Could the UK go cashless?

Turkey plans to be entirely cashless by 2023. But such a top-level desire, in such a short space of time, brings considerable challenges. Should the UK follow suit?

Della Hudson is Director of Hudson Business Advice and author of The Numbers Business: how to grow a successful cloud accountancy practice. “I do like the idea of a cashless society, and I do feel we’re definitely heading in that direction. The danger is we go too fast and end up excluding a small group of people.”

That group might include the poorest in society, those who find themselves outside the system, and those who are less able or willing to be technologically up-to-date – such as some of the elderly.

“Some of those potentially excluded can’t get bank accounts for example,” Hudson says. “However, the banking sector is changing too – so there might be a push towards greater accessibility for those sectors.”

From cost to benefit

Hudson points to considerable progress from the ground-up in terms of businesses going cashless, in spite of bank fees acting as a potential barrier. Anyone living in a UK city, for example, will have noticed the occasional café, bar or restaurant becoming “card only.”

“There’s a sandwich bar I know,” she says, “that has gone cashless because they’ve seen how much better it is to get people through the payment process as quickly as possible.” Paying by cash “is the main thing limiting their capacity in the very busy lunch period.”

Businesses like this can work hard persuading people to pre-order, “but now that contactless is so fast, stopping cash payments – with all the associated delays of fumbling for cash, counting out change, opening and closing the till, totting it all up at the end of the day and taking the cash to the bank – it becomes more appealing.”

Visit the FSB for advice on going cashless with your business.

The benefits to SMEs go even further. “It saves on paperwork, as you can feed directly into Xero, Quickbooks or whichever system you are using. And nowadays, there are costs incurred in paying coinage into bank accounts; so that’s another consideration making going cashless a positive thing.” 

Better by a country mile

Alexandra Bond Burnett, MD of Blue Arrow Accounting makes the point that going cashless is becoming increasingly necessary, if not essential, in rural areas.

“Beneath my office there’s a stationers and gift shop. Being able to use products like iZettle and SumUp makes it so easy for small businesses – you can set up and get going, and it’s no longer the case that paying by card is going to penalise the SME.”

For the customer, such changes are attractive too because “you can make a small payment; previously, you would need to spend at least £5 to justify the retailer accepting your card.”

The notion that we need access to cash “is dying out fast,” Bond Burnett says. “While this is no bad thing in itself, it has been accelerated by the changing dynamics of banks – with local branches closing down and not being replaced by ATMs, it is becoming vital outside the cities.”

Challenger banks such as Monzo, Starling and Tide “are filling a gap that’s been created.”

Tax advantages

For both Hudson and Bond Burnett, whilst the Government is not actively driving the change towards a cashless society, HMRC are likely to be strongly in favour of it.

“Not having cash also means advantages in terms of anti-money laundering initiatives,” says Della Hudson; “you have a fully electronic audit trail, instead of a paper trail.”

For Alexandra Bond Burnett, “the ideal agenda for HMRC is that they are working towards a fully digital process for tax, with the intention of significantly reducing or eliminating the tax gap.” Currently estimated at 5.6%, tackling the tax gap is arguably HMRC’s prime motivation behind its considerable investment in Making Tax Digital.

And being cashless definitely helps. “This is a good thing,” Bond Burnett says; “we are now seeing 100% digital companies and 100% digital accountants increasing rapidly in number, and that’s just the start of things.”

Making the world go round

What about the impact of going cashless on accountants? Della Hudson laughs. “Anyone who has ever done incomplete accounts will know how to answer that! It simplifies our job because you will be able to confirm easily whether missing cash is in or out of account.”

It also helps commercially, Hudson says; “even if you consider yourself to be purely about compliance, all accountants have at least an element of advisory and we should help our clients do what’s right for them.”

As an example, Hudson offers the kind of client whose businesses are most likely to be affected by the move to cashless – those who use cash a lot such as plumbers, electricians and domestic engineers. “When you’re on the move, it was previously hard to manage non-cash payments. But now, you can generate a quote from your phone; do the work; press a button to turn it into an invoice; plug into your provider; and the customer is able to pay there and then.”

Finally, will it work in Turkey – and if it does, is this next for the UK? “In areas where computer literacy is highest,” says Bond Burnett, “that’s where the momentum will happen fastest. It’s essential to look after the people who fall through the cracks, however, and it will be interesting to see how Turkey addresses those problems.”

Della Hudson agrees: the bottom line is that “there are compelling reasons to go cashless, but we have to bear in mind those members of society who can’t.”

A cashless society brings with it some potential positives…

  • It can be a powerhouse for small, rural economies.
  • It is advantageous to the young, who feel much less attached to cash.
  • It is a key weapon in the fight against tax fraud and in reducing the tax gap.
  • And it should also help with cash flow for small businesses.

… and some potential issues needing further consideration…

  • Those who don’t like making electronic payments, or who do not have bank accounts, need to be looked after.
  • “Consider also charities and schools,” says Alexandra Bond Burnett, “who often raise money for good causes by bucket collections of small change. There needs to be some kind of concession put in place there.”

In summary

We’re slowly moving towards a cashless society from the bottom-up in the UK, with card-only SMEs becoming more widespread. Some rural communities have been forced into it through a lack of local branches/ATMs, but the efficient, paperless nature of paying by card is now outweighing the associated bank fee for many.

The main drawback of going cashless is that some people are still heavily reliant on physical money, and we have to ensure they can still function. Could your business go cashless, or is it already there?

Read Part 2 of this series where we ask, why do we still have cash at all?

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Mark Blayney Stuart is Business Journalist of the Year, Wales Media Awards 2017 and Former Head of Research at the Chartered Institute of Marketing.

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