Concerns about the prospects of a completely cashless society have been compounded in recent months, following a number of high-profile payment systems outages. But are we actually close to a cashless reality?
According to UK Finance, the trade association for the UK banking and financial services sector, in 2023, the volume of cash payments made in the UK fell by seven per cent to six billion (from 6.4 billion in 2022). The number of cash payments rose during 2022 for the first time in a decade but has now fallen back to roughly where it was in 2021.
Cash accounted for 12 per cent of all payments made in the UK during 2023, down from 14 per cent in 2022. Overall, around 39 per cent of UK adults lived largely cashless lives throughout 2023. However, the number of people mainly using cash actually rose to 2.6 per cent (an increase from 1.7 per cent in 2022).
For now, cash remains the second most frequently used payment method in the UK. The data comes from the latest Payment Markets Report by UK Finance, produced in collaboration with Accenture, the global professional services company.
Debit cards remain on top
As expected, debit cards remain the most popular payment method in the UK, accounting for 51 per cent of all payments made in 2023. In fact, they are the most used payment method amongst UK consumers across all age groups.
UK Finance noted that increased card volumes may still be impacted by deferred expenditure following the pandemic. Many people are opting to use credit cards to spend larger sums on the likes of holidays and home renovations, which they did not, or were unable to, purchase during lockdowns.
An increasing number of small businesses accepting card payments has also proved a significant factor in card payment volume growth.
Contactless payments also continue to rise in popularity. 2023 saw a seven per cent increase in contactless payments made in the UK (to 18.3 billion from 17 billion in 2023).
In total, contactless payments represented 38 per cent of all payments made in the UK – comprising both the use of physical cards and cards loaded onto mobile phones or other devices, such as watches, which are then used to initiate contactless payments.
In particular, the report highlights the growth of mobile contactless payments. Forty-two per cent of the adult population report being registered with the likes of Apple Pay or Google Pay (up from 30 per cent in 2022).
Given that mobile phone penetration is above 90 per cent in the UK, UK Finance explained that there is room for mobile contactless payments to continue to increase in usage, although it expects this will likely be reflected in a migration of payments from contactless cards to mobile contactless devices.
Is mobile banking set to dominate?
Remote banking (online, mobile, or telephone) remained popular in 2023, with 87 per cent of adults using at least one form of remote banking last year.
Mobile banking use increased from 53 per cent to 60 per cent, while online banking (via a computer) fell from 65 per cent to 62 per cent. This reflects the fact that some people are now conducting all of their banking via a mobile device – removing the need to visit the full website of their account provider.
If the current trends continue, UK Finance expects mobile banking to become the most used remote banking service in the coming years.
Adrian Buckle, head of research at UK Finance
Adrian Buckle, head of research at UK Finance, offered his take on the findings: “There is a huge amount of choice available to consumers in terms of how they make payments, but we can definitely see the continued popularity of debit cards and contactless. This has been driven both by consumer demand as well as new technologies which help to increase acceptance levels, particularly among small and mobile businesses.
“Mobile contactless payments are growing fast and one-third of adults are now making these at least once a month, with scope for usage to increase further.
“This doesn’t mean we are on our way to becoming a cashless society. Cash is still the second most frequently used method of payment in the UK, although on the whole we are using it less and more people are leading largely cashless lives.”
Looking to the future
Over the next decade, debit card payment volumes are forecast to continue to increase. This growth will be driven by the continuing rise of contactless payments, the ongoing growth of online shopping and ever-increasing levels of card acceptance amongst businesses of all sizes. It is forecast that over 31 billion payments will be made using debit cards in 2033.
The number of cash payments is expected to continue the long-run declining trend seen in recent years, as consumers continue to turn to alternative payment methods. However, the rate of decline is expected to slow as use becomes concentrated amongst people who have a strong preference for cash. UK Finance forecasts that there will be around 3.4 billion cash payments made in the UK in 2033, accounting for around six per cent of all payments.
Sulabh Agarwal, global payments lead at Accenture, commented: “The best payments system is the one that feels invisible to the consumer — something that’s secure, intuitive and doesn’t require any extra consideration.
“Just as credit and debit cards once offered consumers a more seamless option than cash or cheques, contactless and mobile payment methods like digital wallets are quickly gaining market share. To preserve and grow their traditional payments revenue streams, UK banks must learn from the successful customer offerings and business models in Latin America and South East Asia, where these methods are more widely used.”
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