Debit cards usurp cash but mobile will soon rule

Debit cards usurp cash but mobile will soon rule

The debit card may have usurped cash in the UK over the last decade but it could be supplanted itself within years by the mobile phone, predicts the Payments Council.

In 2001, 43% of retail spending by value was made using notes and coins, according to the Council's 'Way We Pay' report. This fell to just 30% in 2011 as people switched to plastic, with a fourfold increase in spending on debit cards over the ten years.

Brits still make a lot of very small cash transactions - three out of five of our one-off payments. But, since 91% are under £25, the Council predicts that notes and coins will soon give way to the tap of contactless cards at the checkout.

By 2021, consumer spending is forecast to be roughly 45% higher than in 2011, but the use of cash is expected to have fallen one per cent. And with banks, telcos and technology companies all scrambling to bring payments to mobile phones, card usage could be on the decline by then too, suggests the report.

Although cash has become less important to Brits, it has never been easier to access, with the number of ATMs in the country doubling over the decade to more than 64,000.

In 2000, three fifths of cash came from a hole in the wall but many people still relied on cashing cheques and using passbooks in a branch. In 2011, 71% of cash withdrawn was via ATMs and this proportion is projected to grow to 78% in 2021.

On average, people each took £4501 of cash from their accounts in 2011, but that is forecast to drop to £4,178 by 2021 due to the rapid adoption of new payment technologies.

"If our choice of cash as a way to pay had kept pace with consumer spending, we would each have carried around an extra £1090 in 2011, and would need yet another £2018 (a total of £7,609) each in 2021, equivalent to an amazing extra £188 billion of paper and metal shuffling its way through our wallets each year," says the report.

The rise of debit cards has not only hit cash; cheque usage is now halving every five years. This decline is down not only to cards, but also automated payments such as direct debits, which now comprise two thirds of regular household and individual bill payments.

Meanwhile, Brits have also changed how they manage their money, migrating from branches to remote channels. Between 2006 and 2011, the number of Internet bankers rose from 17 million to 26.8 million, and the next stage in the evolution is the move to mobile, predicts the report.

Adrian Kamellard, chief executive, Payments Council, says: "We scarcely notice the steady changes in the way we pay, yet someone in their thirties today will see more change in their lifetime than in the entire history of money. Even recent innovations such as payment via a mobile phone, which ten years ago some felt to be science fiction, will soon be commonplace.

"The 2000s were the decade of the debit card. The 2010s are likely to be the decade of the mobile phone. Just as we can't imagine how we ever did without the Internet, many people will soon wonder how we used to be so dependent on cash and cheque. Twenty years from now even cards may seem archaic."

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