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UK card payments eclipse cash as concerns rise over soaring transaction charges

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·2-min read
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Debit cards have seen transaction fees rise by 22% to 7.2 pence per transaction. Photo: Getty
Debit cards have seen transaction fees rise by 22% to 7.2 pence per transaction. Photo: Getty

Debit and credit card transactions accounted for more than four in every five pounds spent in 2020, new data from the British Retail Consortium (BRC) revealed. The report also pointed out that the government needs to tackle soaring transaction fees that hit businesses and customers alike.

Card transactions hit 81% last year, up from 78% in 2019. The majority of this was accounted for by debit cards which exceeded more than half (54%) of all retail transactions by volume in the UK for the first time in 2020.

Cash use accounted for 15% of total spending in retail, down from 20% in 2019, but still accounts for 30% of individual transactions.

"It will come as no surprise that 2020 saw a significant decline in cash use. The pandemic has seen national lockdowns... spurring a robust shift online and leaving fewer opportunities for cash spending," the report said.

The volume of cash purchases fell by 7 percentage points in 2020 to 30% of retail transactions.

Cash was used to pay for £60.9bn ($83bn) worth of goods in 2020, accounting for just over 15% of sales value, compared with £77.6bn in 2019.

Read more: MPs urged to tackle anti-competitive practices in card payments

The report also pointed out that the trend towards card payments has meant retailers incurred costs of more than £1bn to accept these payments in 2020.

Debit cards have seen transaction fees rise by 22% to 7.2 pence per transaction.

Businesses, already hit by COVID, Brexit, global supply chain disruption and rising commodity prices, believe these "excessive card fees add further cost pressures to retailers."

Equivalent to £46 per household per year, these additional costs can also end up translating into higher prices for consumers.

The BRC, along with other business groups, has asked the UK government to intervene and tackle anti-competitive practices in card payments to protect British businesses and consumers.

“Parliament needs to urgently intervene in this anti-competitive behaviour by regulating card scheme fees and abolishing interchange fees, both of which ultimately hurt consumers,” said Andrew Cregan, payments policy advisor at BRC.

“Card firms are abusing their dominant market position, and this must come to an end.”

Read more: £47bn in extra investment needed to boost UK economic recovery

BRC’s survey also showed that the pandemic has changed the way Brits shop, with consumers making fewer, but bigger shopping trips.

While the number of transactions fell by 13% — from 19.1 billion in 2019 to 16.7 billion in 2020 — consumers spent on average 20% more per transaction.

This took the average transaction value from £20.16 in 2019 to £24.15 in 2020.

Watch: Why can't governments just print more money?

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