Rise in cash-only spenders driven by cost of living crisis

The survey found that the number of people who primarily use cash for everyday spending reached a four-year high during the cost of living crisis.

Around 1.5 million adults will primarily use cash in 2023, the first increase since 2019, UK Finance said.

“This is likely to reflect cash being used to manage limited budgets,” Adrian Buckle, head of research at UK Finance, said.

But data from a banking industry group also revealed that the majority of young people are now paying with their smartphones or watches.

Nearly three-quarters (72%) of 18-24 year olds regularly use digital wallets for contactless payments.

Their parents and grandparents were much less likely to spend money in the same way.

Just over a quarter (27%) of people aged 45 to 54 say they use mobile contactless payments regularly, falling to just 8% of those aged 65 and over.

Buckle said he expects the older demographic to catch up in the coming years.

“Mobile contactless payments are seeing rapid adoption, with a third of adults using them at least monthly, and there is room for usage to grow further,” he said.

Unlike cards, which have a contactless payment limit of £100, mobile contactless payments have security features such as fingerprint technology and no upper limit.

Additionally, card data must not be compromised by interception by fraudsters.

Cash payments have been in steady decline over the past decade, especially as consumers turn to contactless cards for everyday purchases.

The slight increase in 2022 is thought to be due to soaring prices, tighter finances and closer budget scrutiny.

According to UK Finance, cash use fell again last year to 12% of all payments, with 22 million consumers now living primarily cashless lives.

But the survey found that 1.5 million people will primarily use cash in 2023, up from 900,000 the previous year, reflecting the continuing impact of the cost of living on people on limited incomes.

Cash is the second most popular payment method after debit cards, and an estimated 3 million people still rely on it.

The City’s watchdog, the Financial Conduct Authority (FCA), has announced tougher rules to ensure banks and building societies provide access to cash.

The ministry said the new rules would require banks and building societies to fill gaps in cash access with measures such as banking hubs, ATMs and post office facilities when considering branch closures.