UK finance’s payment trends

Cash and debit/credit cards have dominated the payments market. Technology has brought various payment methods to the forefront. UK Finance, the banking and financial industry voice, highlighted mobile banking, buy now pay later (BNPL), and mobile wallets in its latest ‘Payment Markets Report’ for 2032.

The research shows how corporate and consumer payments boosted 2022 payment volume. UK Finance reports enterprises made 13% of UK payments, while consumers made 87%, rising from 40.4 billion in 2021 to 45.7 billion.

However, business payments typically involved higher amounts. Thus, 82% of payments were made by enterprises. Despite paying more, consumers only contributed 18%. In the past year, UK Finance has seen more lower-valued payments. The larger volume of transactions offsets the low value, thus the total amount spent is similar.

There are several reasons. Prepaid travel cards have been put aside as remote working has grown, according to UK Finance. When they travel, they pay less individually. The cost of living crises is also reducing consumer shop visits, according to the survey.

UK Finance head of research Adrian Buckle said: “In 2022, contactless, online banking, and mobile payments increased, but cost-of-living challenges meant some people preferred cash to help with budgeting.

“Changes in shopping and travel habits, especially due to hybrid working, increased transaction volume. Over 50% of UK payments are made with debit cards.

Cash

Some people utilize cash to manage budgets due to inflation and cost-of-living fears.

In 2022, 21.6 million persons used cash once a month or never, down from 23.1 million the year before.

In 2022, 0.9 million customers used cash mostly, down from 1.1 million in 2021 and 2.2 million in 2017. Most consumers still use other payment methods to pay their bills, but these consumers used cash for daily shopping.

Cash payments rose from six billion to 6.4 billion between 2021 and 2022. However, cash payments dropped from 15% to 14% of total payments.

Cards—credit and debit

Debit cards are still the most popular payment method, and volumes rose 18% last year. Just over 23 billion payments (2021: 19.5 billion). For the first time, half of UK payments were made with debit cards.

Credit card payments rose 19% from 3.4 billion in 2021 to 4.1 billion in 2022.

UK Finance highlighted how contactless payment affected debit and credit cards. With 87% of Brits using contactless payments monthly or more in 2022, they were widespread. For debit and credit cards, 17 billion contactless payments were made.

This was 13.1 billion, up 30% from 2021. The average value of contactless payments rose to £15.10 in 2022 from £12.66 in 2021.

Bank remotely

In 2022, 86% of adults used online, mobile, or telephone banking. Most people used remote banking in 2022, from 80% of 65-year-olds to 95% of 25-34-year-olds.

The Faster Payments Service processed 4.3 billion remote banking payments, up 17%. Remote banking by enterprises boosted growth.

Mobile wallets

Contactless cards and mobile phones are being utilized to make payments. In 2022, 30% of adults registered for at least one mobile payment service, with younger people using mobile wallets more.

These services are still less common than contactless cards, but they are gaining in popularity and mobile payment methods are anticipated to rise.

Buy Now, Pay Later

BNPL services were used by 12% of UK consumers in 2022, the same as in 2021. In 2022, 18% of 25-34-year-olds used BNPL. The percentage of 65-year-olds utilizing BNPL increased from 4% in 2021 to 8%.

Considering the future

UK Finance predicts debit card payments will top 27 billion. Contactless payments, online purchasing, and growing card acceptance by businesses of all sizes will certainly fuel this.

As the cost of living issue eases, consumer confidence returns, and customers switch to other payment methods, it anticipates cash payments to continue to shrink. As cash users concentrate, the reduction should slow. UK Finance predicts 3.3 billion cash payments in 2032, accounting for 8% of payments.

Buckle continued, “There are many payment methods in the UK, and each has its own benefits. We expect card and mobile payments to rise over the next decade, and market developments like open banking may reshape the payments landscape.

People aren’t ready to switch

Sam Richardson, deputy editor of Which? Money, commented on UK Finance’s findings: “It is right that millions of consumers across the country find paying digitally easy and convenient, but as UK Finance’s report shows, a significant minority of people are not yet ready or able to make that switch, as evidenced by an increase in cash payments over the last year.

Whether to pay for daily basics or track finances during the worst cost of living crisis in decades, those who still wish to utilize cash should be able to do so without paying to access their own money.

Unregulated payment methods are also being used by hard-pressed households. Millions use buy now, pay later companies to buy staples, but the lack of regulation leaves consumers with less rights if something goes wrong. The government must regulate BNPL immediately without delay.