Once we have found a set of payment methods that we are comfortable using and that help us manage our finances effectively, it can take a great deal for us to change to a different way of doing things.

In the last couple of years, however, the global Covid-19 pandemic and associated lockdowns have led to significant changes in patterns of payments in the UK. Lockdowns resulted in large sections of the economy shutting down completely for parts of the year. In those parts of the economy which remained open, many businesses switched to home working arrangements, reducing expenditure on travel and city centre spending.

The pandemic not only led to a reduction in the total number of payments made in the UK, it also led to changes in the types of payments that were used. People made greater use of contactless payments, online banking and mobile wallet channels, largely at the expense of cash payments. This led to the question as to whether these constituted permanent changes to people’s behaviour, or whether people’s payment preferences would return to pre-pandemic patterns as lockdown restrictions were eased.

Data from 2021 suggest that trends in payments behaviour have returned towards their pre-pandemic patterns.

Both debit card and credit card payments, which had declined in 2020, rose once again in 2021. Further, the share of payments made using cards, which had increased to 52 per cent of all payments during 2020, continued to increase in 2021, with 57 per cent of all payments in the UK being made using cards. Contactless payments continued to be popular, accounting for almost a third (32 per cent) of all payments made in the UK during 2021.

As for cash, the experience of the past couple of years has shown interesting impacts due to the pandemic. The long-run trend in cash payments over the past decade has been of a continuing decline, with payments migrating in particular to debit cards. In 2020, the pandemic resulted in cash use falling by 35 per cent compared to the previous year. Since 2017 cash use had been declining by around 15 per cent each year, so 2020 represented an acceleration of this decline. In 2021, it appears that there was a reduction in the rate of decline in cash use. Much of this was to be expected. The reopening of the economy and lessening of fears about Covid-19 transmission allowed cash-heavy sectors of the economy to operate again, and also allowed for more face-to-face transactions to take place. Having said this, the total number of cash payments made in the UK during 2021 still declined by 1.7 per cent compared with 2020.

Cash remains the second most frequently used payment method in the UK, being used for 15 per cent of all payments made during 2021. It is also notable that some people find physical cash to be helpful when managing a tight budget. Of course, others find mobile banking to be a convenient way of staying informed about their current balance. Nevertheless, given the rising cost of living, we may see an impact on people’s use of cash over the coming months.

The key trends seen in 2021 suggest:

• a continued increase in debit card payments
• a continued decline in cash payments, albeit at a reducing rate over time
• ongoing growth in Faster Payments and other remote banking payments

More in-depth analysis of payment trends in 2021, and details of our forecasts for the development of payment volumes over the next ten years, can be found in the report UK Payment Markets, available via the UK Finance website.