During 2020 the number of contactless payments made in the UK increased by 12% to 9.6 billion payments, with the pandemic driving a mass-market switch away from physical cash.
The latest figures from UK Finance show that overall, contactless payments accounted for more than a quarter of all UK payments. In the last four years tap-and-go transactions have jumped from being just seven per cent of all payments to 27%.
In contrast, 2020 saw the number of cash payments made in the UK fall by 35%, meaning that notes and coins were used for just 17% all payments in the UK. Cash remains the second most frequently used payment method behind debit cards.
Despite this, there remained 1.2 million consumers who mainly used cash for their day-to-day spending during 2020.
David Postings, chief executive of UK Finance, says: "The pandemic resulted in some marked changes in payments behaviour and while it’s too early to say whether they are permanent changes, we did see an acceleration in some existing trends such as the reduction in cash usage and the growth in contactless and mobile payments."
With more people working from home there was a notable increase in remote banking, as well over two-thirds of UK adults used online banking and over half used mobile banking.
This in turn drove growth in account-to-account payments, with 54% of all business-to-business payments made via Faster Payments. The instant payment rail notched up a 21% increase in volumes year-on-year.
Siamac Rezaiezadeh, director of product marketing at GoCardless, says the explosion in Faster Payments poses a genuine challenge to the dominance of payment cards. "It seems more businesses - and even some consumers - are catching on to the benefits associated with account-to-account payments, such as greater convenience, reduced churn and significantly lower costs compared to cards.
"As open banking payments - which are built on Faster Payment rails - grow in popularity, we expect a credible challenge to the dominance of cards. You only have to look at a case like the Netherlands, with its account-to-account iDEAL payment system now used for more than half of eCommerce transactions, to see the opportunity when this payment form comes to full maturity."