With the contactless limit set to rise to £100 in October, the move to contactless – and even cardless – payment is being encouraged. The pandemic has accelerated the shift towards a cashless society as many high street shops stopped taking cash in an effort to contain the virus. As restrictions ease, the habit to pay by contactless seems to have stuck.

Far fewer people carry cash now, especially amongst young people – if you ask a group of 20-year-olds for a pound coin for a shopping trolley you’re likely to come up empty. Across the UK, 300 cash machines close each month. This seems like quite a surprising figure, but when did you last use one?

Paying by card makes it easier to keep track of your spending, especially with the addition of mobile banking. Digital banks like Monzo provide in-depth insight into your spending habits, making money management easy. If you’re a user of the Samsung Pay card, you can change the account you used to pay with even after a transaction has gone through. Digital transactions are protected and if you misplace your card you can simply cancel it – whereas a dropped £10 note is gone for good.

In light of all this, going cashless seems like it could be a much better option than keeping cash in circulation. Unfortunately, ‘better’ is rarely better for everyone.

Potential downsides of a cashless society

Paying by card is not for everyone, whether that’s due to the financial options available to them or personal preference. For people in abusive home situations, being able to have and spend their own money without a paper trail is a lifeline. Some people simply don’t like the idea that their spending is logged when they pay by card and would prefer to retain the privacy that paying with cash entails.

Many people find managing their money easier with physical cash that can be counted, despite the budgeting options provided by virtual banks. Allocating cash into physical envelopes for each type of spending can make it easier to see how much you have left. This isn’t just an old habit either – many current budgeting bloggers advocate for starting the envelope method.

The costs of card payments for small businesses have become smaller over time – Square Readers now cost a mere £16 and payments incur a flat 1.75% fee – but some still prefer to save every penny possible, especially in their early days of trading. Relying on digital solutions also means that business stalls if data signal drops out, making cash a more consistently available option.

Any spare change?

A cashless society means the end of spare change, something that has presented a massive challenge for homeless people. People have received fewer donations and even long-running Big Issue sellers have been struggling. Some sellers have sourced their own card readers, but this comes with its own challenges: you need a permanent address and ID to open a bank account, and without a stable way to store and earn money the chances of getting that fixed address are slim. This is an incredibly tough cycle to break out of, and the move towards a cashless society is making it harder.

The use of card readers by homeless people also has the potential to backfire, says Brett Scott, a campaigner and expert on financial automation:

‘“Poverty is associated with a lack of technology, and that’s partly what convinces people that someone’s in need.” The presence of devices like card readers changes the psychological dynamic of how people think about homeless people.’

Even in China, which is already virtually cashless, homeless people who use QR codes for donations have been falsely accused of acting on behalf of scammers.

In an attempt to combat the impacts of the end of loose change, organisations such as Tap For Bristol have set up contactless pay points around the city for people to donate to local homeless charities. These donations go towards tackling the systemic causes of homelessness in the city, arguably making them a better option than the spare change which may only help in the short term.

Digital exclusion

The shift to mobile banking and the closures of high street bank branches have made banking less accessible for older generations. ‘The scale of bank and ATM closures and redundant ATMs during the pandemic marks an acceleration of a trend that was already of real concern,’ says Caroline Abrahams of Age UK.

​​’More than eight million people in the UK are at risk of digital exclusion due to the increase in cashless payments, according to data released by the Money and Mental Health Institute, with the elderly and homeless bearing the brunt of the issue.’

Age UK has warned that the ‘elderly will be excluded from a card and digital-only society’ and is urging banks to put access to cash on the same footing as water, electricity. However, access to cash is only one piece of the puzzle: all shops and services will need to continue accepting cash in order to ensure older people can continue to access them.

Retaining access to cash is fundamental for the lives of many and the benefits of a cashless system are arguably outweighed by its pitfalls.