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House of Commons Hansard
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Cashless Transactions
22 January 2019
Volume 653

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I beg to move,

That this House has considered cashless transactions.

It is a pleasure to serve under your chairmanship in a debate that is already better attended than I had suspected it might be, Mr Gray. It used to be said that cash is king, but in reality that is no longer the case. Politicians used to talk of the pound in your pocket, but today just three out of 10 transactions use cash, whether coins or notes; in 2008, it was six out of 10. The Access to Cash report sponsored by, but independent of, LINK, estimates that just one in 10 transactions will use cash by 2033. I do not intend to call for that to be slowed down, but rather to be sped up. Although 98% of adults in the UK have a debit card and the opportunity to use a cashless or digital transaction, some 46% of them still do not like the idea of a cashless economy, even though there is clear evidence that the vast majority of people would be better off in a cashless world.

The so-called poverty premium costs each of our constituents hundreds of pounds a year. Those hit hardest by using cash and sticking to the tried-and-tested methods are disabled people who live in medium-size market towns, where it is estimated to cost over £500 a year not to take advantage of the better tariffs and so forth available online. There is a huge premium on people who are not taking full advantage of the latest digital technology and contactless cards.

There are 2.2 million people who say that they rely day to day on cash. Only 2.5% of those in higher income groups say they do, compared with 15% of those earning under £10,000 a year. There is a clear sense that the greater number of people relying on cash in their everyday life would benefit most from not using it so much. That is why I am calling on the Minister to speed up the Government’s bid to increase the use of the cashless economy, which has not yet yielded the results that we might want to see.

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I thank the hon. Gentleman for bringing this issue to Westminster Hall; I am very aware of it in my rural constituency. Does he agree that it is essential that we ensure the viability of cash transactions due to continuing cyber-security issues? This is especially true in the case of rural areas such as my constituency of Strangford, where people cannot rely on the availability of digital means at all times. In other words, cash is king in my constituency and it cannot be ignored.

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The hon. Gentleman is currently right, but we will all be better off if we hasten the transition, so that people do not have to rely on cash and all of our constituents can use more secure and efficient digital means, whether they live in rural areas such as my constituency and his, or in big cities.

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I declare my interest in this issue. Does the hon. Gentleman agree that the increasing amount of online fraudware—for example, one of my constituents was defrauded of £40,000 by telephone fraud using her online banking—and the use of crypto-assets for online cashless transactions means that we need more regulation from the Government, so that consumers can trust the system to enforce the rules? Do we not need to give police more powers to tackle those who use cashless transactions for criminal purposes?

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I completely agree. Much of this is about trust. It is true, as I said, that 46% of people do not trust a cashless society, whether that involves crypto-currencies—although I suspect most of those 46% are not wholly familiar with every detail of that—or simply contactless cards. Part of this is about regulation; much of it is about trust.

It is worth examining in a small amount of detail why people want to continue to use cash. About 20% say it makes them feel more in control, 16% say it helps them with budgeting, and 3% want to hide their guilty pleasures—perhaps we had best not dwell on those. Some 5% do not trust online transactions at all, and 3% just do not trust the banks. That is a real issue if this trend is to be mitigated for vulnerable groups where needed and if the broader society is to take advantage of cashless transactions.

Countries such as Sweden already have twice the level of cashless transactions as we have in the UK, and their authorities have taken conscious action to slow down the pace of cashless-ising, to ensure that vulnerable groups are not left behind. It is also reported that 4,000 people in Sweden have had chips inserted under their skin, so that they do not even have to use cards—I am not sure that I would quite that far, although I know the Minister might want to consider it as a personal experiment.

We are at risk of ending up with two cultures: those who embrace a wholly digital way of living, and those who do not. There has been an 8.5% decline in the use of ATMs in London, but just a 2% decline in Northern Ireland and a 2.9% decline in my area of the east midlands. There are very different views on what is important for people and on the pace of change.

It is instructive to look at what people use cash for. Figures from the LINK report show that just 13% of people pay their rent in cash—disproportionately those on lower incomes. Some 85% said that they use cash to pay for taxis, which is a particularly instructive example. That is obviously a nationwide figure rather than a conversation about London taxis, on which we could perhaps spend many hours. Taxis are a particularly interesting example because the giving of cash to a driver makes them more vulnerable to theft and to being a target for crime. It also means that they are responsible for ensuring that they have change, so they have to carry a float even before they have taken any cash. It is of course true to say that it would be naive in today’s society to get into a cab outside London and expect the driver to take a card transaction. This is a complex landscape.

Some four out of five people say that they pay their gardener—if they have one—in cash. I am sure that neither the Minister nor I wish to cast aspersions on gardeners, but there is a suspicion that there are parts of the economy where cash is used to avoid the taxation that I know he is very eager to collect at every possible opportunity. There are a whole host of reasons to promote cashless transactions, whether it is ensuring that people are at less risk of the crime that goes with cash or that businesses are at less risk of the increasingly expensive costs of handling cash.

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I am mindful that in my constituency of Strangford, where we have a fishing sector, there is a tradition of boat owners paying their crewmen in cash. There has been a reduction in the number of banks across the whole of the Irish peninsula. Seasonal workers are also paid in cash. I put forward to the hon. Gentleman that one size does not fit all and that there are exceptions. We need to be aware of that, as does the Minister.

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I agree. In a sense, I make the same point that I made before, which is that currently there are a large number of exceptions and it would actually be in the interests of the many seasonal, low-paid and often zero-hours contract workers in my constituency to be paid digitally, because they would be less at risk of crime and the businesses that they work for would have less of the handling costs associated with cash. We are already at the point where the declining ATM network that those people rely on is struggling to make a viable business case to those who use it with such diminishing enthusiasm.

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The case study of First Bus in Bristol—I would not speak accurately on behalf of my constituents if I said it was a cheap network—demonstrates that the use of digital payments has allowed a reduction in the cost of tickets because cash is no longer handled on the bus network. Does the hon. Gentleman recognise that that must be a positive for consumers, whether or not they use cash?

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I agree. That is an example of where digital payments are in the interests of both the business and the consumer—not simply in terms of convenience, but, in the case the hon. Gentleman mentioned, in terms of the viability of the bus route. Companies such as Square have tried to encourage marketplaces to embrace digital technology in such a way that businesses that often operate at the very limit of viability are able to find new and innovative ways of changing their business models slightly. Of course, it is no good for a business to accept cards only when people wish to show up and pay in cash. The London bus network experienced some controversy when it moved to using a card-only payment mechanism, and I suspect that the hon. Gentleman may have experienced the same in his constituency.

As the hon. Member for Strangford said, it comes back to ensuring that a one-size-fits-all force is not exerted either by Government or by business, but that a number of things are done to encourage businesses to understand that there are huge advantages, and to encourage consumers to understand that there are very limited opportunities for fraud when it comes to contactless cards or, indeed, chip and pin. We should be careful not to stoke those sorts of fears unnecessarily.

There are costs associated with handling cash and there are associated costs for consumers—socioeconomic risks for those who are often most reliant on cash but would benefit most from digital payments, for example. We therefore need to ask the Minister for a number of things from the perspective of Government. The first would be to consider whether action should be taken to encourage shops and businesses to go cashless and whether there should be safety net to ban them from becoming entirely cashless, as has happened in some states in America. I would argue that in most circumstances, a retailer of any kind is perfectly entitled to make that decision for itself. We should not sleepwalk into a cashless society, however; we should understand the risks and the benefits.

With that in mind, my single largest request to the Minister is not that we try to invent some system in which, as someone proposed, a business rates scheme encourages cashless-ising in town centres, to encourage businesses to become more viable and eliminate costs to which they might be sentimentally attached, but simply to build on the success that Britain has already shown both in FinTech and in technology more generally. That means putting the governmental shoulder to the wheel and recognising that ultimately, the cost of taking cash is already very close—if not over the line—to outweighing the benefits. We are certainly already at the point where many businesses looking at that in detail would think very hard about whether taking cash was in their interests at all. Clearly, the moment when far more businesses go over that line is fast approaching.

We need to do two things. The first is to consider much more carefully the impact that eliminating cash can have on vulnerable groups in certain circumstances. Then, we must say what we can do to help those groups to embrace a cashless economy with much greater enthusiasm. Some of that means reassuring people about their concerns on the risks of fraud, while another part means defining—as the hon. Member for Strangford mentioned—what can always paid in cash, at least for a long time into the future.

Would the Minister consider setting out a roadmap for the future proportion of cash in the economy, to reassure us that it has been entirely considered and that its impact has been thought through? If I had my way, I would set a target for the elimination of cash from the economy, in much the same way that—in an ideal world—I would think carefully about when cheques might be eliminated entirely from the economy. I appreciate that setting any type of target in that regard is probably down to the market as much as it is to Government, but whether or not there is a target, the trajectory is ultimately very clear: there will be less and less cash in the economy and that will mean certain things for vulnerable groups. Our job as politicians is to provide some leadership and tell people and businesses that it is economically advantageous for there to be less cash in the economy, however sentimental some people might feel about where we are in today’s society.

I will leave that gentle request there, rather than demand anything more of the Minister, but I would say that the direction of travel is clear: cash was king, but it is now coming towards the end of its reign.

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It is a pleasure to serve under your chairmanship, Mr Gray, and to respond to the debate secured by my hon. Friend the Member for Boston and Skegness (Matt Warman). I thank him for his suggestion that I get a chip implanted in my arm—I have only just started paying with my Apple watch, so that might be some way off. I will suggest it to the Chancellor as something that he might like to do.

As my hon. Friend laid out, all the evidence suggests that people are increasingly turning to digital payment methods. In 2017, debit cards overtook cash as the most frequently used payment method in the UK. The Government support digital payments, which, as we have heard in the debate, can offer consumers and businesses convenient, tailored, and flexible ways of purchasing goods and services. Increasingly, they can also offer additional services, such as ways to help budget, keep a record of transactions and manage financial affairs, which can play an important role for those who, traditionally, would be considered more vulnerable and harder to serve.

As my hon. Friend also mentioned, the public support and trust our historic currency in cash and notes—perhaps to a surprising extent. We have seen that over the course of the past 12 months, with campaigns to save the penny and for a Brexit coin, and the Royal Mint sees it every day with the demand for it collector’s coins, both on its website and at its south Wales shop. The pace of technological change has never been faster and it will never seem so slow again as it continues to accelerate. Like my hon. Friend, we want the UK to be at the forefront of technological change, to embrace the opportunities and, as we have heard from the tenor of the debate, to ensure that that change works for as many people in society as possible. That includes taking a lead in supporting the Competition and Markets Authority’s open banking initiative, which aims to make it cheaper and easier for innovative new firms to provide financial products.

Building on that, the Government have tried to lead on FinTech with our FinTech sector strategy, which was published last year and sets out our plans for ensuring that the UK remains the best place in the world to start and grow a FinTech firm. Nearly 100,000 people in the UK now work in the FinTech sector; almost none of those jobs existed just 10 years ago. The UK genuinely is a market leader in this field. We have already heard examples of those firms, which are transforming the financial services sector. TransferWise, which set up in London eight years ago, is another. It now serves more than 4 million customers and transfers more than £3 billion of funds every month.

The wider payments industry is also embracing new technology. For example, as a result of legislation brought in by this Government, UK banks and building societies have been able to introduce cheque imaging. That innovation offers people the additional option of paying in a cheque through their smartphone rather than having to go to a bank. That benefits people who are harder to serve, such as those my hon. Friend mentioned—people in rural areas and those with limited mobility.

As my hon. Friend said, digital payment technologies offer considerable opportunities for everyone, including vulnerable people. Ensuring that the UK leads in this area offers opportunities for new FinTech businesses and jobs, and exports, which I just mentioned. It also provides extra flexibility and convenience for businesses and consumers, such as those who travel by bus or taxi in London or, as we heard, by bus in Bristol. If we get the technology right and ensure it is sufficiently competitive, it may provide lower transaction costs for consumers and small businesses. As we heard, it also offers us the opportunity to lower the tax gap, which would mean lower taxes for all the rest of us who pay our fair share of taxes, and there will be public safety benefits if we can ensure correct enforcement and increased public trust. A number of shops and music festivals have suggested they may go cash free to reduce criminality.

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I referred to my constituent who was defrauded via an online method. She contacted the police, Action Fraud and the bank, but no one was able to help her and she lost her money. Will the Minister set out what his Department is doing with the Home Office to ensure that the police are properly equipped and resourced to tackle these issues?

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We work closely with the Home Office on economic crime. In fact, last week, the Chancellor and the Home Secretary launched a new taskforce on economic crimes, which will include cyber-security and digital payments. Of course, we work across the full range of financial institutions and authorities to ensure that they take this issue seriously. The Government’s cyber-security strategy, in which we have invested almost £2 billion, is designed to increase capability and awareness among financial institutions and police forces across the country. Police forces need to take this issue very seriously as crime changes.

It is also worth mentioning the societal benefits of developments in other parts of the world, particularly in Africa and the developing world, where organisations and companies that have taken the lead on mobile payment services, such as M-Pesa, have been truly transformational in opening up new opportunities for entrepreneurship and person-to-person payments. We have seen that happen in those parts of the world, and we want it to happen in this country, too.

We heard about some of the challenges associated with the increase in digital payments and the falling use of cash. It is worth noting that cash payments fell from 61% of all payments in 2007 to 34% in 2017. However, 34% is still a significant proportion, and about 2.7 million people in the UK remain entirely reliant on cash. We must ensure that those who rely on cash are not excluded as digital payments become more prevalent. We can of course play a role in guiding them to see some of the benefits and opportunities of digital payments. My hon. Friend the Member for Boston and Skegness mentioned examples of people for whom digital payments may be very useful indeed, such as those on lower incomes and migrant workers.

We launched a call for evidence last year to better understand the role of cash and digital payments in the new economy, to explore questions such as how we can maintain access to cash for those who need it, and to better understand the trajectory of cash use. We concluded that although we are probably heading towards a cashless society, we should seek to facilitate and encourage that. Cash—our coins and notes—will be with us for a long time to come, so its continued availability in all parts of the country for all groups needs to be planned carefully by the Government, financial institutions such as the Royal Mint and the Bank of England, and the payments industry.

We are working closely with the industry, which recognises the challenges. Last year, LINK, the UK’s ATM network, announced an independent review of access to cash, chaired by Natalie Ceeney, in response to some of the concerns and criticisms raised over the course of 2018 about the decline in the number of ATMs, particularly in rural areas. It is true that there are probably too many ATMs in some of our urban areas, but there is real concern about the number of ATMs in smaller market towns, on the smaller high streets of larger cities such as Bristol, and particularly in villages. The review is exploring the risks of leaving people behind as we increasingly utilise digital payments. As we heard, its interim report found that many consumers still value having cash.

The wholesale cash industry is also considering the infrastructure required to continue to service cash use as it declines. That will be a serious challenge in the years to come, and we want to be prepared for it. How can we ensure that every shop, restaurant, post office and community in every part of the country, including rural areas, continues to be able to obtain the cash it needs? How can that business model be either profitable or supported by the rest of the economy? In addition, the payments industry is progressing initiatives such as Request to Pay, which can help increase and promote financial inclusion. The Request to Pay service aims to give payers more control over outgoing payments and to help people avoid the cliff edges that can be created by irregular incomes or unexpected bills.

The rise in digital payments has been remarkable. It is not unique to this country; it is happening in all parts of the world, including in perhaps unexpected places such as Africa and the developing world. Contactless payments in this country grew by 99% in 2017, and we expect that trajectory to continue. We welcome proposals to enable the UK to embrace that change. There are no simple solutions, but we look at international examples, such as Singapore, Hong Kong and other parts of the world that are particularly engaged with this question. Hon. Members from across the House with proposals and ideas are very welcome to come to see me or other Treasury Ministers as we consider how we can continue to engage with this issue and drive the sector forward.

We need to consider the impact of the increasingly digital world on society and our economy and find ways to overcome the challenges it presents. Cash use remains important, with more than one third of payments in the UK made in cash. However, like my hon. Friend the Member for Boston and Skegness, we want to guide the economy and the public through the undoubted and probably irreversible journey to a cashless society, and we want to ensure that the UK is at the forefront of new technology while protecting the most vulnerable in our society.

Question put and agreed to.

Sitting suspended.