This is one generational trend I wasn’t expecting.
In my reporting on the Global War on Cash, I have consistently cautioned that cash, as a payment method, has some big generational trends stacked against it. For example, in a 2017 piece for WOLF STREET, I wrote that “the banks, fin tech firms, credit card companies, central banks, national and regional governments, and UN agencies that want to pull the plug on physical currency… already have vital technological and generational trends firmly on their side, as a result of which cash’s days as a… payment method may well be numbered.”
But according to a new survey by LINK, which runs the country’s ATM network, younger Britons are more likely to tout the benefits of paying in cash than some older generations. This is all because of what The Telegraph calls “a social media budgeting fad for ‘cash stuffing’, which sees savers put hard currency aside for various outgoings,” and which has helped make coins and notes more popular with Gen Z than millennials:
Some 17pc of 16 to 24-year-olds surveyed said cash was their preferred payment method.
In contrast, just 13pc of those aged 25 to 34-year-olds, who are mostly younger millennials, favoured cash, while only 11pc of older millennials aged 35 to 44 preferred coins and notes.
The unexpected uptick in the popularity of cash among Gen Z comes amid a glut of videos on TikTok advocating the use of physical money as a way of budgeting.
Videos carrying hashtags like #cashstuffing, #cashstuffingUK and #cashenvelopes show young people dividing their money for the month or week into separate envelopes or ring folders for rent, bills and other expenses.
More than 130,000 video carrying the hashtag #cashstuffing have been posted on TikTok.
It remains to be seen whether this trend has staying power, or can grow further. It also bears emphasising that most members of Gen Z use contactless payment methods most of the time. That said, one interesting aspect of the new (but old) practice of cash stuffing is that those who embrace it use cash not only a lot but almost exclusively. Among the conclusions to its report, LINK noted that “Cash is as important, and in some cases more important, for the youngest generation of adults as it is for other demographic groups.”
Reining In Spending
One obvious reason for this is that 16-to-24 year olds, many of whom are students, have a much leaner budget than their millennial counterparts. Since inflation began surging in mid-2021, those budgets have grown even tighter. And cash has a major advantage over cashless forms of payment: its tangible nature makes it easier for people to manage their money and rein in their spending habits, which is particularly important in times of high inflation, rising interest rates and falling real wages.
In contrast, cashless payments, particularly of the contactless variety, are making us spend more than ever before. This was already well known in 2006, when contactless payment systems began to be rolled out. In an article that year, titled “Cash Is the Enemy of the Card Issuers”, the FT reported:
“Card issuers are aggressively trying to increase the size of their market, and the enemy is cash,” says Christophe Uzureau, a banking analyst at research house Gartner.
“They want to replace as many cash transactions as possible with card transactions, so they can earn fees.”
Mr Williams has found that customers spend about 50 per cent more when they use a contactless card than when they pay for their food with cash: “I think it is psychological: because customers are not pulling cash out of their wallet, they spend more.” Arby’s has also made productivity gains with less time being spent on counting money and taking it to the bank, Mr Williams says.
Another benefit to retailers is that cards allow them to capture data about their customers from small transactions.
Fast forward to today, a meta-analysis of 71 previously published papers conducted by an Australian team of researchers concludes that cashless payment methods are changing our spending habits — in ways that are most certainly not in our interest but most certainly are in the interest of retailers, banks and card issuers. From Science Alert:
It seems that tapping a phone or card on a terminal leads to us being less strict with our budget, compared to picking notes or coins out – perhaps because there’s no physical representation of how much is being spent.
“To prevent spending more than planned, we recommend consumers carry cash instead of cards whenever they can, as it acts as a self-control method,” says marketing researcher Lachlan Schomburgk from the University of Adelaide.
“When using cash, people physically count and hand over notes and coins, making the act of spending more salient. If nothing is physically handed over, it’s easy to lose track of how much is spent.”
The difference in spending was “small, but significant” the researchers say. It was greater for “conspicuous consumption” spending, which is buying items that signal status – so luxury clothing and jewelry, for example.
It’s a link that has been spotted before, but never across so many different experiments and interactions.
While the cash stuffing phenomenon is largely being driven by budgetary concerns, the longer it goes on — and it is already over two years old — the greater the likelihood that younger adults might begin discovering other benefits of cash, such as the fact that it is the only form of money that people can use and keep that does not involve a (fee gouging) third party.
It is the most inclusive form of payment, providing payment and savings options for people with limited or no access to digital money. It is also the most reliable form of payment — cash, as they say, does not crash, though ATMs of course can — and as even the ECB admits, it ensures your privacy, something that is in very short supply these days.
A Transatlantic Trend
Cash stuffing is also growing in popularity on the other side of the Atlantic. In February, Newsweek reported that “Gen Z Is embracing cash, despite digital money being the primary way of spending, saving and investing in 21st century life”:
A 2023 study by HarrisPoll on behalf of CreditKarma found that 69 percent of Gen Zers in the U.S. and U.K. were using cash more than they did in 2022. Nearly a quarter, 23 percent, of those in the age bracket are using cash for the majority of their purchases.
The research checks out with the emergence of keeping large amounts of cash at home rather than keeping it in a bank account, current or savings, a trend that can be seen on social media. Using cash instead of a card or paying via online transactions has become increasingly popular on TikTok, with a myriad of accounts advising watchers on how to successfully do what is known as “cash stuffing.”
The budgeting hack involves withdrawing cash from your bank, often in large amounts, such as an entire monthly paycheck, and sorting it into envelopes or another system to keep at home. This way, budgeters can create “buckets” of money for certain expenditures, such as eating out, clothes, saving for a holiday, or anything they want to put their cash toward.
The growing popularity of cash stuffing has already triggered fits of opprobrium from the mainstream press.
In July, CNBC ran an article warning of the potential “downsides” of this budgeting technique, which apparently include risk of burglary or fire, which could, of course, wipe out the funds; the inability to engage in online shopping; forfeiture of all those lovely little points that could be accumulated on credit card rewards programs as well as the interest that could be earned by having the money stored in a savings account. The last point suggests the article’s author doesn’t quite grasp the concept of living pay check to pay check.
In May 2023, the Australian broadcaster ABC had one of its young staff writers try out cash stuffing. The resulting article was such an obvious hit job that it makes for recommended reading. The writer tells us she “spent less money while experimenting with cash stuffing” but that she “hated every minute of it”. She describes how she “felt immensely guilty paying for my $3.80 coffee with a $20 note, holding up a line behind me,” how she loathed having to ask retailers if they accept cash, and that “having to carry my wallet around was a pain — I’m used to going out with only my phone, and tapping it to pay with my digital wallet.”
In her closing remarks, she insists that she had tried to do this experiment as legitimately as possible before admitting that she never bothered to even find out if she could pay her rent in cash: “I don’t even know if paying in cash is an option and if it is, there’s no way I’m making the effort to drive to my real estate agent’s office every fortnight.”
Cash Resumes Downward Trajectory in UK
As readers may recall, cash is (or at least was) making a tentative comeback in the UK. In 2022, cash payments rose for the first time in a decade, according to a report published in September 2023 by UK Finance. This trend was further confirmed by the British Retail Consortium’s annual survey, published in December 2023. The BRC’s payments survey, like UK Finance’s, revealed an increase in cash payments for the first time in ten years, up from 15% (in 2021) to just under 19% of transactions (in 2022).
But as I warned at the time, card payments are still far-and-away the number one payment choice for UK citizens, the use of mobile payment apps is rapidly rising, and it is quite possible that this rebound in cash use will merely be a dead cat bounce (apologies to cat lovers). Unfortunately, that appears to have been the case.
In other words, the long-term trendline continues. The volume of cash payments made in the UK fell by 7% during 2023 to six billion payments (2022: 6.4 billion), roughly where it was at in 2021, according to the UK’s largest bank association, UK Finance. Cash accounted for 12% of all payments made during 2023, down from 14% in 2022. In contrast, usage of contactless card and mobile payments continued to grow, accounting for 38% of all payments made last year, with one-third of Brits now regularly using contactless mobile payment apps.
Close to four out of ten (39%) UK adults lived largely cashless lives during 2023. However, the number of people mainly or solely using cash increased by two-thirds, from 900,000 in 2022 to 1.5 million in 2023 — the first rise in four years. UK Finance said the increase may reflect those people who have reverted to using cash to help manage their finances during the recent inflationary times — many of whom are presumably young and stuffing envelopes with cash.
A UK Finance spokesperson told The Guardian “it would monitor the situation regarding people who mainly used cash to see if this was the start of a trend or merely a ‘statistical blip’.” Given UK Finance describes itself as “the collective voice of the banking industry,” which has done more to discourage the use of cash than any other cohort, it will presumably be hoping it’s the latter, and will probably do whatever it can (e.g., close a few more bank branches, shut down a few more ATMs, place even more restrictions on cash deposits…) to ensure it is.
The UK’s largest supermarket chain, Tesco, is certainly doing its bit in the War on Cash. The supermarket retailer has initiated a new automated cash-free payment system at 40 of its cafes, claiming that it will cut customer wait times and improve their overall experience. This is despite suffering two major payment outages in the past six months, leading it to plaster its stores with improvised signs informing customers that cash was (in some cases, together with chip-and-pin card payments) the only payment option available,
In the UK, there is no law preventing businesses from rejecting cash, and many retailers, particularly in the more salubrious parts of towns and cities, have taken full advantage of this fact, despite the discriminatory effects it has on the millions of people who still depend on cash, including the roughly 1.3 million who are unbanked.
These decisions hit the most vulnerable hardest, cautions a recent Guardian editorial. They include those without educational qualifications, those in poor health and those with physical or learning disabilities. As the FT notes, you also have to factor in the 13 million Brits with very low digital capability, half of whom are over 70.
Sarah Gayton from the National Federation of the Blind gave a blistering assessment of Tesco’s discriminatory move, labelling it as “totally bonkers” and “a totally backwards step”:
Elderly people go to these places for chit-chat, to talk about the weather and about what’s happening in their lives. It might only be a few minutes of the day, but that is a very valuable conversation.
Why should they be confused over croissants and coffee? Yes, businesses need to make a profit to sustain themselves, but transforming your customers into self-service automatons is not the right approach.
How are those with visual impairments supposed to manage?
While the UK government has finally introduced new rules to ensure what it calls “fair” access to cash, it has done nothing to protect people’s right to use cash to pay for products and services. In other words, while a small but growing number of young adults are embracing the cash- stuffing method, those who want to continue using cash in the UK will increasingly have their work cut out as more and more retailers cut physical currency out of the payments equation.