Card transactions soared to 90% of retail payments in 2021

Card use soared to 90% of total retail spending in 2021, with 82% of transactions on either on debit or credit card, up from 75% of transactions in 2020, as the COVID-19 pandemic and lockdowns “changed the way we pay”.

Cash accounted for just 15% of all transactions in 2021, down from 30% in 2020, according to the latest annual Payments Survey from the British Retail Consortium (BRC). The remaining 3% of transactions was made up of “alternative payments”, such as buy now pay later (BNPL) and gift cards.

As a proportion of total money spent, cash accounted for just 8% of consumer spend  in 2021 (down from 15% in 2020), while credit cards rose slightly to 23%, and debit cards rose significantly to 67% (up from 59% in 2020).

While card usage soared, so did the costs associated with accepting payments. Retailers incurred costs of £1.3 billion just to accept card payments from customers in 2021.

Debit cards, which accounted for the majority of transactions, saw scheme fees rise by 28% compared to 2020, and total Merchant Service charges increased by 12%. That translated into an additional £141 million in costs imposed by card firms onto retailers just to process debit card transactions.

The BRC, along with other business groups, have long been calling for intervention on anti-competitive practices in card payments in order to protect British businesses.

The BRC says the following actions must be urgently considered:

• Stop card fees rising: While the Payments Systems Regulator undergoes their lengthy market reviews into card fees, they must enact temporary interventions to stop card fees rising during this period.
• Remove interchange fees: In 2020, the UK Supreme Court ruled that card firm interchange fees were unlawful, but these are yet to be abolished.
• Treasury Review: The Treasury is called upon to conduct its own review into the cost of accepting cards

Hannah Regan, Payments Policy Advisor, British Retail Consortium said: “With the public in and out of lockdown and cash usage discouraged last year, over 90% of retail spending used debit or credit card. With card usage soaring, already hard-pressed retailers had to pay huge sums to accept these payments. We need urgent intervention from the Payments Systems Regulator and the Treasury to stop card schemes from abusing their dominant market position.”

The rise in the use of card payments in part reflects the increase in online shopping in 2021, when 48.6% of non-food items were purchased online. That figure has fallen to 39.9% in the first 11 months of 2022, with more people returning to the high street as the pandemic eased. As a result, it remains to be seen whether the shift to card payments will stick.

The BRC concludes that cash remains vital for many people, particularly vulnerable groups who do not have access to other payment methods. However, the decline in cash has made it harder for many firms to use cash efficiently – increasing the costs associated with handling physical money. It says the Government will “need to look at solutions” to ensure it remains a viable payment option for consumers.