Cash's Value in a Crisis: Consumers' Control

An issue that should not be taken lightly with regard to rising living expenses

There's no doubt that things are hard right now. Consumers are feeling the pinch as prices go up for everything from gas and electricity to baked beans and toothpaste.

In November 2022, the consumer price index (CPI) inflation rate was 10.7%, just a little bit lower than the record high of 11.1% in October. In real terms, households are now poorer because of this and other things, like rising interest rates, which are at a 14-year high of 3.5% and are affecting all types of credit, such as loans, credit cards, and mortgages.

Forecasters don't think things will get better any time soon. This means that money is tight for a lot of people.

People are turning to cash to get by.

In order to spend less, people are turning to a tried-and-true budgeting tool: cash.

Recent research shows that cash is becoming more important as consumers try to get their finances under control in the face of growing economic pressures.

For example, a report from Money.co.uk says that 42% of consumers in the UK use cash to keep track of how much they spend. A NoteMachine survey found that 37% of people said they were more likely to use cash as the cost of living crisis got worse.

It's not hard to figure out why.

In times of trouble, people turn to cash because they feel like it gives them more control over what they spend. Even people who have a lot of credit don't always like to use it as a payment method because they know it's easy to spend too much and get into debt. It's too easy to just tap to pay for things without keeping close enough track of how much you're spending.

In fact, 65% of the people surveyed by Money.co.uk said they spend more when they use a card or a contactless payment device instead of cash. The UK Post Office looked into the record 20% rise in cash deposits between 2021 and 2022 and found that most people did it to help them stick to their budgets. These results are in line with what they found. In the UK, 39.2% of people who answered a survey about ATM use said they use cash to better keep track of their spending.

Paysafe's 2022 Lost in Transaction: Consumer Payment Trends research adds to the research that has already been done on the topic. In our survey, 26% of the people who said they had changed how they paid for things because of the rising cost of living are now using eCash more.

Even if you don't think about the role of cash in our current cost-of-living crisis, it's important to keep and also increase access to cash.

Digitizing cash and making everyone a part of it

Which? a consumer group, recently said that people should still be able to use cash if they want to. They cited the fact that banks are closing and businesses are becoming less cash-based, which could make many people feel left out if nothing is done.

In a report about how important it is to protect access to cash, the UK government says that about 5.4 million adults in the country depend on cash very or very much for their daily lives. So, it is planning to pass a law that gives the Financial Conduct Authority the power to make rules that make sure cash is always available. There are rules about how far people can travel to deposit and withdraw cash.

In the EU, too, the European Central Bank has promised to make sure people can still get cash, and the European Commission has issued a recommendation that EU merchants and entities that provide essential services must accept cash unless they have a good reason not to. And in the United States, some local, regional, and state governments have made it illegal for businesses to turn down cash payments. The Payment Choice Act, a bipartisan bill that would make it illegal to refuse cash payments anywhere in the US, is currently in Congress.

Everyone agrees that keeping access to cash is important for a fair and strong society, so these initiatives are definitely a step in the right direction. That said, there's no stopping digitalization. So, for cash to be truly available to everyone in the future, it should be as easy to pay online as it is in person. And this is where businesspeople come in. They also have a very important role to play in making sure that this is reflected in the digital retail landscape by making it possible to pay with cash online. Both are for people who can only buy things with cash because they don't have credit or a bank account. as well as the growing number of people who want to be able to spend cash online, whether it's for safety, because they prefer it, or because, as we've seen, it helps them keep track of how much they're spending.

In our Lost in Transaction consumer survey, 47% of people said they'd rather pay for online purchases in cash if it were easy, and 44% said they'd buy more online if they could pay in cash.

People want to use cash, but they don't always have the chance to do so.

Since people's desire for cash is steadily growing, online stores that add eCash to their checkout can offer a more inclusive service, grow their customer base, and better meet the needs of a growing number of customers.

Paysafe's survey of small and medium-sized businesses (SMBs) in 2022 shows that merchants are becoming more aware of both the need for and the opportunity in cash. In 2022, 42% of online SMBs had eCash options at their online checkout, which is more than the 29% who did in 2021.

Overall, it's clear that merchants can give a lot more people access to their goods and services by offering different ways to pay and making those ways more appealing and easy to use.

Taking advantage of eCash

In the end, merchants need to change quickly to make sure that their checkouts have the payment options that people want today. If they don't, they might miss out on new customers or even lose the ones they already have.

Adding cash to digital payments is important not only because it helps people budget better and keep track of their money as the prices of goods rise. It also gives people who worry about fraud and don't want to share their financial information online a way to pay that they can trust. It's a way to support people's right to choose the payment method that works best for them. And it makes sure that everyone can still take part in the online economy, no matter what their banking or credit situation is.

In the end, it's important for all consumers and for society as a whole to support payment needs and preferences now and in the future.

When it comes to giving consumers more choice and power, merchants have a significant role to play and a significant opportunity to capitalise on.