It’s very easy to spend the day in London and assume we are now fully entering into a 'cashless society’.

Yesterday I used my contactless debit card to pay for everything I needed in the city: the tube, an unreasonably priced coffee, lunch, an unreasonably priced round of drinks, a tipsy purchase of some blu-rays I won’t actually watch.

Then while at home in the evening, I exclusively used PayPal to settle some bills, pay for an eBay auction and buy some clothes online. 

And with the imminent introduction of Apple Pay this month, I will surely be its easiest to convince target adopter (iPhone using, gadget-loving writer of digital marketing articles in Soho. You may join the queue to punch me in the face from 5:30pm).

However, cash isn’t quite in its final death throes yet. As is always the way when you live within the self-preoccupied bubble of existence known as Central London, you forget how the rest of the real world works.

According to this year's annual BRC Payments Survey, cash remains the preferred payment method in the majority (52%) of transactions.

Hey 52% is still a majority!

However, alternative payments like the ones I mentioned above, are starting to gain more popularity. Non-card payments accounted for 6.27% of transactions, this is up from 0.06% in 2010. 

Non-card transactions are worth 1.97% of the total retail sales value (£185bn) in 2015.

Here are some more interesting observations from the payments survey…

Cash and debit

The number of cash transactions completed and the average transaction value (ATV) continues to fall. This decline is not as dramatic as it has been in previous years, however ATV across all payment types is down on the previous year.

Cash is under threat from a variety of trends. In particular customers responding to high street banks’ reward schemes for using contactless payments for items under £20, as well as the sheer convenience of contactless itself. Typically the same lower value transactions would previously have been paid for in cash.

There has also been a slight slow-down in the use of debit cards when measured against other forms of payment as well as a drop in the average transaction value (10.67% from 2010). Although debit card payments still account for nearly 50% of sales. 

This could be attributed to the trend for shoppers to become less reliant on large weekly shops, instead they are making more frequent visits to a wider range of smaller shops and spending money on smaller basket sizes.

Non-card payments

Non-card payments account for 1.97% of retail sales value, a rise from 1.75% in 2013.

As the number of payments have increased, the average transaction value has fallen to £5.31, from £5.45 in 2013.

Here is the percentage of turnover by number of transactions:

So this ‘cashless society’ that I fool myself into thinking we live in, is much less prevalent than I thought.

However as these alternative methods of payment become more popular over time, an increasingly spoilt-for-choice customer will certainly choose the retailer that provides the most convenient way for that individual to shop.

Certainly paying via smartphone, contactless card or wristwatch is far simpler than finding a cash machine and standing in line waiting to draw out set denominations of cash.

Meeting the needs of digitally-savvy consumers who are used to seamless, convenient experiences will be a key way to differentiate from other retailers in the coming years.

Christopher Ratcliff

Published 7 July, 2015 by Christopher Ratcliff

Christopher Ratcliff is the editor of Methods Unsound. He was the Deputy Editor of Econsultancy. You can follow him on Twitter or connect via Google+ and LinkedIn

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Comments (1)

Pete Austin

Pete Austin, CINO at Fresh Relevance

Nice article, so I thought I'd fact-check the figure that 52% of UK transactions use cash.

This number is based on a BRC questionaire (linked above), of their members, who are listed here. Basically a small number of large businesses.
http://www.brc.org.uk/downloads/Retail_Membership_Information.pdf

This compares to tens of thousands of small independent shops, market stalls, kiosks and the like - who in my experience are much more likely to use cash, not least because it's relatively expensive and difficult for a micro business to accept credit and debit cards.

The report says BRC member have just over 56% of retail sales: average cash transaction=£8.59 vs card transaction= £30 approx.

So I can model BRC members' transactions as averaging £20 (half clustering around £8.59 and paid by cash, and half clustering around £30 and paid by card).

It follow that if non-BRC members have lower average transactions, say averaging £10 because of lots of individual items such as milk, bread or cigarettes, then these will be about 76% cash.

Combining the groups, I'd estimate the true proportion of UK transactions using cash is 63%.

over 2 years ago

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