Retailers that embrace change in payment methods will benefit in long term, says expert

Retail expert Tom Leman of Pinsent Masons, the law firm behind Out-Law.com, said that retailers which track the changing trends in consumer spending methods stand to benefit in the long term.

A survey by the British Retail Consortium (BRC) has revealed that consumers are increasingly turning away from paying by cash or credit card as the use of alternative payment methods doubled.

The survey showed that the of cash transactions fell by nearly 7% last year compared to 2011, whilst there was also a near 10% reduction in the value of cash transactions relative to the overall value of payments. Cash is still consumers' most common method of payment, accounting for 54% of all payments.

The survey also revealed a 3.4% fall in the number of credit and charge card transactions recorded last year compared to 2011. The number of debit card transactions rose by 3.2%.

The number of payments made using alternative payment methods, which encompasses cheque payments and coupons but also transactions made via mobile wallets and through online payment services such as PayPal, more than doubled in 2012, the survey said. The total sales recorded for non-card payments was £3.3 billion, it said, up from £1.5bn in 2011.

The BRC's survey report said that approximately 40% of "manned tills" operated by retailers are now fitted with the "capability to accept contactless cards". It said that a number of retailers have detailed their intention roll out or consider installing near-field communications technology to facilitate contactless payments over the next year. The BRC said that this would result in more than half of retail tills being able to facilitate such payments.

"The decline in the use of cash and credit cards requires the retailer to innovate to keep its share of the retail wallet," Tom Leman of Pinsent Masons said. "Some retailers already need to spend money on infrastructure to stay ahead and the rise of the alternative payment systems highlights that further. Those retailers that embrace the change and invest in their software will benefit in the long run."

BRC said its survey data was collected from retailers that account for 60% of all retail sales in the UK.

Earlier this year a report into payment trends by the UK Payments Council revealed that low value transactions were largely paid for by consumers using cash. However, it predicted that mobile wallets and other non-card contactless payment technology are likely to become more popular as consumer spending rises in future.

"We still make a lot of very small cash transactions (three out of five of our one-off payments) but since 91% are under £25, contactless payment technology which has started to become a more familiar sight at shop tills and on our cards could revolutionise how way we pay," the Payments Council said. "Currently, most contactless payments are made using a debit or credit card upgraded with the new technology, but soon mobile phones could do the job instead."

"By 2021, consumer spending is forecast to be roughly 45% higher, but the use of cash is expected to have fallen 1%, and cards may be in decline by then too. As we adopt new payment technologies, this may even prove a conservative forecast," it added.