Cash’s role in the British retail economy has been reaffirmed by another set of data, though credit and debit cards remain the most dominant form of payments.
The British Retail Consortium (BRC), a trade association for UK retail businesses, reported that debt cards accounted for 62% of all transactions and 66.7% of spending in 2023.
When debit and credit cards are combined, card payments account for 75% of all transactions and 85% of spending. While this demonstrates the substantial hold cards have over payments, this does not mean that cash is dying out.
The BRC also found that cash use rose in 2023 for the second year in a row to account for 19.9% of transactions, up slightly from 18.8% the year prior. Though cards have well and truly taken the lead from cash, the BRC is not the only UK business stakeholder to observe a continuing preference for cash among certain segments of British society.
Budgetary reasons are often cited as a reason for the continuing use of cash by UK consumers, particularly in the context of the ongoing costs of living crisis. This has been cited by the likes of Nationwide, which reported a 4% increase in cash withdrawals in 2023 to 3.14 million in total.
Chris Owen, BRC Payments Policy Advisor, said: “Persistent inflation and the cost of living crisis continued to affect households across the country and many consumers used cash to budget more effectively. However, the dominance of card payments continues apace, accounting for over 85% of spending.”
Other banks, such as NatWest, have noted that cash use remains popular among certain consumer demographics. In fact, even among those who use cards as a piracy method, NatWest found that 76% of its customers still carry cash in case of an emergency.
Though the BRC’s data released this week covers 2023, various payments failures across the UK retail sector may have influenced this consumers’ preference for cash in 2024. Visa and Mastercard outages notably hit some major UK retailers back in July. Events like this may have made some more aware of the reliability of cash.
This has also been noted by regulators and policymakers, with the FCA introducing new cash protection measures in July – coming at a timely time given the abovementioned outages – and the Treasury Committee in the House of Commons later opened a call for evidence on whether rules are needed to govern the use of cash.
Separately, the BRC has also raised the issue of card fees faced by businesses. The trade association noted that card fees grew by 25% in 2023, amounting to added costs of £380m for retail businesses and bringing total card fees paid to £1.64bn.
The BRC is calling for the Payment Systems Regulator to make ‘meaningful reforms’ in its final reports on card fees and for a market overview of commercial card interchange fees.
It added that it would like to see more growth of Open Banking – on this latter topic the BRC may be in luck, as the UK government is trying to encourage Open Banking growth with legislation.
“Card fees continue to rise at a substantial rate and the PSR must act upon the harms it has identified in its current market reviews,” the BRC’s Owen continued.
“It must move swiftly to reform the market and implement remedies including price caps on fees and price rebalancing measures.”
