First Increase in Cash Payments in a Decade

14 Sep, 2023

First Increase in Cash Payments in a Decade

In the previous year, cash payments experienced a notable resurgence, marking the first such upswing in a decade, as consumers grappled with escalating prices. Nevertheless, it is essential to note that debit card usage still dominated the landscape, constituting half of all transactions, reaching its highest-ever levels.

Many consumers continue to express a preference for managing their finances with cash. However, UK Finance, the organization responsible for compiling this data, anticipates a decline in cash usage in the coming years, once the current financial pressures are alleviated.

Even amid the strain of rising living costs and the gradual emergence from lockdowns, nearly 22 million people resorted to cash only once a month or not at all last year. This stands in stark contrast to the fewer than one million individuals who primarily used cash.

Hybrid working arrangements contributed to the increased use of cards. With people spending part of the week working from home and commuting less frequently, they tended to rely more on card payments. This shift was particularly notable in the transportation sector, where the purchase of annual or monthly season tickets declined in favor of frequent individual journey payments, including those made via cards stored on smartphones and watches.

The research also indicates that consumers may have opted for more frequent but smaller grocery shopping trips instead of their traditional weekly outings, possibly as a strategy to cope with rising prices.

In an effort to manage limited budgets, cash payments saw a 7% increase last year compared to 2021, totaling 6.4 billion payments. While cash remained the second most popular payment method, it accounted for only 14% of the overall total, dwarfed by card usage.

Adrian Buckle, Head of Research at UK Finance, emphasized the diverse array of payment methods available in the UK, each offering specific advantages. He noted that despite the increased use of contactless, online banking, and mobile payments in 2022, some individuals still preferred cash for budgeting, particularly in light of cost-of-living challenges.

In a discussion at a café in Bromley, south-east London, Sarah Maxwell-Scott, an accountant, shared her inclination toward card payments due to the convenience they offered, while Debbie Clark, a retail assistant, favored cash for the transparency it provided in tracking expenses.

The data also reflects the ongoing decline of cheques, with the average person writing one cheque less than once every two years. Many banks have ceased automatically issuing chequebooks to customers. Nonetheless, efforts are being made to preserve access to cash for those reliant on it.

In August, the Treasury announced that banks would face fines if they failed to provide free access to cash withdrawals for consumers and businesses. A new policy mandates that free cash withdrawals and deposits must be available within one mile for urban residents and three miles for those in rural areas.

Graham Mott, from Link, the entity overseeing the UK's cash machine network, stressed the importance of maintaining free cash access, especially during challenging economic times. The Post Office network also reported a surge in cash transactions between June and August, serving as a lifeline for those who prefer cash in areas where bank branches have closed.