UK consumers increasingly turn to debit cards to make purchases

Monday, 02 June 2014
UK customers are “using less cash than ever” as the convenience of shopping and paying by debit and credit card continues to increase. Both the amounts of cash transactions and the average amount spent using cash has declined over the past five years, according to the latest data published today by the British Retail Consortium (BRC).

“Customers are taking advantages of new ways to shop and pay. The availability of contactless cards, handy express stores and self-service tills as well as online sales has increased the use of debit cards for smaller payments in place of cash,” commented Helen Dickinson, director general at the BRC, on their 2013 payment survey.

“This is very much in line with the attention customers have paid to price and value during the recent economic uncertainty as they have sought to minimize payments from their budgets for everyday items.” In 2013, 50 percent of retail sales values were made by debit or credit card, up by 11 percent over the past five years.

14 percent decline in the use of cash over the past five years

During the same time period, there has been a 14 percent decline in the use of cash. The average value of a cash purchase in the UK has also declined, registered at 9.47 pounds, down 17 percent from 2009 when it was 11.43 pounds. Debit card payments currently account for 32 percent of the number of transactions made, which is up 2 percent compared to the year before.

However, during the same time period, the BRC found that there has been a decline in the average debit card transaction value, which has dropped from 31.45 pounds to 27.58 pounds. Despite UK consumers using less cash, it “remains the dominant method of payment”, as 53 percent of all transactions are still made using cash, down 10 percent over the past five years.

“Cash use down 14 per cent in the last five years is a milestone in the development of our digital economy,” adds Dickinson. “It shows that customers are embracing digital shopping whether online or on the high street and retailers are adapting and evolving to meet the demand with excellent services. However, it is important to note that cash still remains dominant in the overall number of transactions.”

The survey also found that UK customers tend to use their credit cards for larger purchases, with the average value per transaction increasing to 40.81 pounds over the past year. Although only 9 percent of all purchases were made using credit card, the spending accounts for 21 percent by value spent as Britons spending the amount on less items, which indicates more “considered purchasing” with their credit cards.

Britons use credit cards for larger, but fewer item purchases

“The recent pattern of spending on larger but fewer products on credit cards shows that customers are now feeling more confident than they did a year ago and reflects the wider consumer outlook of cautious growth.”

The survey also found that banks are still charging high charges to retailers for handling card payments. The average cost for a retailer to handle a debit or credit card payment has risen to 40.9 pence, up 18.3 pence in total over the last five years, as credit and charges cards account for only 9 percent of transactions but 48.7 percent of costs. Debit card handling fees have increased 4 percent in the same time period to 8.8 pence, accounting for 32 percent of transactions but 37 percent of costs.

However, During the same time frame, the cost to handle a cash payment has declined over the past five years to 1.3 pence, with cash accounting for 53 percent of transactions, but 9 percent of costs. “It is really disappointing that the average cost of accepting both credit and debit cards have increased over five years, while cash costs have gone down. Interchange fees cost the retail industry and its customers almost 1 billion pounds in 2013.”

“The much-welcomed European proposals to cap how much banks can charge retailers to process card payments are close to final approval, but in the meantime, we continue to work with the UK Government and Payment System regulator to implement caps on UK fees without further delay, as has happened in other European countries,” concluded Dickinson.

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