Cash decline accelerates in pandemic, research finds

UK Finance’s 2021 Payment Markets Report, an analysis of all forms of payments over 2020, shows that cash remains the second most frequently used payment method behind debit cards.

The research shows that during 2020 there were 13.7 million consumers who used cash only once a month or not at all, a significant increase from 7.4 million consumers the previous year.

During 2020 the number of contactless payments made in the UK increased by 12% to 9.6 billion payments, the report shows. Overall, contactless payments accounted for 27% of all UK payments. In the past four years, contactless payments have jumped from being just 7% of all payments to 27%.

The report reveals that 83% of people in the UK now use contactless, with no age group or region falling below 75% usage. Supermarkets were the most popular place to use contactless payments in 2020, accounting for 41% of contactless payments, reflecting the fact that supermarkets remained open during the lockdown periods in 2020.

There are now 135 million contactless cards in circulation, covering 88% of debit cards and 81% of credit cards, the research shows.

The report highlights strong growth in the use of mobile phones and smartwatches to make payments. Nearly 32% of the adult population were registered to use mobile payments by the end of 2020, an increase of 7.4 million people compared to 2019. In 2020 just over 50% of 16 to 34-year-olds were registered for mobile payments compared to 11% of over 65s.

David Postings, chief executive of UK Finance, said: “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.

“The increase in the contactless limit to £45 coupled with retailers encouraging its use meant that more than a quarter of all payments in 2020 were made via contactless. The use of cash fell, reflecting the fact that large parts of the economy were closed during the year, although it still remained the second most popular payment method behind debit cards. There remains real diversity in the way in which people choose to conduct their day-to-day spending and the banking and finance industry is committed to helping customers make payments in a variety of different ways.”

In response, Link chief executive, John Howells, said: “It comes as no surprise that cash use has fallen. At the beginning of the pandemic in April 2020, ATM transactions fell by as much as 60%. More people are now comfortable using contactless payments and shopping online. ATM visits are still down almost 45% compared to the same time two years ago.

“Clearly, the UK is becoming more digital, however, there are still several million people reliant on cash. Link will continue to protect access to cash for as long as needed, but we also need a plan to make sure that digital eventually works for all.”