Cash giving still adds up
In the Spring Statement 2018, the Chancellor announced that HM Treasury would be launching a call for evidence on ‘cash and digital payments in the new economy’. Its publication caused a bit of a kerfuffle in the media around the potential removal of 1p and 2p coins from circulation, and the impact this could have on charity donations.
But, despite the document not actually making any specific policy proposals and Downing Street later confirming that there were no plans to scrap coppers, the move from government (and subsequent press interest) raised some interesting questions.
Digital payments are on the rise – use of cash has fallen from 62% of all payments by volume in 2006, to 40% in 2016, and is predicted to fall to 21% by 2026. That said, cash has not become obsolete – it’s still a really important part of people’s lives, with 2.7 million people across the UK being entirely reliant on cash. So, we welcomed the opportunity to contribute to this exercise, and asked our members to tell us about how their donors' habits have changed, how a reduction in cash and an increase in digital payments might impact on their charity’s donations, and the opportunities and challenges this might present.
What our members say:
Looking at the feedback from IoF members, the direction of travel is clear – charities are already seeing a decrease in the percentage of donations given in cash, they expect the decrease to continue, and the majority think that they will be using contactless payments in the near future. We found that:
- 70% of respondents have seen a decrease over the last three years in the percentage of overall donations given in cash (19% say significant decrease, 50% say a slight decrease)
- 86% of respondents expect a decrease in the number of future cash donations over the next five years
- 74% of respondents haven’t yet tried contactless payment systems to take donations, but 72% expect to use contactless payment systems in the future
However, there are a number of nuances that need to be taken into account. While charities of all sizes think that the number of cash donations they receive will decrease in the next five years, fewer small charities (with up to £1m total income) are predicting a decrease (75%) compared with 89% of medium organisations (total income £1m–£10m) and 97% of larger charities (annual income over £10m). Charities report quite noticeable differences in donation habits when looking at age of donors – 75% of charities say that over the last three years they’ve noticed that 16–24 year olds are less likely to give cash, compared to 29% of those aged 45–64 and 10% of people aged 65+.
Generally, charities are viewing the future landscape of payments positively, with 70% identifying changes as an opportunity and only 16% viewing them as a threat.
Our response (in a nutshell)
We’ve put together a response, informed by the insight from our members. We’ve emphasised throughout that, with over 160,000 registered charities, there will always be a wide variety and range of experiences and priorities across the charity sector. Some charities are early adopters of new technology and have been integrating and embedding new digital and contactless payments as part of their fundraising activity. Others are more traditional (or have less ability to take on newer changes) and rely on cash collections and donations. The system needs to be broad and flexible enough to work for both, and where future change is likely, it needs to be managed so that there is no cliff-edge for charities or donations through hard-edged changes or interventions.
We believe that the government can play a constructive role in helping support successful future fundraising and giving so that we can maximise the number of donations given to good causes. To do so, we think there are some key principles to build in to future government policy in this area:
- Charities cite the cost of contactless payment technology as being a barrier. If government takes forward policies which are likely to decrease cash, and promote contactless giving, we would like to see consideration given as to how the cost can be reduced for charities (particularly smaller organisations) to adopt contactless payment systems.
- It is clear that there is still a role for cash donations, as well as cheques. Different forms of fundraising will prompt different types of giving, and it is clear that different people donate to charities in different ways. We appreciate that the government has recognised that there is an ongoing role for cash, and we strongly echo this in relation to charitable giving.
- However, while there is a role for cash, we recognise that this role is changing, and likely to continue to decrease in the future. As people change their behaviour, charities will adapt and change too – we do not believe that a reduction in the amount of cash in circulation will lead to people being less likely to give to charity, but they will be giving in new and different ways. This requires a longer and managed transition and so government policy should set out a road map and manage any transition, rather than impose hard or cliff-edge type policies which could cause concern and difficulties for charities.
It is right for government to review how technological innovations and the expectations and needs of people are changing how and when we use cash and what the likely continued growth of digital transactions will mean. You can read our full response to the call for evidence here, highlighting the needs, priorities, challenges, and opportunities for charities in this changing environment and the importance of the right system for cash and digital payments to best support charitable giving.
Stephanie Siddall, Policy Manager at the Institute of Fundraising