UK Finance Report shows effects of pandemic on UK payments market

UK Finance’s Annual Report (members access only) on the UK payments market for 2020 (published on 16 June 2021) (Report) has added interesting context to a year in which prevailing trends in the UK payments market were accelerated by the impact of the Covid-19 pandemic.

The ongoing public health situation unsurprisingly saw overall payment volumes decrease by 11% (down to 35.6 billion) as lockdowns slowed the economy, and also contributed to a 35% drop in cash payments from 2019 as non-cash transactions were actively promoted.

Other headline points from the Report are:

• An increase in the proportion of payments made by debit card - Despite a fall in overall debit card use, debit cards accounted for 44% of all payments – fuelled in part by their prevalence in online shopping.

• An increase in the use of contactless payments – Spurred by the pandemic and increase in the contactless limit to £45. Just over a quarter of all payments in 2020 were made using contactless, up from just under a fifth in 2019.

• A reduction in the use of credit cards - Down by 18% from 2019.Reflecting increased consumer caution and uncertainty, together with reduced spending in key industries impacted by the pandemic, such as travel and entertainment.

• An increased uptake of mobile payments - 2020 saw a 75% increase in registrations among UK adults for Apple Pay, Google Pay & Samsung Pay compared to 2019, with nearly a third of all adults now registered and half of those users making a mobile payment at least fortnightly.

• An increased use of remote banking payments - With total payments made by Faster Payments and other remote methods reaching nearly 3 billion – which included nearly 40% of all B2B payments.

While some of the trends identified in the Report were certainly accelerated by Covid-19, the pandemic was not the only contributor.  The prevailing patterns were present pre-pandemic and also reflect technological advances, changing habits and a diversifying market. For example, in 2010 cash was used for 56% of all payments and debit cards were used for just 17%; in 2020 the corresponding figures are 17% and 44%, respectively.

In addition, the UK payments market serves a wide customer base with different needs and priorities.  As the report points out, individual customers aren’t wedded to particular payment methods and are likely to use a range of payment methods depending on the nature of their transactions.

The trends witnessed in 2020 demonstrate how advances in technology, increasing consumer familiarity with new payment methods, and regulatory proactivity (as evidenced by the proposed further increase in the contactless limit to £100) have combined to create a flexible payments market which seems well equipped to cope with future challenges.

For individual players in the market, the data should provide further food for thought as to where future opportunities may be found and how investment should be targeted.

TLT’s Payments team has specialist experience across all areas of the payments sector and can assist in a variety of ways. Should you wish to discuss the above, or how TLT’s Payments team can support your business, please contact Stuart Campbell or Alex Williamson.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions