Long-term payment trends - preparing us for lockdown?

Many commentators at this time are attempting  to discern where payments in the UK may be heading. What impact will the current Covid-19 crisis have on spending patterns, consumer preferences and business practices? These are challenging questions to address at a time when lockdown is only now starting to gradually be lifted throughout the UK and many parts of the economy are still ?on hold?.

However, what we can certainly do is understand the background against which the current crisis is unfolding. To this end, UK Finance's UK Payment Markets 2020, published today, considers trends in payments in the UK up until the end of 2019, identifies key recent trends in payments, and discusses what this tells us about consumers, businesses and government. And one of the things we can see is that recent trends in payments have inadvertently left the UK far better prepared to cope with payments under lockdown than we would have been a decade earlier.

Anecdotal evidence suggests that during lockdown we have increasingly turned to online shopping, card payments and online banking. However, this is nothing new in the UK.

The overwhelming trend in payments over the past decade or more has been the declining use of cash and the growth in use of debit cards to make payments.

The new findings published by UK Finance show that cards were used for more than half of all payments in the UK during 2019 (51 per cent), the first time that this threshold has been passed.

Card use has been growing for many years but has been reinforced recently by the popularity of contactless payments. Almost eight out of ten people (79 per cent) made contactless payments during 2019. Moreover, contactless payments were common amongst all age groups and regions, with more than two-thirds of people in every age group and more than three-quarters of people in every region using contactless payments.

Card use has also been bolstered by the continued growth of online shopping in the UK. 48 million adults shopped online in 2019, and it was an activity popular for people of all ages, with eight out of ten of those aged 65 and over shopping online during this time.

The wide adoption of card payments, the rise of contactless and the continued popularity of online shopping meant that a large proportion of the UK population were well prepared to rely more heavily on these methods during the lockdown phase of the Covid-19 crisis. For others, the banking sector has been working tirelessly to provide support and assistance where needed to ensure that people can continue to manage their finances effectively.

The growth in card use reflects the ongoing shift of payments in the UK away from cash. In 2019, cash was used for just under a quarter of all payments (23 per cent), the first time it had fallen below this threshold. In 2019, almost one in seven adults in the UK (7.4 million people) used cash just once a month or less frequently, a figure that is growing over time. Despite this trend however, cash was still the second most frequently used payment method in the UK in 2019. Many still prefer to use cash to manage their day-to-day spending. It remains to be seen what impact the 2020 Covid-19 crisis may have had on people's attitudes to cash and preferences for how to pay for things.

Adults in the UK have also increasingly adopted online and mobile banking in recent years, again something which proved beneficial when the lockdown was implemented. Indeed, during 2019, half of all adults in the UK used mobile banking through an app on a mobile phone or tablet, the first time this threshold was reached.

The transformation of payments in the UK in recent years has been considerable, with new technology bringing considerable benefits to many people. It has inadvertently prepared the UK population to be able to continue managing their finances and paying for things during the Covid-19 crisis. UK Finance is now monitoring the next phase of the crisis in order to determine what impact, if any, the experiences of 2020 have had on consumers? preferences about how they pay for things.


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