UK Finance has released its 2021 Payments Market Report, an analysis of all forms of payments over 2020 showing the impact the Covid-19 pandemic and resultant lockdowns had on the nation’s payments behaviour.
For the first time in six years, the total number of payments in the UK declined, falling by 11% to 35.6 billion.
While consumers continued to make the vast majority of all payments (86%) the report demonstrates the reduced opportunities for people to spend money during the pandemic, with the number of consumer payments falling by 13% to 30.7 billion.
Meanwhile, the number of payments made by commercial organisations, government and not-for-profit organisations increased slightly to 4.8 billion, representing 14% of payment volumes but 80% of the total value of payments.
The report details some notable changes in the type of payments people made use of, with significant growth in contactless payments, mobile payments and internet banking, alongside a continued reduction in cash usage.
During 2020 the number of contactless payments made in the UK increased by 12% to 9.6 billion payments. Overall, contactless payments accounted for more than a quarter (27%) of all UK payments. In the last four years contactless payments have jumped from being just 7% of all payments to 27%.
83% of people in the UK now use contactless, with no age group or region falling below 75% usage. Supermarkets were the most popular place to use contactless payments in 2020, accounting for 41%of contactless payments.
This reflects the fact that supermarkets remained open during the lockdown periods in 2020, while many other types of retail and hospitality needed to close. The increase was also caused by consumers being encouraged to reduce contact by using cards, and contactless payments in particular, during lockdown.
The upper limit on the value of an individual contactless payment was also increased from £30 to £45 in April 2020, enabling consumers to make a greater proportion of card payments this way.
This measure was implemented ahead of schedule by the industry in order to help consumers and businesses during lockdown. There are now 135 million contactless cards in circulation, covering 88% of debit cards and 81% of credit cards.
Mobile and Faster Payments
The report highlights strong growth in the use of mobile phones and smart watches to make payments. Nearly a third (32%, 17.3 million people) of the adult population were registered to use mobile payments by the end of 2020, an increase of 7.4 million people compared to 2019.
Whereas contactless payments are widely used across different age groups, there is a notable difference in the current take-up of mobile payments. In 2020 just over 50% of 16 to 34 year olds were registered for mobile payments compared to 11% of over 65s.
With more people working from home there was a notable increase in remote banking, as well over two-thirds of UK adults (72%) used online banking and over half (54%) used mobile banking, with these services providing a convenient way for people to continue to manage their finances during periods of lockdown.
There was also a notable increase in business use and in 2020 54% of all business-to-business payments were made via Faster Payments or other remote banking.
2020 saw the number of cash payments made in the UK fall by 35%, meaning that cash was used for 17% all payments in the UK. Cash remains the second most frequently used payment method behind debit cards.
During 2020 there were 13.7 million consumers who used cash only once a month or not at all, a significant increase from 7.4 million consumers the previous year.
Whilst some of this can be attributed to changing payment preferences, it also reflects the fact that during lockdown, people had fewer opportunities to go shopping and were being encouraged by many shops to pay by card or contactless instead of cash.
Despite this, there remained 1.2 million consumers who mainly used cash for their day-to-day spending during 2020, highlighting the importance of the recently announced commitments made by the industry in relation to supporting access to cash.
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