According to a recent report by the British Retail Consortium (BRC), the cost-of-living crisis in the UK is leading to a resurgence in cash usage among households on a tight budget. Although debit and credit card transactions still make up the majority of payments, the use of alternative payment methods, such as Buy-Now-Pay-Later, has more than doubled. The BRC’s Payments Survey 2023 reveals that cash usage grew for the first time in a decade, accounting for 19% of transactions compared to 15% in 2021.
This increase in cash usage has resulted in a decline in card payments, which now make up 76% of transactions, down from 83% in 2021. Debit cards account for the majority of these card payments. However, even though cards are used more frequently than credit cards, they are mainly used for smaller value transactions. This shift towards card payments has come at a significant cost to retailers, who spent £1.26 billion on card processing fees in 2022, including increased scheme fees and interchange fees.
The report also highlights the growing popularity of alternative payment methods, which now represent 4.9% of transactions, up from 2% in the previous year. Open Banking and Buy-Now-Pay-Later methods are starting to provide competition to card payments.
In terms of overall UK retail sales in 2022, the report states that they increased by 4.3% to £439.5 billion. However, this growth is primarily driven by rising prices caused by increased costs throughout the supply chain. The number of transactions also increased from 17.2 billion in 2021 to 19.6 billion in 2022. Consumers opted for more frequent but smaller purchases, leading to a decrease in the average transaction value from £24.49 to £22.43.
Hannah Regan, BRC Payments Policy Advisor, commented on the findings, emphasizing the need for action to address the rising fees imposed on retailers for accepting card payments. The BRC is calling for reforms in the payment market, including increased competition and reduced costs, as well as a review of interchange fees and the growth of Open Banking.
The report underscores the impact of the cost-of-living crisis on consumer payment behavior in the UK. While cash usage has increased, card payments still dominate, but at a high cost to retailers. The rise of alternative payment methods provides some competition, but further action is needed to ensure fairness and affordability in the payment market.
To learn more about the BRC’s Payments Survey 2023 and its findings, visit [link] and [link].
