2020 saw cash continue its long-term decline.
Cash payments fell by 35% compared to the previous year, according to a report by UK Finance.
This is an acceleration of a decline that has been averaging around 15% a year since 2017.
Not surprisingly the accelerated decline in 2020 is largely attributed to the Covid-19 pandemic.
Contactless payments were promoted to consumers as a safer way to pay for items in store.
This meant that many businesses, trying to protect their own employees from transmissions of the virus, turned to contactless only for the duration of the year.
And the figures on card usage show the result.
Card payments in the UK totalled £52.3billion in February 2021.
Of those transactions, contactless payments accounted for 38% of all credit card spend and 58% of all debit card transactions.
And while cash remained the second most-used method of payment, an increasing number of customers moved towards online payment too.
Contactless and ecommerce the ‘new normal’
E-commerce sales grew by 46% in 2020 compared to 2019.
This represented the strongest growth for online sales since 2008, according to the Office for National Statistics.
Again, Covid-19 is attributed to the rise.
Sales of household goods online rose by 73.9% and online department store sales were up 65.9%.
Other retailers like toy shops and bookshops also saw big increases, up 73.4% in 2020 compared to 2019.
New technology and smart payment options and mobile wallets, like Apple Pay and Samsung Pay, are becoming more popular every year, particularly among younger shoppers who are used to having more of their life reliant on a smart device.
In one study by Juniper Research, it is predicted that by 2025 global consumer spend through digital wallets will top $10 trillion, nearly double the current spending level of $5.5trillion a year.
What customers think of new payment methods
The events of the last 18 months were thrust on businesses and consumers.
And they’ll have long lasting effects on the way consumers act, shop and spend their money.
Indeed, many consumers who had never considered trying contactless or online shopping before 2020, have now embraced these new ways, and many don’t see themselves going back.
In one study, 32% of shoppers said they will use cash less often when we’ve moved past the events of this year.
Nearly a quarter (24%) said they’ll continue using electronic payments rather than return to using cash.
It’s not 2020 that has brought this change, as we’ve discussed.
While Covid-19 has accelerated the change, cards and contactless have been slowly overtaking cash for the last decade.
Part is down to consumer preference and convenience.
The second part is that cash is becoming more expensive to access.
According to a study earlier this year by consumer group Which?, more than one in four cash machines are now charging a withdrawal fee for customers.
The research found that the amount people are paying to take out their own money has increased from £75m in 2018 to £104m last year.
It is widely believed that the rise in ATMs charging for withdrawals has come as a result of banks closing local branches, removing free cash machines, coupled with the increase in contactless payments.
According to ATM network operator, Link, there were 15,277 cash machines charging for cash withdrawals in 2019, compared to 11,120 in 2018.
What does this mean for businesses?
Speaking to internetretailing.net, David Jinks, head of consumer research at ParcelHero, said that unless retailers developed an omnichannel approach, embracing both online and physical stores, the High Street would be dead by 2030.
So as well as embracing more convenient ways of paying in store, like using contactless cards payments, businesses need to see how they adapt to online shopping and expand their offering even more to consumers.
Doing so has a number of commercial benefits.
That’s because, according to research, consumers naturally spend more in store when using contactless, compared to those who use cash.
A study by Mastercard found that contactless payments have increased consumer spend by roughly 30% since they were introduced in 2007.
When not restricted to just the cash in their wallet, shoppers are more likely to make impulse purchases, pushing up the average transaction value.
Continuing trends point away from cash, towards online & contactless
With younger people leading the charge and contactless payment technology evolving to include a wider array of contactless devices like smartwatches and even payment rings, everything points towards a further move away from cash.
There will, of course, be people who prefer, or will continue to rely on cash to pay for purchases.
A report published last year warned that cash could become obsolete by the end of 2026 and called on the Government and regulators to step in to protect cash payments for those who rely on them.
But for the most part, we are certainly seeing the demise of cash as a predominant payment type in the UK.