Last week we reported that Tesco had opened its first cashless store, situated in High Holborn, London. 

Shoppers are able to use the likes of contactless cards, Tesco Pay+ and Apple Pay at self-service tills. Staff will be on hand to help. This builds on a cashless store trial at a staff-only branch in Welwyn Garden City, Hertfordshire.

Retail analyst Bryan Roberts went to see what all the fuss was about. He reports that the store has been well received by the majority of customers.

“Shopper throughput at peak times has been reduced and only about five shoppers a day find the cashless aspect to be a dealbreaker,” he says in a LinkedIn post. “Won’t suit every location in London (especially not in tourist areas) but wouldn’t be surprised to see more of these in the future.”

Are cash payments on the way out in the UK?

In 2008, 60% of UK payments were made in cash. By 2018 this had fallen to 28% and has been predicted to drop to 9% by 2028. 

We could soon reach a tipping point where diminishing economies of scale make the cost of cash-handling and distribution unviable, according to Bank of England Deputy Governor Jon Cunliffe.

In a speech given at the London School of Economics, he stressed that the Bank of England is committed to continuing the production of cash for as long as people want to use it. “We recently launched our new polymer £20, depicting JMW Turner and containing the latest cutting-edge security features to ensure its safety and reliability,” he said.

But the availability and acceptability of notes and coins requires more than its physical production. Also of importance is distribution by the private sector – banks and ATM providers. “The declining use of cash means loss of economies of scale. That changes the economics of such distribution.”

Acceptability requires not just that banks distribute and ‘bank’ cash. It also requires that merchants accept it. That depends on the all-in cost and convenience of using cash versus electronic payments. “We are, I think, just starting to see examples in the UK where cash is not accepted and only electronic payment can be used. It is not clear how far and how fast that trend will go,” Cunliffe said.

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