A new forecast from UK Finance predicts that debit cards will be the overwhelming favourite way for UK consumers to pay in ten years’ time.
It also forecasts the decline in cash use will slow over the next ten years, and continues to see a role for cash in the 2030s.
Even more surprisingly, it foresees no role for Central Bank Digital Currencies (CBDCs), despite the hype from various analysts and governments around the world.
The UK Payments Market Summary 2022 notes that transaction numbers in the UK have recovered to pre-pandemic levels this year, and foresees significant growth in debit card payments over the next ten years.
Debit card payments are expected to exceed 24 billion payments in 2031, or around 60 percent of the total.
“Debit will dominate by 2031, but there’ll still be a role for cash – against all expectations.”
Despite many predictions of the death of cash, UK Finance say the long-term decline in cash use will slow, and that some six percent of payments will still be made using cash in 2031.
At the same time, Faster Payments and mobile payments are expected to account for around one in seven transactions, up from their current share of less than one percent.
Contactless up – but not as you’d think…
Contactless payments have been one of the stories of the last few years, with some research across all European markets saying eight in ten transactions at point of sale are now contactless.
While noting that contactless has come from nowhere to account for a third of UK transactions this year, the report’s predictions are quite conservative, claiming contactless will account for around half of all credit card transactions and two-thirds of all debit transactions – figures already surpassed in many European markets.
However, as Jacob Rider, Co-Head of Payments Practice at the Projective Group, notes: “[The increase in] contactless and other digital payments continues to take market share from cash purchases.
But this huge increase also provides a new avenue for fraudsters and as a result fraud prevention security measures such as AI and machine learning will be essential.”
Quite whether the payments industry is prepared for the continued rise in fraud predicted by Jacob Rider is a matter of no small debate.
However, questions regarding this level of preparedness also point to a glaring omission on the part of UK Finance – namely, the absence of a role for digital wallets and CBDCs in the payments landscape.
It may be that UK Finance sees wallets as being linked to debit cards in the future, although their report does not say this explicitly.
More interesting would be their view on whether CBDCs will have a role in ten years’ time, as the proponents of these instruments claim: or whether they will prove too difficult to implement, and UK Finance are therefore correct that debit cards will rule.