“Big Four” Banks in Both UK and Australia Escalate Their War of Attrition Against Cash

British banks are now making it harder for customers to even deposit cash in their own accounts, while three of Australia’s Big Four banks are eliminating cash services altogether from many of their branches.  

First up: the UK. Given the self-inflicted harm NatWest has already sustained in the still-simmering Nigel Farage debanking scandal, the latest revelation from which suggests that more than one million bank accounts have been closed in the past four years, one might expect that the “Big Four” lender would be doing all it can to win back the hearts and minds of its customers. But no. Instead, NatWest has decided to make life even harder for them by imposing new conditions “giving [the bank] the right to set limits on inbound and outbound payments”. As the Daily Telegraph reports, the bank has awarded itself “sweeping new powers” to limit cash deposits and withdrawals, fuelling fears that banks are steering customers towards a “cashless society”:

In a leaflet [Natwest] said [the new conditions] could include imposing “daily and annual” cash withdrawal and deposit limits and “limiting the amount of cash” paid in or taken out.

The move has raised fears that increasing curbs on the use of paper money across the system could have negative consequences for consumers.

It comes amid a wider scandal over “de-banking” after Nigel Farage revealed that Coutts – which is owned by NatWest Group – had closed his account because it disagreed with his political views.

NatWest said it was making the change to “protect our customers from the risk of fraud” and that it was nothing to do with limiting customers’ access to cash.

Of course not, what a thought!

Worth recalling is the fact that the UK government is still NatWest’s largest shareholder with a whopping 39% stake — a lingering hangover from the State’s £45 billion bailout of the lender, then known as Royal Bank of Scotland, in 2008. As such, the government, which claims to be working on legislation to “protect” access to cash while allowing retailers of all sizes to reject cash payments, is, at the very least, tacitly complicit in NatWest’s latest hostile act against its own customers. It could also be argued that UK taxpayers are, to a certain extent, funding their own financial repression.

Leading the Charge Toward a Cashless Future

The UK is already one of Europe’s most cashless economies, with physical money accounting for just 17% of retail payments, compared to 56% in 2010. As in many countries, the move away from cash accelerated sharply during the first two years of the pandemic, largely due to the explosion in online purchases during the lockdowns and overblown fears about the health risks of using cash — fears first raised by the World Health Organization and then seized upon and massively magnified by the media, banks, payment processors, fintech firms and other cash assassins.

But as I reported this time last year in “Is Cold, Hard Cash Making a Comeback?“, the trend may have already reached its apogee. Survey after survey has shown that the overwhelming majority of UK citizens do not want to live in a fully cashless economy. In fact, only 3% of the population have gone fully cashless, according to a recent YouGov poll commissioned by the ATM network provider LINK. Only 12% want to live in a cashless society while 69% oppose it. In a similar survey by BusinessComaparison, 74% of respondents reported using cash over the previous month.

The volume of notes in circulation has actually increased by around £11 billion since 2020, to the current total of just over £81 billion, though this is apparently more due to people “hoarding” cash (as the central banks call it) during the early months of the virus crisis than actually spending it. That said, cash remains the preferred choice of payment for millions of people and is the only choice for an estimated 6% of the population, with this figure increasing to 9% for those in vulnerable circumstances, according to UK Finance.

In other words, the pandemic may have accelerated the shift from cash to digital, but cash is still hanging on in there. So, the cash assassins are doubling down. And leading the charge, as always, are the country’s biggest banks.

They have motives aplenty for wanting to kill off cash. For a start, cash is expensive to manage, store and transport. Banks would much prefer their customers to use their digital payments and digital banking infrastructure, which are cheaper to run, require far less labour, generate fees and interest and have the added bonus of generating reams of data about their customers’ earning, spending and saving habits. Also, people tend to spend a lot more with digital payment methods, as Brett Scott, a journalist, financial analyst and cash advocate notes in his book Cloud Money:

“[O]ne of the big reasons why the cashless society is promoted is that people spend 25-40% more with digital payments — this is good for big business, but not good for ordinary humans.”

The Big Nudge

In the UK, the banks have already closed some 5,000 bank branches over the past eight years — at a rate of around 54 per month — and 15,000 cashpoints, or ATMs, over the past five, with hundreds more scheduled to close this year. This has created a self-reinforcing feedback loop, noted Scott in a 2018 article for the Guardian:

There is a feedback loop going on here. In closing down their branches, or withdrawing their cash machines, they make it harder for me to use those services. I am much more likely to “choose” a digital option if the banks deliberately make it harder for me to choose a non-digital option.

In behavioural economics this is referred to as “nudging”. If a powerful institution wants to make people choose a certain thing, the best strategy is to make it difficult to choose the alternative…

Financial institutions… are trying to nudge us towards a cashless society and digital banking. The true motive is corporate profit. Payments companies such as Visa and Mastercard want to increase the volume of digital payments services they sell, while banks want to cut costs. The nudge requires two parts. First, they must increase the inconvenience of cash, ATMs and branches. Second, they must vigorously promote the alternative. They seek to make people “learn” that they want digital, and then “choose” it.

It is also true that cash’s days may well be numbered in many countries anyway as a result of technological advances and generational preferences. But there is a whole world of difference between a natural death and euthanasia!

Now, the large banks in the UK are making it increasingly difficult for people to not only deposit cash in their branches but also use the intermediary services offered by the Post Office, which, ironically, were established to fill some of the yawning gaps in basic financial services left behind by the banks’ mass culling of branches and ATMs.

The Post Office has partnerships with over 30 banks, building societies, and credit unions, so 99% of UK bank customers can access their accounts at their PO branch. After the lockdowns of 2020, the Post Office became the only place in many communities where people could get their hands on actual banknotes, as Euro News reported in July 2021:

Retailers post-pandemic have been prioritising debit and credit cards but in the UK, the Post Office is trying to help save cash.

With many bank branches closing and free-to-use ATMs being withdrawn, accessing cash has become more difficult.

The Post Office says in communities across Britain, it’s one of the few places where people can get their hands on the actual banknotes.

“Increasingly the post office is the last counter in town,” said Martin Kearsley, the Cash and Banking Director for the Post Office.

The campaign was a resounding success. In July 2022, £3.31 billion in cash was deposited and withdrawn across the Post Office’s 11,500 branches — a record high for any month dating back over three centuries of operations. The trend remained strong through the rest of 2022, with a new record haul in September of £3.35 billion. But then the banks began setting limits on cash deposits, not only for their own branches but also for post office branches as well, ostensibly as part of tightening money laundering controls.

The result was a slight fall in deposits at Post Office branches in December, normally a bumper month. Kearsley blasted the banks for trying to force small businesses to become cashless, further restricting the ability of households to use cash on the high street:

Small businesses are the backbone of the British economy. Over-zealous limits imposed on the amount they are able to deposit is resulting in more businesses no longer being able to accept cash, impacting both their ability to trade as they would like, as well as their customers who need or choose to budget using cash. They must remain able to deposit their takings locally, securely and conveniently without having to suspend or disrupt trading to make an ever longer journey to a distant bank branch to deposit their takings.

In April this year, the Financial Conduct Authority entered the fray by setting formal cash deposit limits for post offices, including a limit of £1,000 per 24-hour period for personal accounts and £10,000 per 12-month period. For business accounts, cash deposit limits were reduced, subject to customer arrangements, to below the existing limit of £20,000 per transaction.

A Major Milestone For Aussie Banks

In Australia, meanwhile, the “Big Four” banks — Commonwealth Bank of Australia, Westpac Banking Corporation, ANZ Group Holdings Ltd, and National Australia Bank Ltd — were recently able to claim a major victory in their war of attrition against physical money. More than a billion dollars worth of physical cash disappeared from circulation in the last financial year, marking the first time the number of notes in circulation officially declined since dollars and cents were introduced in 1966. According to Channel Nine News, this is the “strongest sign yet” that Australia is truly on its way to becoming a cashless society.

Cash use has diminished significantly down under, especially during the pandemic, according to the Reserve Bank of Australia’s 2022 Consumer Payments Survey. This is in large part due to changes in consumer behaviour, but is also a result of the increased difficulty of accessing and using cash:

The share of in-person transactions made with cash halved, from 32 per cent to 16 per cent, over the three years to 2022. The decline in cash use was particularly pronounced for smaller payments; cash is now used less than electronic methods for all transaction sizes… The decline in cash use between 2019 and 2022 partly reflects the impact of the COVID-19 pandemic on people’s payment behaviour, which accelerated the decline that had been underway since at least the first CPS (Consumer Payments Survey) in 2007.

To help accelerate the public’s move away from cash, three of the Big Four — ANZ, Commonwealth Bank and the National Australia Bank — have announced plans to cease handling physical currency altogether in select city branches, directing customers to withdraw and deposit cash at ATMs instead. The Commonwealth Bank and National Australia Bank are now referring to their cashless branches as “expert centers” and “specialist centers” respectively. ANZ unofficially calls their cashless outlets “digital branches.”

Needless to say, the move has not gone down well with some customer segments. As Channel 9 News reported, some Australians reacted to the new by ditching their debit cards for a “Cash Only” week between July 3 and July 10 in protest against an increasingly cashless society. Those protesting paid only with coins or notes, “with some even vowing to forfeit their purchases if denied the opportunity to use cash.”

Beyond social media engagement numbers, it is hard to gauge how much of an impact the protest movement has had. Perhaps readers down under can shed some clarity.

In Australia, the Commonwealth Constitution and the Bills of Exchange Act uphold the use of cash as legal tender. Yet despite petitions to parliament to enshrine its use, it is not forcibly legal (h/t Savita). Ominously, a recent paper on the “cash-use cycle” by the Reserve Bank of Australia claims that “half of merchants that accepted cash in April 2022 planned on actively discouraging cash payments or displaying signage to that effect at some point in the future.” Predictably, most of these merchants “were more likely to have higher turnover and be located in metropolitan areas.”

By contrast, in my country of residence, Spain, the government passed a law last year essentially obligating all bricks-and-mortar retail establishments to accept cash payments. Failure to do so can result in fines of up to €10,000. The law was largely the result of the tireless campaigning of Plataforma Denaria, a grass-roots movement set up by Javier Rupérez, an 82-year old former diplomat and politician, to defend the rights of consumers to pay for any good or service in cash.

It also helps that cash is still King in Spain, used on a daily basis by roughly 60% of citizens, according to the Bank of Spain’s latest annual payments survey. There has even been a recovery of sorts in cash usage since 2020. This is despite the best efforts of Spanish banks to limit access to cash by, among other things, culling branches and ATMs and, as in Australia, limiting or even eliminating cash services in many of their still-standing branches. It is also despite the Spanish government’s introduction of a €1,000 cash payment limit in 2021, as part of a new anti-fraud law.

Digital Dystopia Down Under

Back in Australia, a new “voluntary” digital ID could be ready for national roll out as early as next year. From Channel 9 News:

“A digital ID would usually be an application in a phone or computer that stores a mathematical representation of an individual that uniquely identifies them, without the possibility of reverse engineering their personal information, such as an address or date of birth,” Dr Philip Bos, a security expert and founder of privacy protection software company BlueKee, told 9news.com.au.

“One way the scheme would work is via an app that is opened using the person’s biometrics and sending an ever-changing, long mathematical code that identifies one to the other – the user and the business/government agency.”

One thing the Channel 9 article doesn’t mention is that a comprehensive digital identity system is a basic pre-requisite for the central bank digital currencies (CBDCs) being explored by more than 100 countries around the world. Australia is closer to launching a CBDC than any of its “Five Eye” peers. In fact, barring Sweden, it is the only country in the NATO-plus-friends collective to have reached the pilot stage of the development process, according to the Atlantic Council’s CBDC Tracker.

Readers may recall (from my September 9, 2022 article, Big Banks in Australia and Canada Are Leading the Way on Digital Identity) that Australia’s Big Four are also heavily involved in developing ConnectID®, a national infrastructure for digital identity verification, which (according to ConnectID®’s official website) “makes it easier to verify who you are, using organisations you already trust. You can expect to see ConnectID rolling out gradually across institutions and businesses in Australia during 2023.”

As an article in Australia Financial Review reported at the time (emphasis and comment in parenthesis my own), the banks apparently “see ‘identity-as-a-service’ as an incremental revenue stream that will allow them to charge retailers, utilities or fintechs for validating customer details, given banks are highly trusted [no, seriously, that is what the banks say] in the digital economy”. Which, I suppose, is just one more reason for wanting to kill off cash.