Bank of England issues new £20 note

To coincide with the Bank of England’s launch of a new £20 note featuring economist Adam Smith, APACS - the UK payments association – gives an overview of how we use cash and how this has changed in recent years. APACS figures show that although plastic card payments are increasingly popular, Britons show no signs of abandoning cash any time soon.

Cash still accounts for more than six in ten (63 per cent) of all day-to-day payments by volume, and the £20 note is one of the most popular denominations of them all – accounting for 66 per cent of all notes dispensed by British cash machines in the last quarter of 2006.

Cash is particularly popular for low-value payments – over 96 per cent of all payments under £5 in value were made with cash in 2006. Retailers are the biggest recipients of our cash, despite the ongoing migration to cards from cash and cheques. About six out of ten of all personal cash transactions by volume are made in retailers. Cash is also heavily used on buses, in pubs and clubs and to pay for meals out or take-aways - eight in ten of all payments in the travel and entertainment sectors are made by cash.

In terms of the changing trends in our use of cash, 2004 was a landmark year when card payments overtook cash by value for the first time. Although the move from cash to plastic cards has been rapid – as recently as 1999 we spent more than £100 billion more in cash than on cards – we still spend over £270 billion each year in cash.

Sandra Quinn, Director of Communications at APACS says: “Most of us are likely to see one of these new £20 notes at a cash machine as it’s where many of these new notes will first be dispensed. It’s a fact that during the next week most of us are likely to visit a cash machine at least once, withdrawing on average over £60. We are all still carrying around quite a bit of cash because, despite our continuing love affair with our cards, cash remains first choice for small value payments such as for a pint of milk or our morning paper. However, this may all change with the arrival of contactless technology on our cards, starting later this year. This will enable us to choose to use our cards more quickly and conveniently for transactions under £10. Pre-paid cards are also starting to take off and they are likely to become more widely used for small value transactions.

Sandra Quinn continues: “Although the way we are using cash is changing significantly, we expect the likelihood of Britain becoming a cashless society in the foreseeable future to be similar to us all working in paperless offices. We have been using notes in Britain for over 300 years and we expect that we will continue to do so in significant amounts for a long time to come.”

Over the past twenty years the number of cash transactions we make has continued to decline – the only exception was in the period following the introduction of the lottery in 1994, when cash volumes rose for a while.

Undoubtedly the decline of cash has also been driven by the fact that the number of people regularly paid in cash has continued to fall. Twenty years ago one in three workers were paid in cash whereas today only 6 per cent are paid in this way.

The other ways we obtain our cash have also changed significantly in recent years. Acquisition of cash from cash machines has grown dramatically - in 2005 we withdrew £179.8 billion in cash from ATMs compared to just £80.2 billion in 1996. By 2016, it is expected that cash machines will provide nearly 80 per cent of our cash compared to 65 per cent in 2005.