Cash is no longer the most used payment method at UK retailers as debit cards accounted for more of the 19 billion transactions in 2016, according to research by the British Retail Consortium (BRC).
In its annual payments survey, the BRC revealed that, for the first time, there were more retail purchases made by debit card than cash.
In 2016, there were around 8.1 billion transactions for each payment method, but debit cards accounted for 42.6% compared with 42.3% of payments made by cash. This represented a 4.5% increase in the number of debit card payments and a 4.9% drop in the number of cash payments when compared to 2015.
Total UK retail sales increased 3.5% in 2016 to £351bn, compared with £339bn the year before.
Contactless card technology, which allows people to pay for things by simply holding the card over a scanner, has increased the use of cards to pay for goods in retail outlets. In late 2015, the maximum spend allowed by contactless cards was increased from £20 to £30, which inevitably led to more purchases being made using debit cards.
“The ever-increasing number of contactless cards and the ever-widening number of retailers and payments terminals that accept them has contributed to the significant growth in card purchases in 2016,” said the report.
Self-service terminals at retailers are replacing checkouts with people working on them, adding to the growth of contactless payments as most are equipped with contactless capability.
Meanwhile, even traditional checkouts with a person working on them are increasingly accepting contactless payments, said the BRC, which is something that is only set to continue.
“During 2017, further upgrades are planned by retailers to significantly increase the number of stores and devices that accept contactless cards,” said the BRC.
The technology investments are going further with more retailers investing in the hardware and software required to accept payments through smartphone apps, such as ApplePay, AndroidPay and SamsungPay.
“Many retailers that do not currently accept these payment channels have plans to do so in the future, both online and in store,” said the BRC. Payments made through these mobile wallets are not constrained by the current £30 contactless limit, so they could become popular.
Read more about digital and contactless payments
- MasterCard rolls out fingerprint and facial recognition identification technology for online payments following a successful Dutch pilot.
- Tesco’s retail bank has partnered with payment provider MasterCard to give customers more innovative digital payment methods.
- Barclays bank is piloting technology to enable customers to withdraw cash by just tapping their smartphone or contactless card on a reader.
Beyond retail, the number of payments made using debit cards across all sectors will exceed the number made by cash by the end of 2018, according to recent figures from Payments UK.
The payments industry trade body said this is driven by the increasing use of contactless cards. It revealed that the number of UK contactless payments in 2016 hit 2.9 billion, up from 1.1 billion in 2015. Contactless payments comprised 7% of the total number of payments in the UK last year, and are expected to reach 27% by 2026.
The transport sector is a pioneer of contactless payments. For example, Transport for London (TfL) is seeing huge growth in contactless payments. Its latest figures reveal that more than 200 million journeys are made on London’s transport network using contactless payment technology every day.
Today, 40% of all pay-as-you-go journeys are paid for using contactless technology, compared with 25% in 2016, with around 10% of these transactions made using mobile phones.