Cash payments to fall to 14bn by 2022, says Payments Council, as contactless transactions rise

A new report by the banking industry body that runs the UK's payments system predicts that cash payments will fall over the next decade, while consumer card use will almost double. More use of 'contactless' cards and mobile payments, as well as e-commerce, will result in card use doubling from nearly 10 billion payments in 2012 to an estimated 17 billion in 2022, the Payments Council said.

The report was published as card provider Visa Europe reported a five-fold increase in UK consumer spending using contactless card technology, with payments worth £45.2 million in June 2013. UK consumers made 51 million contactless purchases in the 12 months leading up to June, the card provider said; a substantial share of the 187 million purchases made across Europe in the same period.

"Cash remains strong given the ease of acceptance by retailers," said technology and payments expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com. "However, new tech is increasingly providing more engaging and less costly alternatives."

In June, research firm Gartner predicted that the value of worldwide mobile payments (m-payments) would increase by 44% this year from the $163.1bn recorded in 2012. It also expected the number of individuals making these transactions to increase to 245.2 million worldwide. However, the firm said that the uptake of near field communication (NFC) technology, a method of contactless payment available on some smartphones, had been "disappointing".

In a typical contactless payment system, a consumer can use a credit or debit card, key fob or smart card to make a secure payment at the point of sale. Contactless cards can be tapped on a reader installed at the point of sale for purchases of £20 or less. There are currently more than 28 million Visa contactless cards and 280,000 contactless terminals in the UK, according to Visa. Contactless cards can also be used on London buses, and Visa reported that more than three million journeys had been paid for in this way since the technology was introduced in December 2012.

In its Payments Market 2013 report, the Payments Council said that consumer payments would be worth over £2 trillion in 2022, up from £1.3 trillion this year, due to population and economic growth. Regular household and personal bills would continue to be made using direct debit, and the number of wages paid directly into bank accounts would continue to grow, it said.

Cash and cheque usage would continue to fall over the same time period, the Payments Council said. More small value transactions in shops and payments to friends and family would instead by made using contactless cards and mobile phones, it said.

The number of one-off payments made directly from consumer accounts through mobile and internet banking would increase dramatically, from 356m in 2012 to around 1.5bn in 2022, according to the Payments Council. Both the number of people with internet-connected mobile devices and the range of m-payment services available from phones and tablets would also grow, it said. The Payments Council plans to allow secure account-to-account transfers using only a mobile phone number from next year, it said.

"The next few years will be an exciting time for the payments industry," said Adrian Kamellard, chief executive of the Payments Council. "Over the coming decade we will see major innovation with the introduction of our Mobile Payments Service in 2014, the Current Account Switch Service next month and of course all the innovations brought to market by individual players within the payments field."

"The Payments Council will work hard over the next decade and beyond to ensure that the payments infrastructure in the UK continues to lead the world and fully meets the needs of all its users," he said.