Cash payments decline as consumers embrace mobile contactless payments

The total number of cash payments in the UK has decreased as more consumers opt for digital transactions using cards and phone apps like Apple Pay and Google Pay according to latest UK Finance data.

The research showed that last year, the UK population made 6 billion cash payments, accounting for only 12% of the total, compared to 14% in 2022. In contrast, contactless payments with cards or phones reached 18.3 billion, representing 38% of all payments. 

The total number of payments made in the UK increased by five per cent to 48.1 billion with almost four out of ten (38 per cent) of all payments made in the UK during 2023 were contactless

One third of UK adults were using mobile contactless payments at least once a month

Consumers made 85 per cent of the total number of payments (41 billion payments) with businesses (commercial firms, government, and not-for-profit organisations) making the other 15 per cent (7.1 billion payments).

Spending data over recent years suggests that there has been a shift towards consumers making a greater number of transactions that are each worth a lower individual amount, albeit without necessarily increasing the overall amount spent. Anecdotal evidence suggests that this trend is caused by increased numbers of shopping trips, the transition to hybrid working, the use of multiple bank accounts, and the increased use of Buy Now Pay Later (BNPL) services.

Debit cards remain the most popular payment method, accounting for 51 per cent of all payments made in 2023. They are the most used payment method amongst UK consumers across all age groups.

Card volume increases were driven by several factors, with much of the trend towards an increased number of lower value payments being focussed on consumer retail card spending. Beyond this, migration from cash towards cards continues, as does the trend of small businesses increasingly accepting card payments. On the credit card side in particular, deferred expenditure following the pandemic may still have been affecting spending during 2023, with people spending on summer holidays, home renovations or other big-ticket items that they did not purchase during lockdowns.

The volume of cash payments made in the UK during 2023 fell by seven per cent to six billion payments (2022: 6.4 billion). The number of cash payments rose during 2022 for the first time in a decade but has now fallen back to roughly where it was in 2021.

Cash accounted for 12 per cent of all payments made in the UK during 2023, down from 14 per cent in 2022.

Almost four out of ten UK adults (39 per cent) were living largely cashless lives during 2023. However, the number of people mainly using cash in 2023 rose to 2.6 per cent per cent of the population. This represented an increase from 1.7 per cent in 2022.

Overall cash remains the second most frequently used payment method in the UK, although that varies slightly by age.

Remote banking (online, mobile, or telephone) remained popular in 2023, with 87 per cent of adults using at least one form of remote banking last year.

Mobile banking use increased from 53 per cent to 60 per cent, while online banking (via a computer) fell from 65 per cent to 62 per cent. This reflects the fact that some people are now conducting all of their banking via their mobile device, without the need to visit the full website of their account provider.

If the current trends continue, mobile banking is likely to become the most used remote banking service in the coming years. Over the next decade, debit card payment volumes are forecast to continue to increase. 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. It is forecast that over 31 billion payments will be made using debit cards in 2033.

The number of cash payments is expected to continue the long-run declining trend seen in recent years, as consumers continue to turn to alternative payment methods. However, the rate of decline is expected to slow as use becomes concentrated amongst people who have a strong preference for cash. We forecast that there will be around 3.4 billion cash payments made in the UK in 2033, accounting for around 6 per cent of all payments.

Adrian Buckle, Head of Research at UK Finance, said “There is a huge amount of choice available to consumers in terms of how they make payments, but we can definitely see the continued popularity of debit cards and contactless. This has been driven both by consumer demand as well as new technologies which help to increase acceptance levels, particularly among small and mobile businesses.

“Mobile contactless payments are growing fast and one third of adults are now making these at least once a month, with scope for usage to increase further.

“This doesn’t mean we are on our way to becoming a cashless society. Cash is still the second most frequently used method of payment in the UK, although on the whole we are using it less and more people are leading largely cashless lives.

“Over the next decade we forecast that the long run trend of a decline in cash use and growth of certain other payment methods such as cards and Faster Payments, will continue. We also expect to see further developments in the payments landscape that improve the customer experience.”