Monday, October 26, 2020
Tech

UK announces proposals to protect cash amid evolution of digital payments

UK announces proposals to protect cash amid evolution of digital payments
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The UK government has set out plans to protect the future of cash to cater for the needs of certain consumers as well as businesses as the adoption of digital payments increases.

According to the plans, set out by HM Treasury, even though cash use is declining, with people choosing to use cards and e-wallets, physical money is still crucial for groups such as the elderly and vulnerable.

The government has also observed that many people find cash more accessible than digital payments, or that it helps them to budget and manage their finances in a way that suits them.

“We know that cash is still really important for consumers and businesses – that’s why we promised to legislate to protect access for everyone who needs it,” said John Glen, economic secretary to the Treasury.

According to Glen, the government wants to “harness the same creative thinking that has driven innovation in digital payments” to protect the UK’s cash system and ensure there is no financial exclusion caused by the transition to digital payments. A call for evidence on the theme of protection of the UK cash system opened on 15 October and will run until 25 November.

The exercise over the coming weeks will seek views on how to ensure that ways to withdraw and deposit cash can be maintained, and how it is possible to improve cashback, what affects cash acceptance, and where regulatory responsibility should sit.

Under the government plans, the Financial Conduct Authority would be given overall responsibility for the UK’s retail cash system, given its existing regulatory role and consumer protection objective. Cash would be offered at retailers of all sizes without the need for a purchase, which is seen as a way to ensure wide availability of cash while reducing cash infrastructure costs.

Current EU law makes it difficult for businesses to offer cashback when people are not paying for something, and the UK plans to scrap those rules after the end of the Brexit transition period on 31 December 2020.

Last year, consumers received £3.8bn of cashback when paying for items at a till and, according to the Treasury, this is the second most used method for withdrawing cash in the UK behind ATMs.

According to the Bank of England, debit cards overtook cash as the most frequently used payment method in the UK in 2017. A report by Capgemini suggested that global non-cash transactions increased by 14% in volume between 2018 and 2019 with 708.5 billion transactions – the highest growth rate in 10 years.

Digital wallets, including QR code payments, were the preferred choice of 48% of respondents, and the Capgemini report predicted that half of the world’s population would be using digital wallets by 2024.



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