Here’s why payment choice works for everyone except the banks amidst check-out free stores push

Amazon launched its Amazon Go concept, with a fanfare of trumpets, in 2016.

These stores were supposed to offer benefits for both customers and the all conquering parent company.

Customers could shop for the items they wanted, walking past scanners which registered their purchases without any kind of checkout or scanning of items required – the ultimate in convenience shopping for the public, whilst delivering much lower staffing costs for Amazon.

And, of course, the stores were “cashless”.

In March 2023, with no fanfare of trumpets, Amazon announced it was closing eight of its 29 Amazon Go locations in the United States, along with shelving plans for expansion in markets such as the UK.

Currently, Jeff Bezos has more chance of landing on Mars before Elon Musk than Amazon Go has of opening the 3,000 stores apparently originally envisaged.

There are a variety of reasons why Amazon Go has not been a planet engulfing success – and one was the restriction imposed on how those using the stores could pay.

In 2019, Amazon was forced to announce that the new Amazon Go in Manhattan would be the first to accept cash. The company had no choice. New York had passed a law compelling all retail stores to offer customers the option to pay using their cash.

With many cities and states following New York’s example of banning “cashless” – and a Federal Payment Choice Act doing the rounds in Washington – there clearly isn’t much of a future for Amazon Go or, indeed, any other retailer looking to restrict payment choice.

Bezos should really have done a bit more research on public payment preferences before launching a “cashless” retail chain - or at the very least asked himself a fundamental question: is retail innovation which limits choice ever a good idea?

Here in the UK, a recent survey (June 2023) conducted by YouGov on behalf of the Payment Choice Alliance revealed that only 3% of the UK adults never use cash; only 12% of the British public in any way support a “cashless” society; and 71% of adults - 40 million people – want a Payment Choice Act passed, banning retailers like Amazon Go from imposing “cashless”.

A Payment Choice Act would give the British public the right to use their notes and coins, when and where they choose.

The views of the UK public are mirrored in many other countries in Europe and further afield. Which explains why a number of individual countries have already introduced payment choice legislation and the European Union has recently announced plans to bring in rules compelling “essential” retailers to accept cash.

It is not just the public who will not accept “cashless”; many retailers and other businesses fear that without cash being an available option, the fees imposed by card and digital payment schemes would simply go through the roof, along with the incidence of expensive chargebacks.

They are also well aware that cash is the only method that always works; every retailer has experienced card and digital downtime – cash never goes down.

As I was writing this article, on 26th June, Starbucks in the US was forced to admit its card acceptance systems were down. It was either your app or cash, if you wanted to both smell and drink the coffee.

Starbucks had already announced that it had no intention of making its corporate stores “cashless”. The good customer service and business sense of that approach was underlined by the events of 26th June.

So, let’s look at who is pushing the “cashless” agenda, if not the majority of the public or retailers?

The Mastercard “War on Cash”, announced in 2010, continues, but the real problem in the UK is the antics of high street banks, at least some of which apparently decided a long time ago that killing off cash was their preferred route to even higher profits.

Actually, it is hardly appropriate to call the UK’s Big 5 – Barclays, HSBC, Lloyds, NatWest and Santander – high street banks now. They only have around 3,000 branches between them in 2023, down from 6,000 plus five years ago – and they are reportedly aiming to reduce the total to around 1,500 by 2026.

Put another way, by 2026 it is unlikely that any town with fewer than 35,000 residents will have a bank branch.

Even when a bank branch can be found, businesses in many cases face arbitrarily expensive cash deposit charges. Some banks are seemingly determined to make the cost of cash artificially high, as part of their push towards making the UK a “cashless” society.

In any event, the absence of bank branches gives businesses a headache both in relation to getting cash for their floats and depositing their cash takings.

Post Offices – and there are still around 11,500 of them in the UK – thankfully offer one solution for cash withdrawals and deposits, but more cash friendly infrastructure is required to support both businesses and the public.

Bank hubs – facilities jointly staffed by all the significant UK banks – have been suggested as a solution, but their deployment has been painfully slow, even by Amazon Go standards.

What is required to ensure cash continues to work for both businesses and the public is cooperative action between major retail groups – including Tesco and Sainsbury; cash management organisations, such as Brinks, G4S and Loomis; the Post Office; and non-bank ATM operators.

Working together, these parties can ensure that convenient 24-hour cash withdrawal and deposit facilities are available in every significant community around the UK.

As for the former high street banks, they will have to pay fair prices for the cash services their customers continue to want to use, prices regularly set under the auspices of an entirely independent cash regulator. The Financial Conduct Authority would support the regulator as necessary to ensure banks meet their newly established obligations.

An organisation called the UK Cash Supply Alliance has been set up to promote the structural changes needed to guarantee both the public and businesses get the cash services they want and deserve.

Meantime, the UK Payment Choice Alliance is working to help ensure the UK gets a Payment Choice Act, either under this government or the next.

Prime Minister Rishi Sunak should be aware that the YouGov research revealed Conservative voters are even stronger supporters of payment choice than those favouring other parties. Introducing a Payment Choice Act, therefore, surely makes sense for someone hoping to govern beyond 2025.

About the author: Ron Delnevo is Chair of the UK Payment Choice Alliance.