Cashless payments to overtake notes

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Published: Saturday 7th February 2015 by The News Editor

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Cashless payments are set to become more popular for the first time this year than transactions using coins and notes, the UK payments body is predicting.

The Payments Council has been forecasting for several years that 2015 will be the tipping point when the number of non-cash payments, including those using credit and debit cards, cheques, direct debits and standing orders and mobile payments, overtakes the number of payments made using the physical money sitting in your wallet.

While the number of cash payments has been edging down slowly in recent years, the number of non-cash payments has been growing.

The Payments Council expects that this year there will be 400 million fewer cash payments than there were in 2014 and 700 million more non-cash payments.

This would mean that in 2015 around 19 billion transactions are made with cash and 19.9 billion are made without cash, marking the first year that cash is no longer king.

The Payments Council will shed further light on cash and cashless payments numbers when it confirms how many transactions were made in 2014 later this spring.

While the Payments Council has not pinpointed a month in 2015 when it expects non-cash payments to overtake those in cash, analysis by The Times found that, assuming that cash payments fall and cashless payments increase at a constant rate from the start of this year to the end, cashless payments would surpass those made in cash on March 8 this year.

The growth in online shopping and the rise of new, innovative ways to pay have led to consumers turning to a growing range of payment options in recent years.

About three-quarters (74%) of Britons now shop online, compared with just over half (53%) in 2008, according to Office for National Statistics (ONS) figures released last year.

Using a card to make a contactless payment by swiping it on a reader at the till instead of having to enter your Pin number is also becoming an increasingly popular way of paying for low-value items, when traditionally someone might have scooped up the loose change sitting at the bottom of their wallet.

Last year saw contactless payments hit new records, according to the UK Cards Association, with £2.32 billion spent using the method in 2014.

This was more than three times the total value of contactless spending the previous year. Contactless payments can be used on transactions worth up to £20.

Last August, the number of transactions made using debit and credit cards generally in a single month passed the one billion mark for the first time, according to data from the Association.

Richard Koch, head of policy at the UK Cards Association, said: “Instead of having pockets full of coins or carrying wads of notes, people are increasingly choosing their cards instead.

“Three in every four pounds spent in British shops is now paid with cards and we’re all using them for smaller purchases too.

“It’s the rise in convenient contactless payments for lower sums and smaller transactions online which in particular are changing the way we choose to pay.”

The Association said that debit and credit cards now account for just over three-quarters (75.8%) of total retail sales, up from 51.6% in 2004.

With people using their cards more often to pay for smaller amounts, the average value of a debit and credit card transaction has fallen by £3.79 since August 2011 – down from £50.52 to £46.73.

It is also getting much easier to ditch your wallet altogether – and instead reach for your mobile phone when you want to make a payment.

In 2012, Barclays launched Pingit, which allows customers and non-customers to send money as easily as texting.

Since launch, Pingit has had 3.7 million downloads and a total of £918 million has been sent using Pingit.

Another mobile payments service, the industry-wide Paym scheme, has had nearly two million people registering to receive payments since it was launched last April.

Fast forward into the future and people could even find themselves using their clothing to pay at the till.

In December, Barclaycard revealed that it is developing pairs of contactless ”tap and pay” gloves, which people can use by swiping the back of their hand on the reader at the till, in a similar way to making contactless card payments.

Prototypes of the gloves are being trialled by Barclaycard with a view to possibly making them available to consumers more widely this year.

New technology has also helped to bolster the future of cheques, a form of payment which a few years ago was in danger of being killed off.

Barclays has been running a pilot of a scheme which allows people to pay in a cheque by taking a photo of it with their mobile phone. This means that the cheque takes a much faster period to clear.

Steven Cooper, Barclays personal banking CEO, said: “What we are seeing across the industry is that consumer behaviour is helping to drive new products and services, designed to make people’s lives easier.

“For example, we now have almost nine million Barclays contactless debit cards and close to 10 million contactless Barclaycards in wallets across the UK.

“The growth in the use of contactless is incredible, with twice as many transactions seen using this technology in our debit cards in 2014 compared with 2013.”

So is this the beginning of the end for cash?

No, according to the Payments Council, which still expects 12.9 billion cash transactions to take place in 2023, alongside 27.5 billion transactions without cash.

Nearly £690 million is expected to be typically spent each day in cash in 2023.

The Council pointed out that there are currently 69,000 cash machines across the UK – a figure which is an all-time high as well as being up by 58% on 2003.

John Howells, CEO of national ATM network Link, said last month: “Cash is a vital part of the way we lead our lives and it is certainly going to endure over the next decade and beyond.

“Its use is especially important for lower-income groups and is particularly significant from a financial inclusion perspective.”

Mark Bowerman, a spokesman for the Payments Council, said cash is still a vital payment method for many consumers, with students, people who need to tightly control their budgets, older people and people with a disability being particularly high users of cash.

He said: “We are not forecasting that cash will disappear. Cash is widely used for day-to-day purchases by virtually everyone and for some people (around 3.5 million) cash is the only method that is used.”

Published: Saturday 7th February 2015 by The News Editor

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