Cashless payments overtake physical currency in the UK

For the first time ever in the UK, cashless payments have overtaken the amount forked out in notes and coins.

This is according to the Payments Council, the body which represents the payments industry in this country, and has just published its data gathered from 2014.

Cash payments made by consumers and businesses throughout 2014 dropped to 48 per cent of total outlay, down from 52 per cent in 2013.

That meant non-cash payments – including debit and credit cards, direct debits, internet-based payments, bank transfers, transactions over the phone, and yes, good old cheques which are still kicking about – took the majority share this time around with 52 per cent.

However, if you focus solely on consumers, cash still reigns king over cashless payments, with a 52 per cent share (again) if you ignore the business side of the equation. However, the Payments Council reckons that even the consumer figure for cash will drop below the 50 per cent mark next year – but we’ll see a slow decline. Cash won’t be doing a disappearing act any time soon.

Cash is, of course, still the most prevalent single payment method going by volume, with debit cards in second place, the latter being used in 24 per cent of transactions.

Comments

Winston Bond, European Technical Manager at Arxan Technologies: “The figures released by The Payments Council reflect the trend seen in customers choosing to use automated and debit card transaction methods, such as contactless and mobile payments to pay for their groceries.

"With many retailers and banks rushing to launch innovative approaches for financial services via mobile applications, one vital question that needs to be addressed is that of security. As they compete on the latest and greatest apps to gain either new consumers or maintain existing loyalty, there is the risk that security will fall by the wayside in favour of aggressive time-to-market deadlines.

"Most organisations are taking a software-based approach to mobile payments via cloud-based approaches, such as Host Card Emulation (HCE) capabilities, but to ensure they don’t fall victim to a hack attack they must ensure that the cryptographic payment tokens within their software are properly secured with a software secure element that provides anti-tampering and white-box cryptography technology.

"The use of tokenisation technology replaces private card data with a HCE token that protects privacy and prevents fraud in mobile payment transactions. Delivering such a holistic and robust level of protection for the mobile payments sector is critically important as these new capabilities see broad consumer adoption.”

Paul Heywood, MD EMEA at Dyn: “With consumers increasingly relying solely on electronic payments such as contactless and debit cards, both merchants and banks in the UK will need to ensure that their digital properties can handle the increased activity in digital banking.

"Banks and their digital suppliers rely on Internet Performance to ensure that all transactions and updates are up and running, even at peak times. As the UK moves towards a cashless economy, the risk of digital banking suffering downtime or delays needs to be completely eliminated as there is no alternative payment method. If merchants and banks don’t make their Internet Performance a priority, they risk upsetting valuable customers.

"In order to ensure that their solutions are always available, banks and merchants should take latency seriously. Load balancing, for example, allows businesses to balance their load across multiple servers, which optimises resources, minimises response time, and avoids overload.

"The adoption of a hybrid approach to cloud computing and traditional data centres adds complexity to real time traffic routing with inter and intra app latency being a critical success factor.

"In addition, if you have a data centre or server failure, Active Failover enables the service to stay up and running as traffic is automatically re-routed to an alternate endpoint. Only by putting back-end systems in place that offer prevention can businesses ensure that the cashless economy keeps going around.”

Spiros Theodossiou, VP of Product Strategy at Skrill: “We are reaching a tipping point in the payments industry. With digital payments overtaking cash transactions for the first time, the move towards a cashless society is well underway. The significant growth seen in contactless transactions last year is further evidence that consumers are gravitating towards faster and more convenient ways to pay.

“In response, financial payments companies are delivering innovative new products, from digital wallets to contactless and mobile payment methods, increasing the options for consumers to move away from more traditional methods.

“For the younger generation in particular, expectations are high when it comes to the availability of alternative ways to pay. Where cash was once king, now card and digital payments are becoming a part of their day-to-day routine. Our own research shows four out of ten (42 per cent) people think that shops will cease to accept cash as a form of payment in the next twenty years, and one in five (20 per cent) 18-25 year olds think shops will stop accepting cash in just five years’ time.

“However, it is likely that cash will prevail for some time yet as consumers will find it hard to wean themselves completely off cash due to its physical nature and the flexibility it offers. Much like the decline of newspapers, digital alternatives may be more suited to our modern lives but many people remain reluctant to see the end of traditional methods quite yet.