EXCLUSIVE: “A new warrior in the war on cash” – Ron Delnevo, Cash & Card Consultants and Nigel Constable, UK Cash Supply Alliance in ‘The Fintech Magazine’

Can the UK Cash Supply Alliance end hostilities for good? Ron Delnevo meets its Co-founder and Chair, Nigel Constable

The war on cash started in 1949. Frank McNamara, a New York businessman, had dinner with his wife and some clients at Majors Cabin Grill in his home town. When the time came to settle the bill, Frank discovered he had left his wallet in another jacket. His wife had cash, so the bill was paid – but the experience got Frank thinking.

Perhaps what Frank should have thought was that he needed to take his wife out more because, in those far off days, no woman would ever forget to take a handbag, even if her husband was dumb enough to forget his wallet. Anyway, the next year Frank returned to the same restaurant and this time paid with a small cardboard charge card. Diners Club was born that evening, with the card industry later describing Frank’s meal as the First Supper.

Credit cards were the next ‘big idea’, with Bank of America launching the BankAmericard in the US in 1958 and Barclays launching the Barclaycard in the UK around a decade later. A similar pattern emerged in relation to debit cards. The first US debit card appeared in 1978. However, in the UK they were delayed by nearly 10 years. Of course, it took longer than that for the card industry to pluck up the courage to openly declare a war on cash. Famously, the industry leader who finally swallowed enough brave pills was Ajay Banga, the now former CEO of Mastercard.

Banga announced his war on cash in Mumbai in October 2010, the day after the Indian government started a campaign to give identification numbers to all 1.2 billion citizens. He saw a huge opportunity to work with the Indian government, with payments to the poor being processed via the Mastercard network. He was no doubt annoyed to find that, in 2010, 85 per cent of the planet’s payments were still being made using cash. The fact that this percentage had been the same or higher for more than 2,000 years cut no ice with the plastic tycoon. It just strengthened his resolve.

So how successful has this phoney war on cash been? Mastercard and Visa, the two giant US payment networks, have both been very successful in issuing cards. Today, there are around five billion of them, carrying one or other of the two brands, in use. China UnionPay claims to have issued another seven billion cards. In total, there are probably around 25 billion credit, debit and prepaid cards worldwide. Given that there are only around six billion adults on the planet, this is a mind-boggling figure, especially as around 25 per cent of those adults do not even have basic bank accounts.

Way back in 1950, when Frank McNamara paid for a meal by card for the first time, effectively 100 per cent of payments worldwide were made using cash and cheques. Nearly 70 years later, with cheque use having declined to almost zero in many countries, according to McKinsey, cash still accounted for 77 per cent of the world’s transactions (in 2018). And this despite the huge – and expensive – efforts of the card and mobile payments industries. But the war on cash continues – and, unfortunately, the UK has become the main battleground.

Contactless payment has been the primary weapon used. Introduced to UK debit cards in 2007, the public was slow to show much interest but, thanks to massive marketing budgets and collaboration with Transport for London, since 2015 contactless payments have increased dramatically. And, as card use has been made easier, using cash has been made more difficult. Bank branches have been disappearing faster in the UK than in any other country in the world.

The ‘big five’ UK banks have closed more than half of their branches in the last decade. A similar picture emerges in relation to ATMs, which now account for more than 90 per cent of the cash accessed by the public each year: more than 25 per cent of the UK’s free-to-use ATMs have been removed in the last five years. So, getting cash has been made significantly more difficult for the 40 million adults – 75 per cent of the UK’s population – who still use cash frequently.

Depositing cash is now a problem, too. Bank branches closing is partly responsible for that, as is the fact that cash deposit at LINK ATMs has never been implemented. Cash acceptance in the UK is also becoming a major issue. The UK government shows no sign yet of following the good example set in the United States as far as payment choice legislation is concerned. A Payment Choice Act is badly needed, not least because a recent survey by the UK’s Financial Conduct Authority revealed that only 64 per cent of UK businesses are content to continue accepting cash.

One problem in the UK is that there has been no strong voice speaking up for cash – until now. I recently caught up with Nigel Constable, co-founder and chair of the UK Cash Supply Alliance, a new not-for-profit, supported by volunteers in the industry, and determined to speak up for both cash and the public interest. Constable has worked in the cash industry for 30 years, and was a founding director of Note Machine, one of the largest and most highly-integrated ATM operators in Europe. This is what he told me…

Ron Delnevo: Why do you believe it is important to maintain cash supply and offer payment choice?

Nigel Constable: I believe cash is the lowest-friction payment method, particularly for smaller amounts, and that for many it represents an important way of budgeting, from the weekly shop to the evening out with friends. It is critical for the health of many people’s personal finances that they are free to pay using the method of their choice. Card and contactless payments are here to stay, and have obvious value, but it is easy to spend beyond your means through a series of low-value payments. Cash is physical and tangible and, for millions, represents a convenient, easy way to manage expenditure.

RD: What’s your take on the cash health scares that surfaced in the pandemic?
NC: Not enough has been made of the extensive research done by the Bank of England and others, which shows that the risk of contracting viruses through cash usage is vanishingly small. These scares have been used by some retailers to avoid taking cash because banks have made it very difficult to pay in cash in some localities, following an acceleration in branch closures.

RD: So, do you see cash recovering, then, as the impact of the pandemic recedes?
NC: I am confident that a recovery will mirror the increase in shopping footfall as we exit the pandemic. People will still value having cash in their wallets and purses as they go about their daily business.

RD: Cash in circulation increases each year in almost every country. Given we are constantly told that people are abandoning cash, how would you explain this phenomenon, and does it mean the long-term future of cash is assured?
NC: I am very confident that cash has a long-term future – and it seems others agree, otherwise the Bank of England would not have seen the need to invest millions in introducing polymer notes. That, incidentally, has resulted in the best-quality, cleanest notes we have ever seen in circulation in the UK. The global economy continues to expand and, in local economies across the world, people value cash for the same reasons – certainty of value, immediacy of settlement, low costs to make and receive payments and ease of management.

RD: What is the rationale behind founding the UK Cash Supply Alliance?
NC: The UK CSA exists to bring organisations together that are involved in all aspects of the supply chain, to ensure that cash remains firmly on the consumer’s payment choice menu. We will work with government and regulators to make sure that the voice of the consumer is fully understood and strongly represented.
The British public have always shown iron resolve to stop unwanted outcomes being forced on them.
With the help of the Alliance, I am confident the public can end the war on cash and, in doing so, remove the threat of an imposed ‘cashless society’.

This article was published in The Fintech Magazine #23, Page 22-23