Shoppers are turning away from cash and cheques in favour of spending on their debit cards, according to new figures released today by the Payments Council.
Cheque usage dropped by £21.5bn in the second quarter of 2010 – a decline of 10% compared with the same period in 2009. On average, 290,000 fewer cheques were written every day between this April and June than were used the previous year.
Meanwhile, the amount of cash withdrawn from machines was £1.6bn lower than in the second quarter of 2009, equating to a 3.2% drop.
On the other hand, the use of debit cards (for paying for goods and services) and Faster Payments (for transferring cash between bank accounts) both rose.
£7.9bn more was spent on debit cards in the second quarter of 2010 than in the same period the previous year – a 12.4% rise – while £16.9bn was transferred using the Faster Payments system. This represents a dramatic increase of 67% in the amount of money moved via Faster Payments, which the Payments Council says was possible because more banks made the service available to their customers in 2010.
Cheques to be phased out
The declining use of cheques is one reason why they are likely to be phased out altogether by 2018.
The Payments Council has set 31 October 2018 as the target date for the closure of the central cheque clearing system, although it is currently consulting with industry and consumer groups on the impact this might have, as well as whether the goal is realistic.
Which? personal finance campaigners have warned that ending the use of cheques before suitable alternatives are available could damage the interests of consumers – particularly those who currently rely on cheques.
Faster payments and the future
Sandra Quinn, director of communications at the Payments Council, said: ‘The payments revolution continues apace in the UK. Cheque usage is shrinking dramatically, while credit cards hold less appeal for consumers and businesses.
‘We use cash less where there is an easy alternative, but we’re years away from cash falling out of fashion. Debit cards are taking over our daily purchases, while Faster Payments are fast becoming how we transfer our money electronically.’
However, Which? banking expert Melanie Green commented: ‘The Faster Payments system is an important innovation, but some consumers are still unable to use it. It is services like this that must be fully developed and made easily accessible for people before cheques disappear.
‘Having said that, there are good reasons why more and more people are banking online. The internet arms of both HSBC and the Co-op – First Direct and Smile banks – performed brilliantly in our recent People’s Choice poll of financial brands, showing that a web-based banking experience can knock spots off the competition.’
For more information on online banking, read the Should I bank online? and Protecting your online bank account advice guides. You can also read the latest Which? review to compare the market’s best bank accounts.
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