The COVID cash cliff

The COVID cash cliff

By Karl Macgregor, CEO & Co-founder, Vyne

To say that ‘cash is dead’ feels somewhat of an understatement. Although this is a narrative that fintechs have peddled for years, the COVID-19 pandemic proved that many had truly jumped the gun.

The stats paint a grim picture. According to the Bank of England, the volume and value of cash withdrawn from ATMs dropped 60% in spring 2020 compared to the same period in 2019. Whilst we saw a slight recovery as high street stores, pubs and restaurants reopened their doors later in the year, overall usage remained down by 35% year-on-year. Now, just 7% of in-store purchases in the UK are expected to be made in cash by 2024.

It’s not just the pandemic that has caused cash usage to nosedive, however. The closure of local banks and a dwindling number of ATMs has seen the fabled cashless society feel closer than ever. Couple this with changing consumer behaviour – such as a surge in online shopping and usage of mobile phones – and it suggests that retailers who continue to rely on cash payments are in need of a rethink.

With the popularity of payment options seemingly in a moment of change, and retail purchases online and in-store in a state of post-pandemic flux, merchants large and small need to consider how to not only entice customers back but also keep them engaged.

While there are of course many factors at play, this is where the payments process cannot be overlooked, which I would argue is an integral part of the consumer experience. In short, for any retailer looking to improve the bottom line, all roads lead to open banking.

I firmly believe instant account-to-account bank payments, powered by open banking technology, will help speed up the retail sector’s economic recovery.

How? Firstly, granting customers the ability to complete payments through their own banking app (without the need for cash or cards) appeals to COVID conscious shoppers, who may be hesitant to return to busy high streets if they are forced to interact with cash or pin pads. This mobile-first experience also increases conversion, as consumers don’t need to rely on carrying around bank cards or inputting lengthy details online.

Additionally, the absence of sharing card details in both the physical and online environments helps to eliminate the risk of fraud for consumers, which totalled an incredible £783.8 million in 2020 despite a 5% decrease. Retailers in turn benefit from no chargebacks, fraud screening or risk of data hacks – the responsibility for which traditionally sits at their doors.

And the benefits for retailers don’t stop there. Take cash flow for example. With customers settling up in as little as three clicks on their phone, money is moved between bank accounts in real time bypassing the card networks and their associated fees. Better cash flow means empowering retailers to grow their businesses as we emerge from the pandemic rather than wait for funds to land in their accounts.

As we – albeit tentatively – return to a ‘new normal’, I would argue there has never been a stronger case to consider and implement new payment strategies and future proof growth by widening alternative payment options at the checkout. In-store and online retailers both face a changeable landscape, but one thing we can be certain of is that cash has now well and truly has its day.