Debit cards overtake cash for the first time in the UK

Debit card spending overtook cash transactions for the first time in the UK in the 12 months to October, according to figures released by the Payments Council.

Spending on debit cards reached £272 billion over the past year, while cash transactions stood at £269 billion, reports the Payments Council, with plastic overtaking notes and coins during the August Bank Holiday.

There were 1.6 million more transactions on debit cards every day between July and September compared with the same three months a year earlier. Cash machine withdrawals also dropped during the period, as consumers used their cards for smaller value transactions at high street stores.

In April, the Payments Council predicted that by 2018 the amount of cash used in the UK will fall by 20% after adjusting for inflation, even though total spending will rise by around 15% in real terms.

Technology and cultural changes are driving the move, says the Council, with debit cards and contactless technology taking over from cash, particularly among younger generations.

Sandra Quinn, of the Payments Council, comments: ""Cash is too cumbersome for many consumers these days - they prefer a card for anything more than the smallest transactions. We now expect our debit cards to be accepted everywhere we go - in pubs and clubs, at the corner shop, online and on the high street. Having quickly supplanted cheques, then claimed the scalp of credit cards, they have now usurped cash's throne too."

Cheque usage also continued its inexorable decline, with 104 million fewer written in the UK in the 12 months to October.

Credit card spending remained steady during the period.

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Comments: (1)

Paul Love - Konsentus - Nottingham 03 December, 2010, 17:51

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For many years debit cards have often been primarily used at ATMs to withdraw cash, which is then spent over the counter. This story goes to show that the UK has passed the tipping point, and we have managed to drive consumers to directly use their debit cards to spend on, rather than to withdraw cash. (Which is also good for the economy as a whole given the costs involved in printing, counting, transporting and managing cash.)

However this certainly isn't the case in many other European countries, where cash is still king. At this week's Central European Card Conference we heard that banks in Poland are now issuing contactless debit cards to encourage consumers to spend directly with their cards, and this does seem to be driving greater card transaction volumes. It will be interesting to see if we see if this approach is adopted elsewhere.