Natalie Ceeney CBE is Chair of Innovate Finance and Chair of the Access to Cash Review. Before the UK went into lockdown for COVID-19, Natalie joined the podcast to speak about the Access to Cash Review’s study into the UK’s rapid transformation to a cashless society. The review found that millions of people – just under 20% of the UK population and disproportionately those on low incomes – would struggle to manage without access to cash. In this episode Natalie tells us why the UK cash system is at risk and what can be done to bolster it, and to protect the people who most depend on it. Now, with the UK in lock-down, ATM use has reduced dramatically and many shops are refusing to take cash because of health fears. As a result, the country’s fragile cash infrastructure is coming under more pressure than ever. More information on the Access to Cash Review and their full report can be found at accesstcocash.org.uk
More information on the Access to Cash Review and their full report can be found at accesstcocash.org.uk and you can follow Natalie on Twitter.
Alice Merry (00:04):
Welcome to the podcast that takes a feminist look at the world of money. My name is Alice Mary and this is the feminist finance podcast.
Alice Merry (00:16):
If you can remember any news that came out before coronavirus hit and you're based in the UK, you might remember numerous news reports about ensuring access to cash. These are based on work done by the access to cash review, which looked into the risks faced by the most vulnerable in our society as we increasingly find ourselves becoming a cashless economy in the UK. That review was chaired by Natalie Ceeney and Natalie's come onto the podcast today to tell us more about their findings and what can be done to protect those who most need access to cash. As well as chairing the access to cash review, Natalie's also chair of Innovate Finance and she's a non executive director with several companies and organizations. Before her current role, she previously held three CEO roles including at the Financial Ombudsman Service, the UK Courts and Tribunals Service and the National Archives and she's held multiple executive director roles including in HSBC, UK. I started by asking Natalie about the decline in cash that we've witnessed in the UK.
Natalie Ceeney (01:23):
So across the world populations are embracing digital payments. What's different in the UK is just the speed of that change. So if I go back a decade, six out of every 10 transactions in the UK were in cash; last year, that was down to fewer than three out of every 10; and we currently forecast that within a decade that would be down to less than one out of every 10, which to all intents and purposes would make us a cashless society. Now, if I put that in context, we are well ahead of most of the rest of the world. In Europe for example, most European countries see more than eight out of 10 of every transaction being in cash. And there aren't many countries we can look to who are ahead of us. The Nordics are our biggest example. For example, in Sweden, fewer than 15% of all transactions are now in cash. So we can look to them, but not many other places.
Natalie Ceeney (02:14):
But the problem is that digital payments don't yet work for everyone. We quantified in our research what percentage of the population will seriously struggle to exist in a cashless society. And the answer is just under 20% of the population. So around 8 million adults in Britain. And the infrastructure that supports cash is coming under severe strain as the economics just don't work anymore. And as a result, we're really looking at a situation where a sizable proportion of people in the UK could be left unable to get cash and even if they can get it unable to spend the cash,
Alice Merry (02:46):
That's a really large number of people who would struggle to cope in that case. And I think many of us would assume that it would be the older members of our society that would struggle. But, I think the report that you released showed that poverty was the thing that was greatest... Most related with struggling to cope in a cashless society.
Natalie Ceeney (03:06):
You're absolutely right. So if in the UK you earn less than 10,000 pounds a year, you're 14 times more likely to be dependent on cash than if you only earn 30,000 pounds a year. And one of the reasons for that is quite simple. It's budgeting. If you imagine you've only got a fixed amount of money to last the week, if you've got it in cash, you've got it in your hands, you can see it, you can budget it and you can't go over spent. Whereas with digital payments, it's actually quite easy to go over spent. We've all, I'm sure been in a situation where we've tapped a card and two or three days later the payments come through and we thought, "Oh, I thought I'd paid already." Or direct debits that come out when you haven't quite got the money in your account, particularly if you work, say in the gig economy or get paid on a non-regular basis.
Natalie Ceeney (03:51):
So, poverty is one of the big reasons why you could depend on cash. But there are other reasons too. So in the UK, we don't have universal mobile connections and broadband, a significant proportion of rural communities, therefore, just couldn't make digital payments work on a mobile. For example, I live an hour outside of London in a rural community in Kent and we have no mobile signal, nothing, in my village. And as a result, taxi drivers just couldn't use mobile payments because they wouldn't work and it's going to be quite a long time before we've got universal connectivity in the UK. And we found a whole host of reasons really why people would struggle to go digital that we hadn't really anticipated when we started the report and they all do link with vulnerability.
Alice Merry (04:38):
It was interesting when, when I was reading the report, I was thinking about the fact that women are more likely to have lower incomes in general in the UK. So it seems likely that women might be overrepresented in the group of people that would struggle to, to manage in a cashless economy. I wonder whether you found any findings specifically around gender in the report.
Natalie Ceeney (05:00):
You're absolutely right in that women are more likely to be lower paid and therefore more highly correlated with cash dependency. But the other area we found was actually around the nature of relationships and nature of many domestic relationships. And one area we found as we've talked to domestic abuse charities, for example, was that often in a controlling relationship, an abusive partner, who is most often a man, will take control of the bank account. In fact, around a third of abuse victims report control over finances. And in fact we found that many domestic abuse survivors said the only way they could find to escape an abusive relationship was to be squirreling away cash. So there are many ways where this isn't gender neutral. And I would, I would agree with you that income level is one area, but also so is control of household finances.
Alice Merry (05:52):
That's so important. And did you see any examples, on the flip side, did you see an examples where digital payments might have benefits to women or help protect women?
Natalie Ceeney (06:03):
We did. And I think it's worth saying that even the people who are very dependent on cash generally told us they'd like digital payments to work for them. And this is the issue really. How do we make digital payments work for everyone? So, for example, a number of older people, again, particularly women feeling physically vulnerable, said they'd quite not like not to be having to carry a lot of cash around. It feels safer not having to have money in your pocket that could be robbed. So there are some issues about physical vulnerability, but what we also found is it is those most vulnerable segments of society where we haven't yet developed the digital solutions that work for them.
Natalie Ceeney (06:40):
So if I give you an example, if you imagine someone say who's in their eighties who lives in their own home and who is perfectly able to live alone but needs a neighbor to do occasional shopping for them. Well, handing over a note, a 20 pound note, and being able to look at the change your neighbour gives you back means that you're less likely to be ripped off. You can see the change. You've got the control of that relationship. What you don't want people to be doing is handing over a contactless card, not able to easily check how much money's going out of their account. Now those solutions can easily be designed. We can see small pockets of where they exist, but the problem is they aren't yet being designed for people who are vulnerable because frankly they're not commercially particularly attractive. So I think there are significant advantages of digital payments for actually just about every segment we met of the vulnerable populations, but they need to be explicitly designed with those people in mind. And that's going to require a different model of development and design.
Alice Merry (07:41):
Are you starting to see any of those kinds of models emerge? Are there any examples yet in the UK of digital solutions that really are working for these vulnerable groups?
Natalie Ceeney (07:52):
There are some, and if I point to a few, some of them are coming out of the UK FinTech community and we're particularly good at digital innovation in the UK. So one of the issues we found with why people might be dependent on cash is actually they've got a longterm mental health issue. If you know that when you become ill, you are likely to significantly overspend, say, if you're going into a manic episode or you become depressed, then actually you might not trust yourself to completely depend on digital payments. You might want to live in cash just in case you go into an episode. Well there's a company called Toucan who are developing a solution for exactly that problem that would allow algorithms to detect when you start spending out of your normal patterns and to alert people you've predetermined as your friends and carers to say, I think you need a conversation because my spending's gone awry.
Natalie Ceeney (08:40):
Now, that's a really good example of dealing with a very real problem about digital payments. We've also seen carer cards developed actually by Visa. The problem is most of the banks in the UK, the infrastructure, won't enable them to be widely available, but this would allow someone in that situation I described who maybe has a carer or wants to get someone to do their shopping with them but doesn't want to hand over a contactless card, to set limits on what that card can spend, potentially on a daily basis. And there's, there's an app in the UK again developed by a FinTech called Go Henry that does exactly that. The parents to children allow children to have safe limits on spending and learn budgeting. Actually, exactly those sorts of solutions might be available to say people with learning disabilities or, or older people who are less comfortable digital technology. So there are actually loads of examples you could see, but they need to be made mainstream. And the problem is we're talking about segments of the population who aren't particularly commercially attractive and as a result maybe not attractive to mainstream banks.
Alice Merry (09:45):
Before we talk a bit more about the solutions, I wanted to bring you back to the topic of our cash infrastructure. Because, certainly when I read the report, I realized how little I understood about the cash structure. I even had a conversation the evening after I read it with my sister and I was saying, did you know that every pound you spend in cash costs - I can't remember how much it was, let's say 2p. And she said, costs what? What do you mean? How does it cost? What costs? I think we're so used to getting our money out for free from an ATM and we're so used to kind of free bank accounts and so on that we barely think about the cost on the cash infrastructure side. I'd love for you to break it down for us a bit. How, how does our cash move around the UK and what kind of costs does that have?
Natalie Ceeney (10:30):
You're absolutely right. I think we've all taken cash for granted for a very long time. There is no reliable data on how much cash costs. So we estimated it now with the review and we estimated that cash costs the UK economy about 5 billion pounds a year to run. And if I break that down, well first of all you've got to print the notes, but that's not the main issue. And the coins too. The UK has around 30 cash sorting centers. Every company, every country has these, some for notes and some for coins. And what they do is constantly act as the repository to test that the coins and the notes are valid, they are, they are legal, they're not counterfeit. And actually, in the life of the note, they will be constantly coming back to these sorting centers. So what will happen is sorting centers will have requests from ATM across the country - in the UK there's about 6,000 of them - and vans will run up and down the country every day taking cash from the sorting centers into the ATMs and filling them, making sure that they're done safely. There's obviously security costs on that. The ATMs themselves cost money and typically the people who operate the ATM will get a fee of around 35 pence each time anyone gets them out, which actually for many ATMs doesn't even cover the cost, given so little cash is now being used and the cost of running this infrastructure is pretty fixed. You then go into spending the cash. So for shops, they have to take cash, they have to count it up. That's real time and real salaries. They then have to transport it to a bank to pay it in. Now we've seen mammoth bank closures in the UK. About a third of our bank branches are closed in the last five years, so often that journey can be quite a long one. The banks then charge to take in that cash and then they put it back in a van and it goes back to the cash sorting centers.
Natalie Ceeney (12:18):
So one of the issues we've been looking at in our review, is actually how can we make that whole system cheaper? Because if we want to keep the cash infrastructure viable in the UK, we've got a cash infrastructure that's been built for a high cash age and it's extremely expensive and ultimately we all pay. And at the moment, we don't pay through accessing cash, but our banks pay the charge and then they put that back on us either through overall bank charges or, and this is what's happening to the UK, by closing services. So the consequence of this cost is that ATMs are becoming unviable up and down the country. We have seen quite significant closures of ATMs; we're seeing about 8% a year of our ATMs close. We see a lot of ATMs switch to charging. This time last year, 7% of our ATMs charged for you to get access cash. Now a quarter do so. All of these things are happening to make our cash infrastructure frankly creak at the seams. And as a result, we have to do something to change the cost base if we're going to keep cash viable.
Alice Merry (13:21):
So, the strain on the system is basically that we're all using less cash, right, so it's becoming less commercially viable. Is that the case?
Natalie Ceeney (13:31):
Absolutely right, so most of the costs of the cash infrastructure in the UK are fixed, but we're using less and less cash. And as a result, if you, if you consider an ATM provider, they've got fixed costs to maintain an ATM, they've got to put it in the wall, they've got to make sure it gets refilled on a regular basis. They've got to deal with any security issues, they've got to keep it maintained, and they only get paid when people make cash withdrawals. And as a result, they're getting paid less. And yet they've got the fixed cost. And equally if you're a cash in transit operator who runs vans up and down the UK, you've got to run the vans. But if you haven't got much cash in them, you'll get paid less. And so the cash infrastructure in the UK, as in most countries, is run by commercial players. And all of those commercial players are seeing their economic models come under the same strain. And we know that many of them are saying, if this goes down much further, they're going to struggle to continue providing services. And so what we're worried about is, possibly, a wholesale collapse of the UK cash structure, but more likely partial collapse. So towns that are left without services, shops that decide it's too expensive to bank cash so they're going to go cashless, and gradually our cash infrastructure is going to start disappearing or become too expensive to use. And the problem is, I go back to where I started, we've got about 8 million people in Britain who would struggle to function in a cashless society. So we really risk leaving millions behind.
Alice Merry (14:59):
This is really a remarkable risk. I think people aren't really very aware of it. And I guess what I'm understanding from this is that even if just a couple of players in this really complex value chain that you've described, if even a couple of players just said, no, this isn't worth it us for us anymore, it's not commercially viable, and they dropped out, our whole cash infrastructure could potentially grind to a halt, at least in some areas of the country.
Natalie Ceeney (15:24):
You're absolutely right. So, we have most of the ATMs in Britain provided by just two players, both of whom are commercial companies who exist to make profits for their shareholders. The cash in transit system is run again by a couple of players, again, who are really struggling to work out how they make profit from the system for their shareholders. So you're absolutely right. It wouldn't take an awful lot, for quite a big collapse in the system.
Alice Merry (15:51):
Wow. And so I guess my, my next question really is what do we do about it? Because I think the kind of common solutions that you might see in the newspapers or something, is, you know, we have to somehow regulate that they can't be closing ATMs in villages, or, I'd even seen in some countries like the US and Denmark, shops aren't allowed to reject cash. Do you think this kind of legistlative approach or this kind of setting new rules, is that the way ahead or do we need to see something else?
Natalie Ceeney (16:20):
I think legislation is definitely part of the answer but it's only part. So we come back to what are we trying to achieve. If we want an inclusive society, I take the view that until digital payments work for everyone, we need to keep cash viable. So if that's the starting point, the question becomes how do we keep cash viable. Now, on the one hand, we need to make sure that the people who provide cash access, have a requirement to keep it viable for everyone. At the moment, there is no legal obligation on the banks to make sure their customers can get cash. In fact we saw in Sweden, which is a bit ahead of us, banks stopping giving customers access to cash and as a result they hit a crisis point a couple of years ago. Okay, so our view is we do need legislation to require banks to give their customers suitable, free access to cash, but that doesn't have to be through ATMs, it could be through cash back. It could be through innovative ways. It could be through lower-cost ways, and that's the other half of the equation. We've got to make sure this is more affordable because ultimately we all pay and we need our banks to be able to make this infrastructure affordable.
Natalie Ceeney (17:26):
Now, I mentioned earlier we have 30 cash sorting centers in the UK. If you would invent it now, there's no way you'd need 30, you'd probably need four or five. So there's a piece of work already being led by bank of England with the banks to say, actually, what kind of wholesale cash infrastructure do the need for this different age. We also need to look at whether we really want to be running vans up and down the country every day with cash, versus looking at local cash recycling. There are environmental reasons why that would be good as well. So you could imagine a system where maybe a shop takes cash, pays it back into an ATM, which then allows access again. Now they're all anti money laundering issues you have to look at there. But the technology for looking at counterfeit notes is now getting better and better and there are ways of dealing with some of these problems. So I think there is a joined up solution that says, on the one hand, banks have to give their customers suitable access to cash and, by the way, allow those small businesses to keep depositing yet. But on the other hand, we need to all work together, through innovation and different thinking, to reduce the cost of this cash infrastructure so that it's just economically viable to keep money.
Speaker 3 (18:40):
One of the really interesting things that caught my eye in the report was the recommendation, and I think it's actually an existing system in some places, that convenience stores offer cash. And maybe some of us will remember when it was quite common in a supermarket to be offered cash back. But I think that the idea was that more small local shops could be offering the opportunity to take out cash from your bank account.
Natalie Ceeney (19:07):
So, cashback is fascinating. As you say, about 10 years ago, we walked into a supermarket and at the end of our shopping, the supermarket would say, Oh, would you like cash back? The problem is the way cash payments got made, the rules got changed. So supermarkets used to do that because it got the cash out of their till, which meant they didn't have the hassle of banking it, and it didn't cost them anything. But the current interchange mean that actually it costs the shop to take digital payments. So if you imagine an interchange fee of say 2% on every transaction for a supermarket to say, "here's 10 pound cash back", they actually have to pay 2% of that in fees, which is why all the supermarkets have stopped offering cash back. So we need to change the rules to enable shops to benefit from giving cash back rather than be penalized for giving cash back.
Natalie Ceeney (20:02):
But there's another problem that we found as well. The legislation by which we give cash back with a purchase and by which we do ATMs, is governed by PSD2. The Payment Services Directive 2 doesn't currently allow cash back without a purchase. So for a convenience store, they could give cash back if we could stop it costing them money. But at the moment they can only do it if you buy something. So we're lobbying government to change those rules and as well as legislation to give banks responsibility to ensure suitable cash access, we want that tidied up to incentivize convenience stores to be able to give cash without a purchase, and have those interchange rules changed so that actually the retailer are paid for that. And that's something that everybody is supportive of. The banks see big advantages to it because it hasn't got the big fixed cost of an ATM network. Convenience store are generally in favour, as long as they don't become the only channel for access for cash, which obviously raises security issues for them. What we need is a change in the rules so that we can make that happen easily.
Alice Merry (21:04):
Really interesting. And it was, it was really interesting for me to hear about that suggestion because as I mentioned to you just before we started recording, I'm based in Peru, in Lima. And in Peru, it's absolutely standard that you can get cash in a local neighborhood shop. And across a lot of emerging economies, where they're not so much dealing with a legacy system that's no longer viable around cash, in many cases they're trying to get good convenient cash and bank access for the first time to communities that haven't had access to banks and easy access to cash in and cash out of a bank account. And so I did think that there could be quite a lot perhaps in the UK that we could learn from countries like Brazil, countries like Kenya, where these kind of neighborhood shop access to cash in and cash out has become quite standard.
Natalie Ceeney (21:56):
You're absolutely right and in fact there are examples we can learn from globally. If I look at issues around cash access in the UK, one of the areas where cash dominates is small value payments. Well if you look at China with AliPay or WeChat pay or Sweden, where they've got Swish, they've created very, very easy apps that are as easy as text messaging for the transfer of low value payments. Now that would help people who at the moment are dependent on cash because it would give them a way of paying small values without buying a physical terminal. And you're absolutely right about convenience stores. So as we did our report, we could see some shifts across the world that would benefit the UK. But unfortunately we do actually need to change our norms to make them happen.
Alice Merry (22:43):
Talking of of changing the rules, the Access to Cash Review recently called on the new UK Chancellor, Rishi Sunak, to include measures to protect access to physical money and to help those who risk being left behind, in the March budget? Could you tell us a bit about what you hope that the Chancellor might be able to do?
Natalie Ceeney (23:03):
So what we've been asking the Chancellor to do is to put a legal obligation on UK banks to provide suitable cash access to customers and allow small businesses to deposit cash. We want that legislation to be framed at a very high level because the world is changing fast and exactly what suitable means will change over time. We also want that legislation to be neutral of channel. So exactly as we've just said, actually ATMs are quite expensive. There'll be some towns and cities which absolutely need ATMs, but there'll be others where actually a pub, or a local convenient shop giving out cash is exactly what that community needs and it's affordable and I think we can, we can innovate. I mean it does seem ludicrous that I can order foreign currency to be delivered to my door securely, and yet I can't do the same with with cash, despite the fact we have an awful lot of vans and delivery services running all over the UK. So I want us to be channel neutral and innovative. So that's the primary legislation we want. At the same time, we want some of the rules about cash-back without purchase tidied up, so that we really can innovate and explore new ways of giving people cash access.
Alice Merry (24:15):
Brilliant. I'm going, for the last question, I'm going to zoom out a bit from what we've been talking about today and listeners of the podcast will know that usually at the end of the episode, we kind of are doing a bit of a crowdsourcing exercise to gather ideas about what a feminist financial system would be like. So Natalie, I'd love to hear your thoughts about what a feminist financial system would look like to you.
New Speaker (24:40):
That's a very big question!
Alice Merry (24:41):
Isn't it?!
Natalie Ceeney (24:44):
If I step right back, I mean, ultimately, a feminist financial system would be inclusive and it would be one that meets needs, whoever you are. And just by looking at it, you know it's currently incredibly unequal. So, certainly in the UK and across most of the world, it's the poorest, who are disproportionately women, who pay most for loans and credit. It's women who have lower pensions, since they earn less over their lifetime. It's women who take lower risks on investments, which actually for pensions isn't a sensible thing to do. It's also women who find it harder to secure funding for investments. In my sector, which I work in, fintech just 2.2% of current investment in fintech goes to female-founded companies, which is terrifying. And we know that if we look at many lending decisions or financial institution decisions, they look at households which often exclude women. So an easy example would be, you know, a household that gets insurance for car, it's in the man's name, the couple separates, and the woman has to start again with her no-claims record. So our system is quite skewed against women as the moment. And I think a lot of that is actually unconscious bias. So one thing I would really love to happen if financial services is pulling out that unconscious bias, not assuming that an average person is an average person. Actually, we're not average people. There are different needs. Women do behave differently from men. Women have different lives to men. So, pulling out unconscious bias, and as we get financial services to design products, explicitly thinking about what that proposition or what that product means for women versus men or people in different circumstances. And, linked with that, really addressing some issues which penalize poorest, whether it's high cost credit, or lack of longterm retirement income, or as we were just talking about, access to cash.
Alice Merry (26:39):
Since I spoke with Natalie last month, the Chancellor in the UK did release the March budget and, as Natalie hoped, it did include measures to help safeguard the UK cash system. It's not clear yet what those measures will be. Some of the measures being proposed include new powers to make sure that banks meet the cash needs of their customers and measures to address the distribution of cash around the country, among others. But I'm sure Natalie and the team at the Access to Cash Review will be pushing to make sure those measures really do help protect the most vulnerable.
Alice Merry (27:14):
For me, this was a really interesting conversation partly because I work a great deal in financial inclusion in many developing countries, and there's a lot of noise in that world about the potential for financial inclusion through digital - the potential to include people who are perhaps geographically too far away from banks or have a lower income and are not considered attractive customers to traditional banks, that there's a great deal of potential to include them in the financial system, give them access to loans, to savings accounts to cheap ways to move their money about through digital finance. And there has been a lot of success stories. You might have heard about some of the famous mobile money cases in Kenya, and so on, where that has really been really quite successful. But, in terms of our most basic transactions, in terms of buying something and selling something and being able to hold on to cash value in our hand, cash is the most inclusive system out there. You don't need to be literate. You don't need to be digitally literate. You don't need to have access to any other company or institution in order to use cash. And I think that the experience that we're having at the moment in countries like the UK, countries like Sweden, show us that we really have to pay attention, that we can't take our cash for granted, and that we really do need to consider it as a vital and inclusive infrastructure that we have to preserve, at least until we're sure that digital finance won't leave the most vulnerable behind. Thank you for listening. Please do share the podcast. Please do leave us a rating and a review, and I look forward to speaking to you next time.