For the first time, debit cards have overtaken cash to become the number one payment method in the UK, according to data collected by the British Retail Consortium (BRC).
Last year, the share of debit card payments grew by 4.5% to almost 43% of all retail transactions. In contrast, cash saw a 4.9% shrinkage in its share of retail purchases to account for 42%. With credit and charge card transaction volumes growing slightly, for the first time more than half of all retail purchases were made using plastic.
The BRC puts the increasing use of cards down to a number of factors, with one of the biggest being the rise of contactless payments and another the growing number of retailers that have invested in technology to accept new payment applications both online and in-store.
Investments are also being made to ensure cash users are catered to. Some £30 million was spent by retailers last year on preparing for the new plastic £5 note, with more costs coming this year when the new £1 coin comes online.
Meanwhile, the trade group claims that its campaign on interchange fees has reaped major rewards for customers, with new EU rules helping to save hundreds of millions of pounds. However, the group says the government should act to ensure these benefits are maintained once the UK leaves the EU.
Andrew Cregan, policy advisor, BRC, says: "A growing number of retailers have invested in payment technology to accept cards, contactless payments and new payment applications both online and in store. In part, this has been facilitated by the Interchange Fee Regulation (IFR), which was introduced across the European Union following a successful campaign by the BRC and has led to a significant fall in the cost of collection that benefits retailers and their customers.
"Looking ahead, the Government should act to retain the benefits of the IFR for retailers and their customers after the UK leaves the EU and introduce further regulatory action to address the alarming increase in other card fees and charges at a time when the retail industry is facing acute cost pressures elsewhere."