Bank of England on the money with its 1982 vision of a “less cash” society
The Bank of England has a fairly dubious record of forecasting the UK economy, but 30 years ago it was right about one thing – how our use of cash would change.
A look through the Bank’s publications archive, uploaded to its website on Tuesday and going back to 1947, reveals all sorts of historical curios – not least its handling of Nazi gold in 1939.
Another is a 1982 report on why demand for cash was growing far more slowly than expected, which at the time was hard to reconcile with a widespread belief that the black economy was on the rise.
It came to the conclusion that new technology was perhaps the most important factor. But it also provided a look at what the future would hold:
“The term ‘cashless society’ is … and will for the foreseeable future continue to be, an implausible prospect for the United Kingdom (and indeed for most other countries).
It is more realistic to think of a ‘less-cash society’ in which the use of cash gradually becomes even more restricted to lower value transactions and to those transactions in which both parties seek anonymity.”
And that’s exactly what has happened over the last 30 years.
It’s worth pointing out just how different consumer finance was back then.
In 1981, cash was still the most common payment for wages in the UK, with only 38 percent of salaried workers receiving pay by bank transfer. That’s now 91 percent, according to the Payments Council.
Cash is still the most common type of transaction today, but it’s mostly used for small payments now.
Britons spend more money using debit cards and even cheques, even though the Payments Council had – until recently – planned to phase out cheques in 2018.
Cash machines were another big reason why the Bank in 1981 thought a cashless society unrealistic:
“…although these remove the need for customers to carry large amounts of cash, they do buttress cash as a major means of payment.”
That’s true now more than ever.
In 1981, there were around 3,200 ATMs, but today there are more than 65,000, boosted over the last five years by a campaign to improve free access to cash in poor areas.
And the Bank of England has also been trying – with success it seems – to distribute more £5 notes through more cash machines.
Like the authors of the 1982 report say, that will buttress cash usage for years to come, even if coins and banknotes gradually lose ground to newer technologies like contactless payment.
Visa Europe says contactless transactions are rising around 22 percent quarter-on-quarter, although they still represent a small fraction of total payments.
The Bank’s 1982 judgement that we’re becoming “less cash”, not “cashless”, still holds true today.
The Bank of England’s report was based on work from John Trundle, now CEO of Euroclear UK & Ireland.