20 September 2017
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Online and contactless drive surge in UK card spending

19 June 2017  |  9106 views  |  0 card chip

The number of purchases using debit and credit cards has more than doubled in the past 10 years, as contactless payments and online retail have driven a change in the way consumers pay, a new report from The UK Cards Association shows.

Debit and credit cards were used to make 16.4 billion purchases in 2016, up 146% from 6.7 billion in 2006.

Growth in the number of card transactions has outstripped the rise in the amount spent, showing consumers’ increasing preference for using cards instead of cash for lower value payments. Last year the average value of a card transaction fell to £43.47, its lowest level in 15 years.

The report highlights the impetus provided by a surge in online spending and contactless payments. By the end of 2016, four in 10 (39%) card transactions were either online or made using a contactless card, compared to a quarter (24%) the previous year.

The data from UKCA chimes with new figures from Barclaycard, which shows that half of in-store card payments up to £30 are now made by contactless. The growth is having a knock-on effect to mobile tap-and go as well, says Barclaycard which has recorded a 90% rise in the amount spent through its Android app through 2017.

In the next decade, the increasing use of contactless and mobile payments, particularly by younger people, will be a major source of growth for debit card payments - which celebrate their 30th birthday this month - the UKCA report says.

The volume of debit card purchases is forecast to grow by 57% to 18.2 billion in 2026, four times%) will be contactless. Credit card transactions are expected to increase to 3.7 billion by 2026.

Just last month, Payments UK forecast that payments by plastic debit will overtake cash in 2018, three years earlier than expected.

Not all forecasters are so optimistic. New research from Ovum commissioned by Icon Solutions, seeks to quantify the detrimental effect instant payments and PSD2 will have on traditional credit and debit card payments.

The study - which is being distributed at EBAday in Dublin tomorrow - predicts that e-commerce card usage will stagnate at current levels of around €260bn annually and by 2025, boosted by increased consumer convenience and the lower charges that PSD2 facilitates, Instant Payments will overtake cards.

The research indicates that the shift away from cards is likely to gather pace, and by 2027, single-transaction e-commerce card payments will drop from the top spot declining from 40% market share to just 11%. This will leave instant payments and digital wallets (such as PayPal) as the two dominant payment methods across Europe as early as 2024.

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