Cash overtaken by non-cash payments in the UK

Cash overtaken by non-cash payments in the UK

For the first time, last year more payments in the UK were made electronically than with cash, according to figures from the Payments Council.

Of all payments made by British consumers and businesses in 2014, 48% - or 18 billion - were in cash, down from 52% in 2013.

However, while cash makes up just five per cent of payments from businesses, it still accounts for 52% of those made by consumers. Debit cards were used for 26% of consumer payments, direct debit for 10%, and credit cards six per cent.

Last year 1.6 million Brits - 3.1% of all adults - predominantly used cash. But nearly 40% of these are aged 65 or over and people under 35 are far more likely to use electronic alternatives.

There are big differences in payment methods at different types of retailers, with just a third of purchases at electrical goods stores made with notes and coins, compared to more than 80% at newsagents.

This is related to the fact that a quarter of all cash payments made by consumers are for less than £1 and more than half are for less than £5. This is expected to change with the rise of contactless cards and mobile payments as cash volumes are forecast to fall by 30% over the next ten years.

Comments: (6)

Chetan Ghadge
Chetan Ghadge - Wipro - Pune 21 May, 2015, 09:461 like 1 like

I would like to know how statistics are gathered for cash transactions.  Cash transactions are mostly bi party transactions and remain private unless reported exclusively by parties involved.

 I believe the statics in this article are only for reported cash transactions . In reality there might be many more cash transactions going un reported contributing to a parallel economy.

Jim Wells
Jim Wells - Wellspring Consulting International - Fort Lauderdale 21 May, 2015, 12:36Be the first to give this comment the thumbs up 0 likes

Have to wonder about the motivation and the emotional fragility of the Payments Council in making an announcement that is clearly impossible to substantiate.  What it does accomplish is reminding consumers how important it is to retain the option to use cash and resist initiatives to promote "cashlessness" to avoid increasing government intrusion into their financial lives. 

A Finextra member
A Finextra member 21 May, 2015, 15:491 like 1 like

Chetan, I was thinking the same thing. How can cash transactions be tracked? I do believe that use of cash is falling behind in a major way, and that is fine. I don't use cash much myself. But the numbers need to be substantiated. 

Jim Wells
Jim Wells - Wellspring Consulting International - Fort Lauderdale 21 May, 2015, 22:05Be the first to give this comment the thumbs up 0 likes

The fundamental flaw in the Payments Council's thinking is that, unlike credit cards and e-payments, debit cards (particularly prepaid) are cash equivalents.  

Dinesh Katyal
Dinesh Katyal - Financial Data Exchange - San Francisco Bay Area 24 May, 2015, 21:25Be the first to give this comment the thumbs up 0 likes

It is true that the actual extent of cash transactions is difficult to measure. However, it is possible to make reasonable approximations based on retail data, average cash value of items sold, etc. What is more important is consistent measurement and trends over time. In any case it is about time that cash went out of 'business'. US too has been trending away from cash quite a while.

Peter Robinson
Peter Robinson - Liberti Consulting - Northampton 01 June, 2015, 17:351 like 1 like

It'll be a long, long time before cash goes 'out of business'. There are far too many consumers out there still paying by cash and all the time they choose that as their preferred method of payment, retailers will continue (and want to accept them) - particularly when it's cheaper than the next best alternative, a debit card.

Retailers have, through the British Retail Consortium (BRC), for years been tracking the cost (and use) of cash versus other payment means. By volume of transactions, they still (as far as I'm aware) represent over 50% of sales in the UK. It's true that contactless debit cards have been making serious inroads into cash useage and this is likely to continue to grow.

The BRC will (hopefully) be announcing their latest payment trend update for the 2014 calendar year. That'll be a pretty good, and accurate, representation of what's happening with cash in the retail sector.