As the cost-of-living crisis intensifies, UK consumers are turning to cash for savvy budgeting, reveals insights from the British Retail Consortium’s (BRC) Payments Survey 2023. The report highlights a significant surge in cash transactions, climbing from 15% in 2021 to 19% in the past year, reflecting households’ strategic financial management amid economic challenges.
Debit and credit cards, though still dominant, experienced a decline in usage, constituting 76% of transactions, down from 83% in 2021. Debit cards took the lead, comprising four-fifths of these transactions, indicating their preference for everyday spending. Despite the resurgence of cash transactions, cards maintained a stronghold, representing 85% of the total amount spent.
This reliance on card payments, however, imposed substantial processing fees on retailers, amounting to £1.26 billion in 2022. The report underscores a 27% increase in scheme fees and a 7% rise in interchange fees as a percentage of turnover.
Interestingly, alternative payment methods, including Buy-Now-Pay-Later (BNPL) and Open Banking, witnessed a surge in popularity, rising from 2% to 4.9% of transactions. These methods are emerging as competitive alternatives to traditional card payments.
Despite an overall increase in UK retail sales by 4.3%, reaching £439.5 billion in 2022, the report notes a shift in consumer behavior. The number of transactions rose from 17.2 billion to 19.6 billion, signaling a preference for more frequent, albeit smaller, purchases. Average Transaction Value dropped from £24.49 to £22.43, indicating a reversal from pandemic-era trends of less frequent but larger shopping trips.
Hannah Regan, BRC Payments Policy Advisor, emphasizes the need for market reforms, urging The Payment Systems Regulator to institute meaningful changes fostering competition and reducing payment market costs. The BRC advocates for a Treasury Review of interchange fees and underscores the growth of Open Banking, ensuring a diverse and competitive landscape in the evolving payment market.
