Nearly one in three of all payments in the UK were made using contactless cards or with a smartphone or smart watch in 2021 (32%), a rise of 36% compared with transaction volumes in 2020, according to figures from UK Finance. The figures also show that more than half of all consumer card payments in the country were contactless (58%). mobile payment uk

Considering cash, the experience of the past couple of years has shown interesting impacts due to the pandemic. The long-run trend in cash payments over the past decade has been of a continuing decline, with payments transitioning in particular to debit cards.
In 2020, the pandemic resulted in cash use falling by 35% compared to the previous year. Since 2017 cash use had been declining by around 15% each year, so 2020 represented an acceleration of this decline.

In 2021, it appears that there was a reduction in the rate of decline in cash use. Much of this was to be expected; many parts of the economy with traditionally high levels of cash usage were closed or heavily restricted during lockdown, and in those parts of the economy that remained open, many retailers encouraged the use of contactless payment options, amid fears about cash being a vector for Covid-19 transmission. The reopening of the economy and lessening of fears about Covid-19 transmission appear to have led to a reduction in the rate of decline, particularly when compared with the experience of 2020. Having said this, the total number of cash payments made in the UK during 2021 still declined by 1.7% compared with 2020. Cash remains the second most frequently-used payment method in the UK, being used for 15% of all payments made during 2021.

Wide variety of payment methods are available in the UK

Debit Cards mobile payment uk

Debit cards accounted for 48% of all payments in the UK

Overall debit card payment volumes had declined in 2020 due to the pandemic, but payment volumes rebounded in 2021 with growth of over 23% to reach a total of 19.5 billion payments. As a result, debit cards consolidated their position as the most frequently used payment method in the UK, responsible for nearly half (48%) of all payments made in the UK during 2021. The overwhelming majority of the population (97%) now hold a debit card and the majority of people use them to make payments.

Throughout 2021, contactless payments continued to grow in popularity, contributing to the ongoing increase in use of debit cards and the migration of payments away from cash. Debit cards are also one of the main payment methods used to pay for online shopping, something which was boosted by periods of lockdown in the UK. Over the next decade, debit card payment volumes are forecast to continue to increase in use. They are predicted to pass the threshold of accounting for more than half of all payments in the UK, reaching over 24 billion payments in 2031. This growth will be driven by the continuing rise of contactless payments, the ongoing growth of online shopping and ever-increasing levels of card acceptance amongst businesses of all sizes, but particularly amongst smaller businesses.

Credit Cards mobile payment uk

66% of adults in the UK have a credit card

There were 3.4 billion payments made using credit cards in 2021, an increase of 21% compared to the previous year, reflecting credit card payments returning almost to their pre-pandemic levels. Spending had previously declined due to (a) lockdowns closing sectors of the economy with high credit card spend (such as holidays, travel and entertainment), (b) restrictions on international travel that affected both the leisure and business travel sectors, and (c) reductions in consumer confidence. As lockdowns were relaxed during 2021, opportunities to make payments using credit cards increased. Having said this, consumer confidence has not returned to pre-pandemic levels, and cost-of-living fears in particular may be making consumers more cautious about taking on additional unsecured debt. Concerns about energy and food price increases in particular first emerged in the autumn of 2021 and may have had an impact on use of consumer credit.

Contactless payments

During 2021 the number of contactless payments made in the UK increased by 36% compared with 2020, to reach 13.1 billion payments.

This was driven by:
• contactless limit increase to £100
• some retailers continuing to encourage consumers to use contactless at point-of-sale
• the continued roll-out of card acceptance devices especially among smaller businesses
• consumers becoming increasingly comfortable and familiar with making contactless payments
• continuing growth in popularity of mobile contactless payment services such as Apple Pay and Google Pay

At the end of 2021 there were 142 million contactless cards in circulation, with 91% of debit cards and 89% of credit/charge cards in the UK having contactless functionality.

Contactless payments are used extensively throughout the UK in 2021, with 86% of people making contactless payments at least once a month or more frequently. People of all ages used contactless payments, and even when considering people of retirement age, around eight out of ten (78%) used contactless at least once a month. The group showing the highest rate of use was the 25-34 age group, where nine out of ten (92%) of people regularly made contactless payments.

Cash

Cash payments declined extensively in 2020, as lockdowns closed many parts of the economy that tended to exhibit high cash use, and as many retailers encouraged customers to use contactless payment methods in order to help support social distancing.

In 2021, as the economy reopened, the rate of decline in cash usage slowed. Despite this, the total volume of cash payments still fell slightly in 2021, and as a result the proportion of UK payments made using cash fell to 15%. Cash remains the second most frequently-used payment method in the UK, behind debit cards.
During 2021 there were 23.1 million consumers who used cash only once a month or not at all, instead relying on cards and other payment methods to manage their spending. This was a significant increase from 13.7 million consumers the previous year, itself a significant increase compared with the year before. It appears that the pandemic and associated lockdowns have accelerated some peoples’ movement towards living increasingly cashless lives.

Over the next decade the number of cash payments in the UK is expected to continue to fall, as consumers turn to alternative payment methods, although the rate of decline is expected to slow as use becomes concentrated amongst people who have a strong preference for cash and in situations where cash has advantages over other payment methods.

Traditionally, cash has been used as a budgeting tool by people who are managing limited budgets. However, increasingly we see younger people budgeting using mobile banking and other technology-based services, rather than using physical cash to manage their spending.

This change in behaviour is something that we are monitoring, but which has implications for the future use of cash in the UK.
In 2031 there are forecast to be fewer than three billion cash payments made in the UK, accounting for around 6% of all payments. Rather than the UK becoming a cash-free society over the next decade, the UK will transition to an economy where cash is less important than it once was but remains valued and preferred by many.

Apple Pay, Google Pay and Samsung Pay

As well as using contactless cards, other devices such as mobile phones and watches can be used to initiate contactless payments, or to make payments for online shopping. Nearly a third (32%) of the adult population reported being registered for at least one mobile payments service in 2021. Of those registered for mobile payments 92% of these people used the services to make payments during the year. Seven out of ten (70%) of these registered users made payments every month. Similar to most new technological innovations, UK Finance market research found that younger people are more likely than older people to use one of Apple Pay, Google Pay or Samsung Pay. We expect that, over the next decade, older age groups will start to catch up with younger age groups in terms of adoption of mobile payments, a pattern that is regularly seen following the introduction of new payment and IT services.

Buy Now Pay Later mobile payment uk

Around one in eight people in the UK (12% of adults) used Buy Now Pay Later (BNPL) services to purchase something during 2021. There wasn’t a significant difference in use between male and female consumers in survey.

The age group that made most use of these services was 35-44 year olds, with one in five adults in this age group using BNPL services during 2021. In contrast, just 4% of people aged 65 or over used these services in 2021.

Merchant Machine identified the UK as one of the ten countries globally that are closest to becoming cashless societies earlier this month.