Just when we thought that Covid might have been the final nail in the coffin for cash, it would appear that the cost of living crisis has given it somewhat of a reprieve, even a chance for revival. Data from the Post Office suggests that the amount of cash deposits and withdrawals in July 2022, was the highest it’s been in five years.
Cash is the ultimate credit limit
One suggested reason for cash making a come back is the cost of living crisis and economic turmoil. When there is uncertainty in the economy or finances are tight, people historically turn to cash as the safe bet. With the Bank of England making noises around a recession, some may be withdrawing cash gradually to mitigate and spread the risk of their savings. Certainly, anyone that witnessed the likes of Northern Rock and Lehman Brothers collapse back in 2008, will have a healthy fear of the same thing happening to them and may therefore be keen to have some hard currency ‘on the hip’.
But for many, the return to cash will be because of its role as the ultimate credit limit. As prices rise and household finances require careful management, using cash provides a physical representation of what there is to play with and can help some to plan, allotting it to food, bills and energy for instance.
Covid expedited the demise of cash
It was presumed that the rapid digitisation of payments and move to online banking that covid and the stay at home order had generated would signal the end for cash. As well as not being physically able to go out to get or spend cash, fears around it being a potential source of viral transmission meant that most people were happy to pay by card. Retailers reduced or removed minimum spend limits and the contactless limit was increased to £100, covering the majority of day-to-day transactions.
In 2021 cash made something of a return, as we too returned to some form of normality, but the personal cash withdrawals of £801million recorded by the Post Office in July 2022, represented a 20% increase on the previous July.
The Post Office is the bank
The data from the Post Office can be accepted as a legitimate national picture as for most people this is now their bank counter and the only place locally that they can access and deposit cash face-to-face. With major banks continuing to shut their branch network in smaller towns and villages and the majority of cash machines now run by third party providers, The Post Office has become the de facto counter service and has agency agreements with all the major banks.
There is an old saying that cash is king and it would appear from this latest data that it still has a significant role to play. The more apt saying should therefore be ‘The king is dead, long live the king!