Cash retail payments halved last year as ecommerce sales soared

The pandemic, lockdown store closures and the subsequent advice to use contactless payments drove the decline in cash use, which halved from 30% in 2020, the BRC’s annual Payments Survey showed.

As many as 82% of transactions were made on credit or debit cards – up from 67% in 2020 – with debit cards accounting for more than four in five exchanges and credit and charge cards making up the rest.

As a proportion of total money spent, cash accounted for just 8% of consumer spend (down from 15% the previous year), while credit cards rose slightly to 23% and debit cards rose significantly to 67% – up from 59% in 2020.

The upward trajectory of card payments reflected, in part, the increase in online shopping in 2021, when 48.6% of non-food items were purchased online, but this figure fell to 39.9% in the first 11 months of 2022 as more people returned to the high street as the pandemic eased.

The report acknowledged that cash remained vital for many, particularly vulnerable groups without access to other payment methods, and urged the government to look at solutions to ensure it remained a viable payment method for consumers.

However, its decline has made it harder for many firms to use cash efficiently, increasing the costs associated with handling physical money.

While card usage soared, so did the costs associated with accepting these payments, the report stated.

Retailers incurred costs of £1.3bn just to accept card payments from customers in 2021.

Debit cards, which accounted for the majority of transactions, saw scheme fees rise by 28% compared with 2020, and total merchant service charges increased by 12%.

This translated into an additional £141m in costs imposed by card firms on to retailers just to process debit card transactions.

The BRC warned that excessive card fees added further cost pressures to retailers already struggling with mounting costs from rising energy, transport and commodity prices, as well as a tight labour market and other supply chain disruptions.

It called for the Payments Systems Regulator to enact temporary interventions to stop card fees from rising during this period and the abolition of interchange fees, and urged the Treasury to conduct its own review into the cost of accepting cards.

BRC payments policy advisor Hannah Regan said: “With the public in and out of lockdown and cash usage discouraged last year, over 90% of retail spending used a debit or credit card.

“With card usage soaring, already hard-pressed retailers had to pay huge sums to accept these payments. We need urgent intervention from the Payments Systems Regulator and the Treasury to stop card schemes from abusing their dominant market position.”

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