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Debit card use quadruples while cheques plummet

Cash payments to fall below 50% within five years

A new report from the Payments Council shows significant changes in the way consumers have paid for goods and services over the past decade, with further dramatic changes expected in the coming years.

The last decade not only saw the rise of internet banking and shopping but it was also the decade where cheques and cash were increasingly replaced by debit and credit cards. Highlights revealed in the new ‘The Way We Pay 2010′ report include: 

Payment methods over the past decade
  1999 2009 2018
Wages paid in cash 1 in 8 1 in 20 1 in 50
Transactions using cash 73% 59% 45%
Cash spending in pubs 90% 40% 25%
Debit card spending £65bn £264bn £490bn
Personal transactions using cheques 6% 2% 0.8%

Rapid decline of cash wages

A decade ago, one in eight workers still got paid cash-in-hand. By 2009 just one in twenty took wages home in notes and coins. By 2018, it is expected to be just one in fifty. A much more dramatic switch from cash has taken place in state benefit payments: ten years ago, 87% of benefits and pensions were paid in cash; today, 79% are paid directly into bank accounts.

Mike Bowman, head of policy and markets at the Payments Council commented: ‘More and more people have opened bank accounts in the last 10 years, and fewer and fewer have jobs in manufacturing where a weekly wage packet is more common. As a result far fewer of us get wages cash-in-hand.’

Use of cash to fall below half of all transactions

While six in ten transactions still involve cash, almost 80% of these are for less than £10. In just five years, cash transactions are expected to represent less than half the total for the very first time. If consumers had not made the move to other payments, such as cards, we would need £102bn more in our wallets each year to meet our spending needs today, compared with ten years ago. This equates to £2,050 more for each adult per year, or £40 per week each.

For example, cash spending in pubs and clubs has seen a major shift. In 1999, we bought nine out of ten of our pints with cash. Now only 40% of pub spending involves notes and coins, as pub-goers are much more likely to be eating out as well as drinking.

Cheque usage plummets

The proportion of spending made using cheques has been falling since 1990. Just 0.8% of retail transactions are now made by cheques. By value, 60% of what consumers pay by cheque is now for financial transactions (for example, savings, investments and paying credit card bills).

Credit cards reach maturity as debit cards dominate

Plastic card usage has surged as traditional payment methods have dropped back. Surprisingly, though, credit card usage has actually fallen in real terms since 2005, with debit cards becoming the favoured option for many consumers. By 2018, one in four of all transactions is expected to be on a debit card, up from just one in twenty 10 years ago. The rise of contactless technology could have a further major impact on these figures.

Expert analysis from Which?

For more information, check out our free reviews of credit cards, savings accounts and current accounts.

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