Contactless accounted for one-third of all payments made in the UK in 2021, research shows

Consumer and business payment habits have returned to their pre-pandemic patterns, with the use of cash continuing to decline, while the use of debit cards and contactless payment methods increases.

That is according to UK Finance’s UK payment markets 2022 report, which documents the changes in how consumers paid for goods and services in 2021 and confirmed that a total of 40.4 billion payments took place in the country last year.  

The report said the Covid-19 pandemic had a transformative impact on the payments market by accelerating the continued decline in the use of cash payments, while the use of debit cards also slumped after years of rising usage.

“The pandemic not only led to a reduction in the total number of payments made in the UK – it also led to changes in the types of payment that were used,” said the report summary document. “People made greater use of contactless payments, online banking and mobile wallet channels, largely at the expense of cash payments.

“This led to the question of whether these observed changes in payment patterns reflected permanent changes to people’s behaviour, or whether people’s payment preferences would return to pre-pandemic patterns as lockdown restrictions were eased.”

And, based on the finance industry body’s data, it seems consumers have fallen back into their old payment habits, with debit and credit card use rebounding in 2021 compared with 2020.

“Both debit card and credit card payments, which had declined in 2020, rose once again in 2021,” said the report. “Further, the share of payments made using card, which had increased to 52% of all payments during 2020, continued to increase in 2021, with 57% of all payments in the UK being made using cards in 2021.

“Contactless payments continued to be popular, with almost a third (32%) of all payments made in the UK during 2021 being made using contactless.”

As regards cash, its use as a payment method declined again during 2021, but the slump was smaller than in 2020.

UK Finance’s data shows that cash remains the second most frequently used payment method in the UK, accounting for 15% of all payments in 2021. Even so, the total number of cash payments made in 2021 was down 1.7% on the previous year.

“The long-run trend in cash payments over the past decade has been of a continuing decline, with payments transitioning in particular to debit cards,” it said. “In 2020, the pandemic resulted in cash use falling by 35% compared to the previous year.

“Since 2017, cash use had been declining by around 15% each year, so 2020 represented an acceleration of this decline. In 2021, it appears there was a reduction in the rate of the decline in cash use.

“Much of this was to be expected – many parts of the economy with traditionally high levels of cash usage were closed or heavily restricted during lockdown, and in those parts of the economy that remained open, many retailers encouraged the use of contactless payment options, amid fears about cash being a vector for Covid-19 transmission.”

Looking ahead, the report predicted that the use of debit cards to make payments will continue to increase over the next decade, and – in time – will pass the threshold (24 billion) accounting for more than half of all payments made in the UK.

“This growth will be driven by the continuing rise of contactless payments, the ongoing growth of online shopping and ever-increasing levels of card acceptance among businesses of all sizes, but particularly among smaller businesses,” it said.