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Cash is back, but for how long?

Consumer interest in cash has risen sharply amid the cost-of-living crisis, what does the financial services industry think is the next step from here?

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Craig Ramsey/ACI.

The Post Office has recorded a huge uptick in personal cash withdrawals, £801m in July alone.

This represents an almost 8 per cent month-on-month rise from £744m in June.

This is only the second time in UK history that personal cash withdrawals have exceeded £800m, since December 2021, and represents a rise of 20 per cent since July 2020.

The Post Office attributed the rise in cash to consumers stricken by the cost of living crisis looking for additional ways to budget, as well as the rising popularity of “staycations” within the UK.

The Post Office also found that cash deposits rose significantly.

Individual cash deposits rose 2 per cent month-on-month to £1.35bn, while business cash deposits rose 1.9 per cent to £1.13bn in the same period.

These figures come in contrast to the general trend of declining cash use within the UK; 2020 saw the number of cash payments made in the UK fall by 35 per cent according to figures from UK Finance, meaning that cash was used for just 17 per cent all payments in the UK.

Martin Kearsley, Banking Director at the Post Office, said the figures were evidence that “Britain is anything but a cashless society”. 

Kearley believes that consumers are being drawn to cash as it offers a “tried and tested way” to budget, adding that the huge volume being handled “demonstrates just how vital being able to deposit and withdraw cash, securely and conveniently, is for millions of people”.

Craig Ramsey, Head of Real-Time Payments, at payments firm ACI Worldwide, thinks “consumers don’t have to go back to cash to control their spending during the cost-of-living crisis”. 

Ramsey highlighted how faster payments, such as real-time payments, and debit cards are very similar to cash, in that you can avoid relying on credit. 

The exec suggested that consumers check out mobile wallets as an alternative to cash, as these can provide a real-time picture of their finances and help to mitigate the temptation to spend. 

Günther Vogelpoel, CEO of payments technology firm, believes that the rise of frictionless payments technology has allowed consumers to spend money without releasing how much they're really splurging. 

Vogelpoel believes this could drive consumers towards technology like prepaid cards, "where you can’t go over the limit" or get caught out by monthly subscriptions.

Inflation hit a 40-year high of 9.4 per cent in June, and last week the Bank of England predicted it would hit 13 percent over the year ahead.

David Ritter, Director, Financial Services Strategy, at digital consultancy, CI&T believes "inflation rates may have peaked but if they stay above average, which in recent years has been 2 per cent or less, then it’s likely that people will continue to use cash to budget".

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