Britons are increasingly keen to pay by debit card and are paying less in cash, but there is growing concern about protecting cash payments. Mobile payments, meanwhile, are a relatively small percentage, but growing fast.
The popularity of contactless cards has helped boost debit card usage
According to a report released this month by the UK Financial, debit card payments in the UK have become the top choice for consumers since 2017, accounting for nearly 40 per cent of transactions, with the popularity of contactless cards driving the growth in debit card usage. Seven out of ten British adults use contactless payments and more than three in five people over 65 use them.
The boom in contactless payments has been a key factor in the growth of debit card usage. Contactless payments using debit and credit CARDS totaled 5.6 billion in 2017.
“Using contactless credit cards is a mainstream payment option that people have long used to.” said Christopher Bendtsen, senior forecasting analyst at eMarketer.
As a payment tool, as well as a subway and bus card, a flash payment card in greater London can meet almost all the needs of living, clothing and transportation.
Cash usage is decreasing, but cash remains a ‘necessity’
Cash, the second most common payment method in British society, has seen its trading volume fall from 60% in 2008 to 30% in 2018 and is expected to fall to 10% by 2028. One in ten British adults has chosen to live cashless, using cash once a month or less.
Cash is still a “necessity” for many people, but it is no longer dominated. Small business owners, the economically disadvantaged, the disabled and those in rural areas are the most likely to rely on cash, according to Which, a UK consumer group.
Meanwhile, 5 per cent of the UK adult population — 2.7m — relied almost entirely on cash in 2016, according to UK Finance.
However, families with lower incomes are more likely to rely heavily on cash than those with more wealth.
In 2016, more than half of the consumers who rely mainly on cash earned less than 15,000 pounds a year.
More than eight million British adults will struggle to cope with a cashless society, according to the cash use assessment report. Poverty, not age, is the most important factor in relying on cash, rather than the fact that older people are often the most dependent on cash, mainly because the poor need more cash.
Britain will not be ready to move into a cashless society for the next 15 years, according to new research from the cash use review.
On the one hand, people have a real need to use cash. On the other hand, the accessibility and acceptability of cash may be threatened.
Between November 2017 and April 2018, nearly 1,500 machines were shut down on the Link network, the UK’s largest ATM switching network, in part because of a surge in non-contact payments, reducing demand for cash. Nearly 3,000 cash machines in the UK disappeared in the second half of 2018, with more than 3,300 bank outlets closed in the past four years.
While consumers do not have to pay any fees to withdraw cash, card issuers do have to pay an “exchange fee”. The exchange fee, calculated by dividing the total annual operating cost by the total number of transactions for the year, is currently about 25p per withdrawal. As the cost of processing and receiving cash rises, more and more retailers want cashless transactions. It is argued that the behaviour of merchants is more important in determining whether cash will die out than the loss of a network of bank branches and cash machines.
Some UK organisations have called on regulators and governments to take action to protect people’s right to use cash, intervene to ensure that bank outlets and cash machine networks operate properly and not leave the future of cash to businesses to decide. Philip Hammond, the chancellor of the exchequer, also said he wanted the public to have a choice of ways to pay. The Treasury has promised to set up a cash strategy group to study how to protect the rights of millions of people who depend on cash.
Mobile payment usage continues to rise
In addition, the proportion of UK adults using mobile payments is growing rapidly, jumping from 2% in 2016 to 16% in 2018. At the end of April, Sainsbury’s, the British supermarket giant, turned a convenience store in the City of London into a smart payment store, Only one of the original nine manual or self-checkout stands will remain, encouraging people to download apps from their smartphones, scan product barcodes and check out with “Apple Pay” or “Google Pay”.
The introduction of mobile payment services such as Apple Pay, Google Pay and Samsung Pay could boost further growth in the UK economy. Although they have been around for some time, they are still the driving force of growth as they continue to sell their services to users.