Debit cards overtake cash as main payment method
Apr 19 2010 by The Journal
COINS and notes will be used in less than half of all transactions within five years after payments made by cash slumped from 73% to 59% over the past decade, according to a new report.
The Payments Council said cash was “king no more” after a study of payment trends between 1999 and 2009 found debit card spending was now the most popular, quadrupling to £264bn last year.
Debit card payments are even dwarfing credit card usage, while the cheque continued its decline and at a faster pace than expected.
The council said it predicted in 1999 that just over one billion cheques would be used by individuals in 2009, but the figure in fact fell to 577 million.
Cheques are proposed to be phased out completely by October 2018, although the council said even if no action was taken, the volumes would more than halve to just 248 million in that time, making up just 0.8% of all personal payments made.
“By 2050, when today’s new workers have retired, cheques look set to be a historical curiosity,” it said.
The future instead looks set to be contactless cards, which allow people to pay for goods worth up to £15 without having to use a PIN number.
There are eight million cards in the UK that allow contactless payment, but the council estimates this will grow to 30 million by 2012. And mobile phones are likely to be used eventually for payments, with an iPhone application already making this possible.
While used less, cash remains the most important method of payment for one-off and small transactions. Today’s study showed around 21 billion consumer payments were in cash, but the majority – 80% – were below £10.
Almost a third of money spent on goods and services was made by cash, but only 11% of financial spending used notes and coins.
For regular commitments, such as bills, cash has plummeted from nearly a fifth of all payments by value in 1999 to less than a tenth last year, or from 19% to 9%.
“Paying for things is more secure and more convenient now we don’t have to keep replenishing the stock of paper and metal we drag around,” said the council.
It added: “By 2050, using cash could well be a minority activity, much more the preserve of informal transactions.”
While cash and cheques are less popular, debit cards have dominated the way Britons pay, with more than six billion purchases in 2009.
The council said the last decade also saw internet banking put firmly on the map.
Ten years ago, online banking did not exist, but there are now 22 million accounts.
The launch of “faster payments“ between banks helped the rise of internet banking, meaning small amounts of money can be moved instantly 24 hours a day.