Cash Cycle in a Digital World

It is unusual for a commercial bank to describe its cash strategy, and so it was particularly good to hear NatWest, one of the UK’s big four high street banks, do this at the Future of Cash conference in Istanbul.

NatWest accounts for one in four payment transactions in the UK serving 19 million customers. Cash transactions make up 14% of all transactions and NatWest cash centres process 30% of all cash. It operates 5,500 ATMs. NatWest also owns the Royal Bank of Scotland and Ulster Bank, both of which issue their own banknotes in Scotland and Northern Ireland respectively.

The presentation referred to a changing market and a changing political focus on cash. The Access to Cash review 2019 has, in part, led to the Financial Services and Markets Act 2023 which has given regulators powers to protect cash access.

Support to customers

Customer research has found that cash is not replaced by digital alternatives. 18-24 year olds are the age group most likely to use cash all the time. Their cash usage has increased post-COVID and 84% use cash at least occasionally. It helps with budgeting, particularly amongst vulnerable customers. It protects people from digital scams, providing data protection and privacy. It is still used for physical giving, particularly to children.

These findings are leading NatWest to explore needs-driven digital replication, digital prompts and insights, a refreshed cash narrative, financial wellbeing aids and security and fraud support.

Simplifying payments

Many customers choose to use cash, but also digital (94%). Most customers, 95%, have and use a debit card and cash.

As a result, NatWest is exploring investing in its self-service estate, novel withdrawal and deposit solutions, journey and product improvements and machine learning usage analysis.

Access to cash

The UK banking industry has established a process for identifying and addressing cash ‘cold spots’ caused by branch and ATM closures.

As a result, 90 shared banking hubs have been recommended. NatWest is working on the evolution of propositions and services, innovating new solution options to meet targeted community needs and working on education and partnerships.

Sustainability

NatWest initiated the UK Cash Environmental Charter and continues to play a central part in this. It is aiming to achieve net zero carbon for its own emissions by 2030 and to eliminate single-use plastics in its note centres by 2030. The target for coins is a 55% reduction by 2030. It achieved 100% renewable energy in 2022.

It is now exploring how it presents customer cash, sustainable cage seals, reducing CO2 through cash in transit and how it manages its coin denominations.

Future vision

NatWest is working on three strands relating to cash.

First, it is developing payment innovations and alternatives to address customer needs and to drive more digital banking. It wants digital payment tools to do what cash does better. At the same time, it is moving physical cash infrastructure into shared spaces and providing customer support through a range of channels.

Second, it is working to increase cash automation and to introduce new deposit solutions that work at a local level.

And third, it is continuing its work on providing access to cash through banking hubs and shared services. It is looking at consolidating and sharing wholesale cash infrastructure and is interested in moving to ATMs provided on a utility basis.