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UK debit card use soars to 90% of spend as fees continue to rise

UK debit card use soars to 90% of spend as fees continue to rise

The British Retail Consortium (BRC) published its latest annual Payments Survey. The survey is an annual publication of the BRC measuring the sales volumes and values of different payment channels employed by retailers across the UK.

The report reveals that in 2021, as stores closed for lockdowns and the public was advised to use contactless payments, cash usage fell to just 15% of all transactions (down from 30% in 2020), while 82% were made on credit or debit cards (up from 67% in 2020).

More than four-in-five card transactions were made using debit cards, with the rest made up of credit and charge cards.

As a proportion of total money spent, cash accounted for just 8% of consumer spend (down from 15%), while credit cards rose slightly to 23%, and debit cards rose significantly to 67% (up from 59% in 2020).

The rise in the use of card payments in part reflects the increase in online shopping in 2021, when 48.6% of non-food items were purchased online.

This figure has fallen to 39.9% in the first 11 months of 2022, as more people returned to the high street as the pandemic eased. As a result, it remains to be seen whether this shift to card payments will stick.

Cash remains vital for many people, particularly vulnerable groups who do not have access to other payment methods.

However, the decline in cash has made it harder for many firms to use cash efficiently – increasing the costs associated with handling physical money.

Government will need to look at solutions to ensure it remains a viable payment option for consumers.

While card usage soared, so did the costs associated with accepting these payments. Retailers incurred costs of £1.3 billion just to accept card payments from customers in 2021.

Debit cards, which accounted for the majority of transactions, saw scheme fees rise by 28% compared to 2020, and total Merchant Service charges increased by 12%.

This translated into an additional £141 million in costs imposed by card firms onto retailers just to process debit card transactions.

Key Finding:

VALUES UP: Total UK retail sales rose by 4.57% to £421 billion in 2021; people were spending more which was reflective of general inflation and price increases across the market, but also a strong bounce back from the pandemic following periods of lockdown and uncertainty for the retail industry.

VOLUMES UP: Extrapolating our sample for the entire retail industry, the data implies that there were 17.1 billion retail transactions overall in 2021, up from 16.7 billion transactions in 2020, but still lower than pre-pandemic levels (19.1 billion transactions in 2019).

DEPENDENCE ON CARDS INCREASES EVEN FURTHER: The drop we see in cash usage in 2021 is replaced almost entirely by an increase in debit card use. Card transactions in 2021 accounted for almost 90% of all retail spending, with 67% of turnover being accounted for by payments made on debit cards.

CARD ‘TAX’: Retailers spent £1.3 billion on costs in 2021, of which £1.15 billion was spent on processing card transactions. The average cost for using a debit card in 2021 rose from 0.265% to 0.273%, with scheme fees increasing by 28% compared to 2020 and total Merchant Service charges increasing by 12%. With a much higher volume of transactions being made on debit cards, this increase resulted in an additional £141 million being spent on processing debit card transactions.

UK Card Payments Market Statistics

Digital & Payment Cards Yearbook

The post UK debit card use soars to 90% of spend as fees continue to rise appeared first on Payments Cards & Mobile.

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