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Most of the UK's small businesses are happy to accept cash and they would never turn a customer away who needs to pay in cash, research commissioned by the Financial Conduct Authority (FCA) found.
New research entitled "Cash acceptance within SMEs" found that two-thirds of small businesses are "very happy" to accept cash and almost 80 percent believe they are "very likely" to accept cash over the next five years.
Almost all of them (98 percent) agreed that their business would never turn a customer away if they needed to pay in cash.
The decline in the use of cash has been a pressing issue for regulators across Europe. The UK, in particular, has had a significant decline in cash usage over recent years.
According to UK Finance, the number of cash payments fell by 35 percent last year, meaning that cash was used for 17 percent of all payments in the UK in 2020. To put this in perspective, cash represented 54 percent in 2012. Despite this long-term decline, cash remains the second most frequently used payment method behind debit cards.
The FCA stressed that cash remains a vital payment method for many, including the most vulnerable in society.
Although in February 2020, 5.4m adults, around 10 percent of the population, relied on cash for all or most of their daily purchases, small businesses in the retail, hospitality and services sectors have typically seen cash usage dropping by 15 percent since before COVID-19.
According to the FCA, the key factors behind this trend were the use of alternative contactless payments, such as cards and mobile phones, the increase in the upper limit for contactless payments to £45, which further increased to £100 in October, and lockdown guidance by the government.
The research nevertheless revealed that most small businesses believe, if cash as a payment method was entirely removed, they would lose customers as a direct consequence. They acknowledged, for example, that some customers, including the elderly, the young and those on low incomes and in rural areas are more reliant on cash transactions.
Although some forms of digital payments impose additional fees on merchants, small businesses did not name costs as an important factor in the acceptance of cash.
In total, 33 percent of the small businesses believe that charges for cash are higher, whereas 29 percent consider card and contactless payments more expensive and a further 22 percent believe costs are similar.
“When asked directly for the monthly cost of depositing cash, just over 1 in 5 small businesses are simply unaware of the costs for depositing cash,” the report notes.
The UK has taken a series of actions to make sure those who rely on cash have access to it through bank branches, ATMs, post offices, or shops that offer cashback.
Although retailers can offer cashback, the FCA research found that less than one in ten businesses offer this service, largely because of the lack of customer demand and of sufficient cash in the till.
The FCA also issued guidance on branch and ATM closures last year, urging firms to consider customer needs where closures or conversions are planned.
Nonetheless, larger banks and building societies are closing many of their physical branches, with the number of branches offering personal current accounts falling by 267 between April and June 2021, according to consumer association Which?. This follows a much longer trend. According to data from the Office of National Statistics (ONS), between 2012 and 2021, the total number of bank and building society branches in the UK fell by 34 percent.
In July, the FCA found that 95 percent of the UK population are within 2km of a free cash access point and 99.7 percent are within 5km. In rural areas, only 76.6 percent of people have access to cash within 2km.
