The popularity of contactless payments, online shopping and smartphones is having a significant effect on how we manage our money and pay for things, leading to debit cards overtaking cash as the most frequently used payment method in the UK, according to the latest research from UK Finance.
The latest UK Payment Markets report shows how new technology, payment innovation and changing consumer habits contributed to 13.2 billion card payments at the end of 2017 overtaking cash payments (13.1 billion) for the first time. This beats previous forecasts by one year when debit cards would overtake cash within one year. In comparison, cash payments were down 15 per cent year-on-year.
The popularity of contactless payments among UK consumers is a key driver of debit card growth. In total, across both debit and credit cards, the number of contactless payments increased by 97 per cent during 2017 to 5.6 billion. Almost two thirds (63 per cent) of people in the UK now use contactless payments, and no age group or region falls below 50 per cent usage.
An increasing acceptance of card payments by smaller businesses and people becoming ever-more comfortable and familiar with the speed, ease and security of making low-value payments has also made the use of debit cards more popular. By the end of 2017 there were nearly 119 million contactless cards in circulation and, with customers and businesses increasingly choosing to use contactless cards and card acceptance devices, it is anticipated 36 per cent of all payments across the UK will be contactless in 2027.
As consumers increasingly turn to contactless payments in situations where previously they may have paid using cash, 2017 saw a decrease in cash payments by 15 per cent to 13.1 billion payments. Around 3.4 million consumers almost never used cash at all, instead relying on cards and other payment methods to manage their spending. Yet despite this fall, cash is still the second most frequently used payment method, just behind debit cards, accounting for just over one-third (34 per cent) of all payments in 2017. Around 2.2 million customers mainly used cash for their day-to-day shopping in 2017, although nine out of ten of them had a debit card they could use if they chose, and the majority used other payment methods to pay their regular bills.
With greater diversity in the way in which different people in the UK manage their finances and conduct their day-to-day spending, the number of cash payments in the UK is expected to continue to fall over the next decade. But, it’s anticipated that cash will still retain its place as the second most frequently used payment method in 2027, ensuring that no-one gets left behind.
Stephen Jones, Chief Executive, UK Finance said: “The choice of payment options available in the UK is allowing people to choose to pay the way that best suits them. But we’re far from becoming a cash-free society and despite the UK transforming to an economy where cash is less important than it once was, it will remain a payment method that continues to be valued and preferred by many.
“These trends are likely to shift further over the next decade. Developments such as Open Banking are expected to bring extensive changes to the payments landscape, something that will likely shape how we interact with our money in the coming years.”