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Card payments rise but cash helping people to budget

Research shows Brits now make 50% of payments with debit cards

cash from wallet
Debit cards, online shopping and the rise of contactless payments mean that cash payments are declining. Photo: Getty (Simon Potter via Getty Images)

Consumers now make 50% of their purchases using debit cards. However, growing fears about inflation and the rising cost of living have meant some people are making greater use of cash as a way of managing budgets, according to a new study by UK Finance.

It found the number of shoppers using debit cards had increased by 18% this year, amounting to over 23bn payments, compared with 19.5bn in 2021.

In its latest Payment Markets Report, UK Finance found that the proportion of cash payments fell slightly from 15% down to 14%, as they remain in fierce competition with online purchases and now contactless payments.

That being said, the total number of cash payments increased from 6 billion to 6.4 billion as the the total number of payments that was recorded by both consumers and businesses increased to 45.7bn in 2022 up from 40.4bn back in 2021.

While cash is still popular day-to-day shopping, the number of contactless payments is growing, with a 30% increase over the past year. 17bn shoppers now make contactless payments at least once a month.

The average value of contactless payments also grew, the average payment was £15.10 in 2022, up from £12.66 in 2021.

65% of UK adults are now using credit cards more frequently. Photo: Getty
65% of UK adults are now using credit cards more frequently. Photo: Getty (boonchai wedmakawand via Getty Images)

UK Finance’s data suggests that there has been a shift towards an increasing number of transactions that are each worth a lower amount, without necessarily increasing the overall amount spent.

In 2022, it was reported that payments made by credit cards increased by 19% with 65% of UK adults now using credit cards more frequently.

Changes to shopping and travel habits, particularly related to the rise of hybrid working, led to a big jump in the volume of transactions made, explained UK Finance.

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Adrian Buckle, head of research at UK Finance, said: “During 2022 we saw increased use of contactless, online banking and mobile payments, although cost of living challenges meant that some people preferred to use cash to help with their budgeting.”

Adrian said: “There is a wide variety of payment methods available in the UK and each provides specific benefits to the people using them. Over the next decade we are forecasting further growth in the use of card and mobile payments and market developments such as Open Banking may bring further changes to the payments landscape.”

The body that is representing over 300 firms across the industry revealed that nearly a third of adults are registered for at least one mobile payment service, while 86% of adults used a form of remote banking.

2022 saw a spike in debit card users. Photo: UK Finance
2022 saw a spike in debit card users. Photo: UK Finance (UK Finance)

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Buy Now Pay Later (BNPL) remains a steady option, with 12% of people using the service to make a purchase. In 2022, data showed 18% of 25 to 34 year olds used the BNPL option.

Transactions made by businesses accounted for 13% of the number of all payments made in the UK during 2022. However, data suggests that 82% of the total value of payments was made by businesses due to its high average value.

Myron Jobson, senior personal finance analyst, at interactive investor, the UK's number one flat-fee investment platform, says: “Making payments using the plastic and smartphones has become as natural as breathing for many.

Myron said: "The vast closure of bank branches amid the shift to online and mobile banking has reduced access to cash."

Over the next decade, UK Finance predicts the amount of debit card payments will increase to over 27bn, which will likely be driven through contactless payments, online shopping, and the ever-increasing levels of card acceptance among businesses of all sizes.

It expects the number of cash payments to continue declining around 8% as the cost of living crisis eases.

Watch: UK inflation: What has caused the surprise drop?

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