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11 months ago

Are Cashless Payments the New Payment Method of Choice?

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The UK has been lockdown-free for a while now, but some of the consumer habits that developed during this time have remained. At the height of the pandemic in 2020, purchases predominantly switched to card payments, with the majority of retail shopping moving online – but how has this trend fared a few years down the line, with stores firmly reopened and back to normal?

To find out how people most often choose to pay, we at BusinessComparison asked 2,000 UK consumers about their spending habits. We also gathered data from around the world to determine which payment method is the most popular and whether the trend of cashless-payment dominion has continued into 2023.

Cashless Payments’ Global Popularity

In 2020, cashless payments grew to new records as many countries implemented restrictions that forced consumers to avoid using cash to pay for purchases. Instead, several trends began to emerge, including increased card machine payments.

Some countries saw exponential growth in cashless payments, particularly Saudi Arabia, which saw 3,337 million cash-free payments in 2020 – an increase of 62.30%. Another notable growth was experienced in India, with 40,628 million cashless payments (up 24.40%,) and Russia, with 55,684 million payments not using cash (up 21.10%). In total, the country that saw the most cashless payments in 2020 was China, which recorded a staggering 340,973 million payments during the year – equating to 934 million cash-free payments each day.

Although almost all countries saw an increase in overall cashless payments during this time, that wasn’t the case for all. France recorded 24,224 million payments not using cash in 2020 but overall saw a decrease in cashless payments of -2.80%. Similarly, the Netherlands recorded 9,192 million cash-free payments but a decrease of -2.40%. Even the UK saw cashless payments drop during 2020, recording 30,910 million payments (down 4.40%). However, the country that recorded the biggest decrease in cashless payments during this time was Singapore, with 3,761 million payments amounting to -22.20%.

In terms of continental data, there was a substantial difference between the amount of payments made not using cash in 2020 per continent – with some continents seeing a far greater volume of payments compared to others.

The continent that saw the most overall cashless payments during 2020 was Southeast Asia, recording 400,533 million cashless payments over 12 months. Cash-free payments in Southeast Asia accounted for 44% of all global cashless payments during this time. Following significantly behind was North America with 205,391 million payments (23% of global cashless payments) and Europe with 180,147 million cash-free payments (20% of global payments).

In comparison, Africa saw just 5,393 million cashless payments over the 12-month period, accounting for only 0.60% of global payments of this type. Between the highest and lowest volumes of cashless payments per continent, there was a discrepancy of 174,754 million payments – which was almost as many cashless payments as the entirety of Europe recorded all year.

Interestingly, Oceania’s yearly cashless payment figures for 2020 were significantly higher than Africa’s (9,474 million), despite both sets of continental data being taken from just one country each – South Africa and Australia.

When looking at the amount of cashless payments made per capita throughout 2020, each country boasted dozens of payments per person, regardless of their population size. This is a testament to the rapid growth that cashless payment popularity experienced during this time.

For example, the United Kingdom recorded 455.32 cashless payments per capita, with a total population of 67,886,011 people in 2020. Similarly, the US had 555.27 cash-free payments per capita – recording a population size of 331,002,651 people.

Meanwhile, China and India recorded the largest population sizes during this time period, with China’s population sitting at 1,439,323,776 people, and India’s reaching 1,380,004,385 people. Despite having such a large population, their payments per capita remained in-line with countries that had much smaller populations, demonstrating just how widely used cashless payments have become. China recorded 236.89 cashless payments per capita, whilst India interestingly recorded a significantly lower 29.44 cash-free payments per person.

Others that recorded slightly lower numbers of cashless payments included Japan, Argentina, Indonesia, and Mexico. Japan’s population in 2020 was 51,269,185 people. The country saw 86.75 cash-free payments per capita through a 12 month period. Similarly, Argentina recorded just 70.44 cashless payments per person, with a population size of 45,195,774.

Indonesia’s population in 2020 was 273,523,615 people, however, the country recorded only 46.37 cashless payments per capita – the second-lowest after India. Similarly, Mexico had a population size of 128,932,753 people in 2020 and recorded 49.82 cash-free payments per person – just slightly higher than Indonesia’s figures.

The Most Popular Cashless Payment Methods

‘Cashless payments’ refer to various payment methods, including the use of credit and debit cards, alongside digital wallets. Whilst all of these methods constitute cashless payments, they’re not all favoured equally by consumers – likely, in part, due to the length of time they’ve been active. Notably, card payments have existed for much longer than digital wallet payments, meaning their popularity is somewhat expected.

The US saw the highest usage of both credit and debit cards in terms of the most popular cashless payment method. In 2020, 84,457 million debit card payments were recorded, alongside 47,333 million credit card payments – higher than any other country. Credit cards were also a popular choice in South Korea, making up 14,286 million payments for the year. Meanwhile, Russia drastically favoured debit card payments, recording 45,169 million payments in 2020.

The use of digital wallets was significantly lower across all countries, with Japan recording the highest usage of this payment type, with 8,641 million payments made. Following closely behind was the US, with 7,486 digital wallet payments made that year. Digital wallets were also more popular in India and Indonesia, with India recording 4,958 million payments and Indonesia recording 4,626 million payments.

The least popular cashless payment type was debit cards with a delayed debit function, allowing consumers to make purchases up to an agreed amount to then be paid back in full to the bank at a later date. This payment type saw the most usage in France, with 2,162 million payments made. Similarly, Germany recorded 1,469 payments using debit cards with a delayed debit function.

UK Cash Usage Trends

With cashless payments reaching substantial figures globally and data from the 2021 UK Finance Payment Markets Summary report finding that cash usage has declined by around 15% each year since 2017, we wanted to determine how often people in the UK still use cash to make purchases. To find out, we surveyed 2,000 adults across the country, asking them when they last paid in cash, where the cash was spent, and what caused them to pay in cash.

We first asked when consumers had last paid using cash in a physical store. Surprisingly, cash was more commonly used than expected. 44% of respondents reported using cash in the last week. Over half of those surveyed from Wales (62%) and the North West (51%) said they had used cash in the last week. Additionally, just under half (48%) in Scotland said they had paid in cash in the last week. Alternatively, just 35% from the South East had paid using cash within the last week.

A further 17% of those questioned reported paying in cash within the last 2 weeks. Within these respondents, 25% of London residents had used cash in the last fortnight, with 21% of those from the East Midlands reporting that they had also paid in cash in the last 2 weeks.

13% said they had paid using cash within the last month, with 24% from the North East paying in cash within the month. In comparison, only 9% of those surveyed from the North West had spent cash just once in the last month.

Paying in cash was slightly more popular with those aged over 65, with 52% of respondents within this age group paying in cash within the last week. Interestingly, there was very little disparity between age groups, except for those aged between 25 to 34 being slightly less likely to spend cash. Just 27% within this age group had paid cash within the last week, compared to 36% who said they had paid in cash within the last two weeks and 18% that had spent cash in the last month.

Interestingly, 1% said they had never spent cash, with the majority aged between 18 and 24 (8%).

Where is Cash Usually Spent?

Next, we asked where people had last spent cash when making an offline purchase. The majority said they had spent cash within a hospitality setting, with 11% reporting that they had paid in cash in a cafe or deli and a further 9% paid in cash in a restaurant.

Farmer’s markets made up 7% of cash spending, with pubs accounting for 6% and butcher shops and fishmongers accounting for 5% of recent cash purchases. Charity shops were another common location for cash purchases, with 9% of respondents reporting that they had last spent cash in a charity shop.

Roughly 10% of respondents from each region said they had most recently spent cash in a cafe or deli, and 16% of those are from London. Furthermore, 17% from the West Midlands recently spent money in a restaurant.

Why Wasn’t a Cashless Payment Used?

Finally, we wanted to understand what had prompted people to pay using cash rather than a form of cashless payment.

Almost 30% of respondents said they had chosen to use cash as it was a small purchase (29%), with a further 29% saying they had cash on them that they wanted to use up. Other common decision-makers included the business only accepting cash payments (15%) and technical issues, meaning that only cash could be used (7%).

Just 17% said that they preferred paying in cash. Of those, 22% of respondents from the West Midlands preferred using cash, alongside 20% from the East of England.

Slightly less than half (48%) of those questioned from Northern Ireland had used cash as they made a small purchase, along with 39% of consumers from the North East and 37% of respondents living in the East Midlands. In contrast, the majority of those in our survey that reported having cash on them that they wanted to use up were from Wales (43%).

The End of an Era...

Whether it was because of spare change cluttering up pocket space or a technical malfunction, the survey highlighted that very few people are choosing to pay using cash because they prefer it.

With fewer consumers actively wanting to pay in cash, now seems to be a great time to make cashless payments more accessible, so why not give it a go yourself? At BusinessComparison, we can help you compare the payment methods your business needs to be successful, from Card Machines to Business Bank Accounts and everything in between.

 

Methodology

The research was conducted to compile the latest global data from the Bank for International Settlements (BIS), alongside the UK Finance Payment Markets Summary 2021. Country population figures for 2020 were collected from Worldometers’ World Population index. Total global payment figures taken from the Bank for International Settlements included credit transfers, direct debits, cheques, debit cards, delayed debit cards, credit cards, e-money, money remittance and undefined payment methods. The data did not include cash payments. In addition to this research, a survey of 2,000 UK adults over the age of 18 was conducted by BusinessComparison between the 20th and 24th of January 2023.

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Jon Cole-Dalton