” of this decline.
By extrapolating the declining trend in ATM withdrawals prior to the pandemic, the BoE found that in Q2 this year, ATM use was down about 20 percent from where it would be without the pandemic.
“This suggests that COVID may have brought forward cash decline by over five years, reflecting a change in people’s payment preferences,” the bank said.
However, the BoE noted that what remains “highly uncertain” is where cash use is headed next, following its pandemic-induced decline and recovery.
“On the one hand, COVID appears to have brought forward and accelerated the rate of change in payment preferences,” said the BoE.
“On the other, if those who were most likely to change their behaviour already have, then the pace of change may actually slow.”
In July, for example, a BoE survey found that one in five Brits still say that cash is their preferred means of payment — a figure that has not varied significantly since the pandemic.
However, in its 2022 Payment Markets Summary, UK Finance forecast that by 2031 just 6 percent of all payments will be made using cash.
“Looking ahead, it seems unlikely that cash use will recover much further from its current level,” the BoE said in the report’s conclusion.
“However, there remains a sizable share of the population who value cash and for whom cash remains their preferred means of payment.”
As a result future, cash trends will be highly influenced by the payment preferences of this segment.
Irish ATMs down but not out
In Ireland, the post-pandemic recovery of cash is following a similar path to that of the UK.
Last week, the Central Bank of Ireland (CBI) published new figures showing that despite a rise in card payments during the pandemic, a steady demand for ATM transactions still remains.
Between January 2015 and January 2019, ATM transactions in Ireland never went below 12m per month.
However, in 2020, this dropped to an average of about 6m transactions per month, followed by a slow climb up to about 8m transactions per month by the end of 2021 and through to mid-2022.
“Both the value and volume of ATM withdrawals in Ireland underwent a structural downward shift at the outset of the COVID-19 pandemic,” said the CBI.
“Nevertheless, the analysis indicates that ATM cash withdrawals remained steady subsequently by value and by volume, speaking to cash’s unique attributes as a means of payment and a store of value and its consequent enduring appeal to the public.”
Eurozone merchants still prefer cash
Over in the eurozone, the European Central Bank's (ECB) inaugural Companies’ Survey on Cash, conducted in Q4 2021, found that cash is still the preferred means of payment among a majority of merchants.
The survey of more than 10,000 merchants found that nearly a quarter said they prefer to take payments in cash.
However, as noted by the ECB, cards as a whole accounted for 53 percent of first-choice preferences among merchants.
Acceptance of cash was near-universal, at 96 percent of all merchants, although 5 percent of those who currently accept cash said they plan to stop accepting cash in future.
These figures are broadly in line with the UK, where 98 percent of small business owners have said that if a customer needed to pay in cash they would not refuse it.
Moreover, according to research by the Financial Conduct Authority (FCA), 80 percent of small and medium-sized businesses in the UK say they are “very likely” to accept cash for the next five years.
