Debit cards to overtake cash payments by 2021
Industry experts predict that debit cards are on track to become king in 2021 when they will take over from cash to become the UK’s most frequently used payment method, according to a new report from Payments UK, the trade association for the payments industry.
The new report, UK Payment Markets 2016, which provides an authoritative overview of current and future payment behaviour in the UK, will reveal over 72,000 payments were made every minute in the UK in 2015 by consumers and businesses – totalling more than 38 billion payments. By 2025 this will go up to 79,044 payments every minute (or 42 billion in the year), with increasing card usage playing a major part.
Cash was still the most popular payment method in 2015 accounting for roughly half (45.1%) of all payments. However it is predicted that by 2025 notes and coins will drop to being used for just over one in four (27%) payments. The tipping point for the most popular payment method will be reached in 2021 when 14.5 billion debit card payments are predicted, overtaking the forecast 13.0 billion cash payments for the first time.
Using detailed analysis of existing payment data, technological and behavioural trends Payments UK also forecasts another landmark in 2025, when credit, debit and charge cards will account for more than half of all payments made (50.2%) – driven in large part by the increasing popularity of contactless.
Focussing solely on payments made by consumers, the average UK adult made 20 card payments per month in 2015, of which around one in 10 were contactless. By 2025 we are predicted to use a debit, credit or charge card virtually every day (30 times per month) and almost half of these transactions – 14 per month – will be contactless. Further, many of these payments may be made using a mobile phone, without consumers needing to carry their plastic cards with them.
Driven by the increasing popularity of online and mobile banking, continued growth is also predicted in the Faster Payments Service which is used to process these payments. In 2015 over two-thirds of adults regularly used online banking, and a third used mobile banking. This contributed to 903 million one-off and forward-dated Faster Payments being sent, with a further 344 million standing orders processed using the service. These payments will more than double over the next 10 years, with 1.9 billion one-off and forward-dated payments forecast to be made in 2025.
Adrian Buckle, chief economist from Payments UK, said:
“Technology, consumer choices, business behaviour and market developments are major factors in how we choose to pay, and will have a major impact on how things change over the next ten years. This year’s UK Payment Markets report reveals a picture of consumers and businesses more ready than ever to reassess how they make payments and make the most of the convenient, cost effective and innovative options that are available.
“We have a long tradition of accurately predicting payment behaviour and forecasting what’s going to happen with existing ways to pay. However, with so much innovation happening in payments at the moment – not just from traditional payment providers but increasingly from new players such as retailers, Fintechs and other technology providers – it is very difficult to predict which of these new innovations will change the face of the way we pay. How their fortunes fare rests in the hands of consumers and businesses but one or two of them are bound to be big winners and potentially losers in the next decade.”
UK Payment Markets 2016 also publishes data and forecasts for the other main payment methods, to give a complete picture of the UK’s payments landscape for both consumers and businesses, across every different payment type.
More than five out of six (85%) current account holders used direct debits in 2015, and 3.9 billion payments were made by direct debit in the UK, worth a total of £1,215bn. Limited growth is expected over the next ten years, with 4.3 billion payments forecast in 2025.
There were 13% fewer cheques written in 2015 compared to a year earlier, but this still resulted in more than 546 million cheque payments in the year, showing they are still valued as a convenient and secure method of payment by those who choose to use them. In value terms, the CHAPS payment scheme, which is used primarily for wholesale financial and corporate treasury payments, accounted for £68.4tn – or more than 90% of the total value across all payment types.
The figures come from UK Payment Markets 2016, which is available to order from Payments UK from today. A free summary of highlights from the report is available to download from: http://www.paymentsuk.org.uk/industry-information/annual-statistical-publications