By Mark Fairlie
For the first time in 2017, the use of debit cards to pay for goods and services overtook cash. According to UK Finance, the banking trade body, although 2.2m still use physical money far more than any other payment method when they visit the shops, nearly 3.5m Brits rarely use cash at all.
UK Finance is predicting that the number of cash transactions completed in the UK will fall from 13.1bn in 2017 to 6.4bn in 2027, at which point it will only account for 16% of all payments.
The rise of the contactless payments
Contactless cards accounted for 15% of all payments made in the UK last year, including the use of so-called smart devices.
Contactless cards work by showing a card or smart device to the reader in-store which then picks up an RFID signal. Users don’t have to insert the card into the machine nor enter a PIN number. Because of the inherent higher-risk of fraud, this payment method has, stores normally cap payments to £20 to £30 a time per transaction.
Both Apple and Google, the leading companies in mobile phone hardware and software, have incorporated RFID into many of their in-house or third-party-manufactured phones. As with a contactless card, a user holds their smartphone or watch within a close proximity to the card reader to make payment.
Steven Jones, the chief executive of UK Finance, does not think we’re heading towards the end of cash as we know it. Quoted in Talking Retail, Mr Jones believes that the emergence of one technology does not mean the disappearance of another.
“(W)e’re far from becoming a cash-free society and despite the UK transforming to an economy where cash is less important than it once was, it will remain a payment method that continues to be valued and preferred by many”, Mr Jones continued.
Many economists believe that a cash-free society would be beneficial as it would eliminate the black market, ensure that the correct levels of taxes would be paid, and, in times of emergency, the money within people’s and businesses’ accounts could be electronically manipulated to provide an incentive to spend money.
Not everyone is convinced. Opinion article writer, Ross Clarke, writing in the Daily Mail believes the move to a cashless society is a “cynical conspiracy”. He cites the opportunity to collect extra fees as the main driver behind the drive which, following the abolition of fees to use credit and debit cards, will be borne by small retailers and businesses. He also believes that the data will eventually be used to collect personal information about consumers which will be used to adjust prices higher for people depending on their income or where they live.
Other payment findings
UK Finance’s report found that there were 38.8 million transactions in Britain in 2017 with nearly 90% of payments made by consumers. 85% of consumer spending was “spontaneous” and the remainder was for bills and other regular commitments.
The number of credit card payments also grew to 3.1bn at the same time that unsecured lending in general across the country saw a significant yearly increase.
Direct debit continues to be popular with 9 in 10 of the adult population using them. The report also reflected the change in the way we engage with our banks as 71% of us now use mobile app-based banking sending 1.6bn faster payments to each other every year.