High Streets Initiative · 12 July 2017

Cards overtake cash as customers go contactless for low value payments

Smartphone payments have given consumers new levels of payment convenience
Smartphone payments have given consumers new levels of payment convenience

Debit cards have overtaken retail cash transactions for the first time, according to new research, as consumers take advantage of contactless for low value payments on UK high streets.

According to the British Retail Consortium’s (BRC) latest annual Payments Survey, card sales exceeded 50 per cent of all retail transactions in 2016. A combination of factors were cited as driving the trend towards cashless sales.

Between 2013 and 2016, the average transaction value made by card fell from £30.53 to £25.40, with customers clearly responding to the convenience of contactless payments. Meanwhile, a third of all card transactions are now contactless.

Alongside greater contactless use for low value payments, the increased contactless transaction ceiling of £30, up from £20 since late 2015, was also seen to contribute to diminished use of cash.

Commenting on the decline of cash sales, Andrew Cregan, a BRC policy advisor, said investment in both online and in-store payment channels and a reduction in transaction costs – through Interchange Fee Regulation (IFR) – had combined to benefit both retail owners and their customers.

The BRC claimed its campaign work on IFR generated savings worth £500m for UK retailers and consumers, after the EU capped some handling fees on debit and credit card transactions.

“Looking ahead, the government should act to retain the benefits of IFR for retailers and their customers after the UK leaves the EU and introduce further regulatory action to address the alarming increase in other card fees and charges at a time when the retail industry is facing acute cost pressures elsewhere,” Cregan added.

Retailers winning the contactless race

Recent research from card machine provider Paymentsense revealed which merchants saw the greatest increase in contactless transactions between October 2016 and March 2017.

The results demonstrated which sectors are yet to fully meet the expectations of consumers when it comes to convenient shopping.

Top five merchants making the most of contactless

  1. Bakeries – 62.5 per cent of transactions
  2. Pubs & Bars – 48.2 per cent
  3. Caterers – 47.8 per cent
  4. Takeaways – 45.5 per cent
  5. Newsdealers/news stands – 44.9 per cent

Guy Moreve, head of marketing at Paymentsense, said data proved merchants had seen contactless sales rise twice as fast as chip and pin transactions.

“Interestingly, our recently compiled top 20 contactless list by sector shows pure retail merchants at ninth position, behind bakeries, pubs and bars, and caterers,” he added.

“It’s clear that the need to provide contactless card payment machines is increasingly critical for all merchants, no matter the industry.”

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This article is part of a wider campaign called the High Streets Initiative, a new section of Business Advice championing independent and small retailers by identifying the issues that put Britain’s high streets under pressure. Visit our High Streets Initiative section to find out more.

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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