Cash takes another hit: U.K. travelers want to avoid it
Coronavirus has made traveling a dicey proposition to begin with, but when U.K. consumers do venture beyond their homes during the pandemic, far fewer plan on using cash for payments.
More than half of U.K. consumers admit their concerns about the global pandemic would make it likely they would choose contactless payment methods over cash when traveling abroad. Prior to the pandemic, the majority of travelers, at 65%, said they took at least some cash on their trips.
Of those who didn't use a debit card during their last trip, 68% said they would in the future, while almost 97% of those who had used one in the past indicated they were planning to do so again, according to research from Consumer Intelligence.
The London-based researcher and consultancy firm surveyed more than 1,400 consumers across all U.K. demographics online two months ago to compile its international spending report.
Use of cash has been on a steady decline for the past decade for various reasons, though it remains resilient in many markets and demographic groups. But its non-use for travel could be a significant blow to the payment method, the report reasoned.
Even if the ever-changing details about coronavirus began to lean away from the dangers of transmitting the disease through handling of paper bills, it is not likely consumers would be quick to give up their fears about cash, said Jade Edwards, head of banking from Consumer Intelligence.
"I think the damage has been done regarding sowing the seed that cash is liable to transmit the virus," Edwards said. "The World Health Organization tried to backtrack from their comments on it, but the fact that they did advocate contactless more during COVID-19 set that view in people's minds."
The fact that many retail shops across Europe and in other countries are discouraging the use of cash at this time "will not be helping to change that view," he added.
However, it is not likely to totally derail cash use in the future, partly because many retailers still dislike paying fees for card acceptance, and some consumers have security concerns regarding cards when traveling. In some cases, travelers desire to leave all bank cards at home when traveling, the report noted.
"In terms of a general outlook, I would expect cash usage to diminish in the coming years, although perhaps not to as great an extent as some commentators expect," said Louis Bridger, general manager of International Currency Exchange in the U.K. and a contributor to the report. "I would expect prepaid card usage to remain static, and debit/credit spend to increase."
Use of cash for U.K. citizens when traveling has some complexities that other payment scenarios do not when it comes to diminishing its use over another payment option, said Zil Bareisis, a London-based senior analyst for research firm Celent.
"First, not every country is as cards-friendly as the U.K. or the U.S." Bareisis said. "Even in Europe, for example, Germany has remained heavily cash-oriented, so people like to have some cash as a safety net in case cards are not accepted."
In addition, with the travel industry decimated, the companies that were hit the hardest were those that relied heavily on foreign currency transactions and travel spend, such as prepaid travel card providers, Bareisis added.
Travelex closed its U.K. offices as the pandemic took hold, essentially ending its foreign-currency services for customers as widespread traveling came to a halt.
"However, I do agree that the pandemic will accelerate the direction away from cash and towards 'contact-free' payments, the question is just how quickly," Bareisis said.
The one-time alternative of travelers' checks has also lost favor, as only four percent of those in the Consumer Intelligence survey said they used them. "Travelers' checks would not be handled as much, but they do need to be 'cashed' in at some point, so you're still back to handling cash," CI's Edwards said.
Travel money companies should respond to consumers' international spending behaviors when fears wane and restrictions to certain regions are lifted, the report noted.
The research found that three-quarters of spend at a travel destination was on cards even before COVID-19 became a pandemic, Edwards noted.
"We expected to see cash declining and card use rising, but looking at it in that way (of three-quarters of spend on cards) was a surprisingly stark picture for cash, even pre COVID-19," he added.