Unseen challenges of Fintech and a digital economy
The United Kingdom recently witnessed the challenges in transitioning to a cashless society. The global cyber outage led to a surge in ATM withdrawals, with an additional ￡6 million being withdrawn in a single day. This incident highlighted the fragility of digital payments and the potential pitfalls of a society overly reliant on them.
The inability to make card or contactless payments is a daily reality for millions of UK adults who predominantly use cash. In fact, there was a surprising 66 percent increase in the number of people primarily using cash for everyday spending last year, marking the first rise in four years.
These statistics, released by UK Finance, coincide with the Financial Conduct Authority’s plans to ensure future access to cash. While this may offer some relief to the most vulnerable and elderly consumers who rely heavily on cash, it does not address their limited access to online banking and other digital services.
Adrian Roberts, Deputy Chief Executive of Link, which operates the UK’s ATM network, said, “We’re not ready to go cashless until digital payments are completely robust, reliable, and accessible to everyone in a way that meets their needs.”
As traditional bank branches disappear, with a loss of 6,000 in the past nine years, the regulator is turning to shared banking hubs to fill the void. By the end of this year, 100 such hubs are expected to be operational, with plans for an additional 250. These hubs ensure access to cash withdrawal and deposit facilities, but new legislation does not mandate access to other banking services, leading to a broader issue of digital exclusion.
According to UK Finance, 60 percent of all adults used mobile banking in 2023, leaving a significant 40 percent who did not. Banking hubs offer face-to-face interaction with various high street lenders, but customers have expressed frustration with the limited services available.
The cost of managing money online is another barrier. The need for a smartphone or tablet capable of running a bank’s app, coupled with “data poverty” where only 5 percent of eligible customers use social tariffs, cheaper mobile and broadband packages available to benefit claimants, exacerbates the issue.
Considering the 13 million Britons with very low digital capability, half of whom are over 70, it becomes clear why the poorest in society are stuck with cash – it’s not necessarily a choice.
Natalie Ceeney, Chair of Cash Access UK, states that banks are voluntarily collaborating to overcome IT issues and provide a commonality of hub services. However, digital exclusion impacts more than just financial management; it affects life in many other ways.
For instance, those excluded from the digital world are less able to save money by comparing prices online for various goods, services, and credit products. They are also excluded from innovations in digital payments. Last year, one in seven people in Britain used ‘buy now, pay later’ schemes to split the cost of a large payment into several interest-free monthly installments. When used responsibly, this can be a lifeline for those on tight budgets who lack the creditworthiness to borrow elsewhere.
Barrier to essential services
Access to public services is another area where digital exclusion has a significant impact. State benefits such as universal credit are “digital by default”, undoubtedly contributing to the estimated ￡7.5 billion that goes unclaimed each year. Phone helplines are often understaffed, and taxpayers who needed to phone spent the equivalent of 800 years on hold in the 2022-23 tax year.
The recent cyber outage wreaked havoc on the UK’s healthcare system. Most GP surgeries have prioritized digital appointment booking systems over phone lines, offering patients a convenient way to obtain test results and repeat prescriptions. Yet again, the digitally excluded are left with an inferior system.
The recent CrowdStrike debacle may be over, but for millions of UK adults, the digital outage continues.
