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Retail survey: UK consumers using debit cards for more, and lower value, transactions

Out-Law News | 04 Jun 2014 | 10:34 am | 2 min. read

UK consumers now use debit cards for around 32% of all purchases, accounting for around 50% of sales value, according to an industry survey.

This year's retail payments survey by the British Retail Consortium (BRC) found that the use of cash by UK consumers fell in value by 14% over the past five years (20-page /8.5MB PDF), despite continuing to account for the majority of purchases. However, the percentage of transactions paid for in cash has fallen by 10%, to 53%, over the past five years due to the growing use of technology such as contactless cards and self-service tills for smaller purchases previously made in cash.

"Customers are taking advantage of new ways to shop and pay," said Helen Dickinson of the BRC. "The availability of contactless cards, handy express stores and self-service tills as well as online sales has increased the use of debit cards for smaller payments in place of cash. This is very much in line with the attention customers have paid to price and value during the recent economic uncertainty as they have sought to minimise payments from their budgets for everyday items."

"Cash use down 14% in the last five years is a milestone in the development of our digital economy. It shows that customers are embracing digital shopping whether online or on the high street and retailers are adapting and evolving to meet the demand with excellent services. However, it is important to note that cash still remains dominant in the overall number of transactions," she said.

The BRC's survey covered 60% of retail sales during 2013, with a combined value of £191 billion. Of these, 53% of transactions were in cash with an average value of £9.47. Debit cards accounted for 32% of transactions, with an average value of £27.58; while credit and charge cards and "other" non-card methods of payment accounted for the remaining transactions.

Technology and payments law expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said that the figures were significant as cash had previously had a "strong hold" on 'convenience' spending below the £20 mark.

"Contactless has been slow to catch on but, now that it is reaching a critical mass with compatible cards being widespread, card schemes can compete for and capture those transactions," he said. "This means increased transaction volumes – a key objective of contactless."

"The rollout of contactless cards to other functions, like London's buses and – later this year – the Tube, will only boost their adoption as cash is needed less and less," he said.

The BRC found that the average spend per transaction on credit cards rose for the first time in three years, suggesting "more considered purchasing" and an increase in consumer confidence, it said. Its research found that consumers were spending the same amount overall on credit cards, but for fewer items.

The report criticised banks for "levying unjustifiably high charges" on retailers for processing credit or charge card payments, finding that the average cost per payment had risen by 18.3% in the last five years to 40.9 pence. At the same time the cost of processing cash payments had fallen by 38% over the same period, to 1.3p per transaction, the BRC said. Debit card processing costs had risen by 4% to 8.8p per transaction, it said.

"It is really disappointing that the average cost of accepting both credit and debit cards have increased over five years, while cash costs have gone down," said the BRC's Helen Dickinson.

"Interchange fees cost the retail industry and its customers almost £1bn in 2013. The much-welcomed European proposals to cap how much banks can charge retailers to process card payments are close to final approval, but in the meantime, we continue to work with the UK government and payment system regulator to implement caps on UK fees without further delay, as has happened in other European countries," she said.