Faster Payments Overtakes Bacs In Latest UK Payments Stats

August 22, 2022
Faster Payments and other remote banking are gaining traction among UK consumers, with UK Finance unveiling that 86 percent of all UK adults used at least one form of remote banking during 2021.

Faster Payments and other remote banking are gaining traction among UK consumers, with UK Finance unveiling that 86 percent of all UK adults used at least one form of remote banking during 2021.

The majority of people in all age groups used remote banking in 2021, ranging from 72 percent of those aged 65 and over to 92 percent of people aged 35-44, according to UK Finance’s latest payments statistics.

The number of people using mobile banking, in particular, continued to grow, reaching 57 percent of all UK adults.

Related to the ongoing popularity of remote banking services in the UK, the number of remote banking payments processed via the Faster Payments Service (or cleared in-house by banks) during 2021 continued to grow strongly.

The number of this type of payment increased by 23 percent compared with the previous year, reaching 3.6bn payments.

Moreover, 39 percent of all payments made by businesses were made using Faster Payments and other remote banking, overtaking Bacs Direct Credit for the first time as the most used payment method among businesses.

The report suggests that Faster Payments may yet become an alternative to card payments and/or methods such as PayPal.

This is due to the continued development of open banking in the UK, which UK Finance accounts in part for the rise in Faster Payments.

Yet, for this to happen, UK Finance concedes that these services have yet to be communicated or marketed to consumers on a wide scale, and it is not clear what the consumer appetite might be to change their established payments behaviour, particularly where the benefits to consumers (rather than businesses) are not obvious.

“We remain cautious in our forecasts at present for the potential volume of online (and real-world) shopping payments that could migrate to Faster Payments,” the report suggests.

Contactless payments

Contactless payments have jumped from 3 percent in 2015 to 32 percent in 2021, according to UK Finance.

In 2021, the number of contactless payments made in the UK increased by 36 percent compared with 2020, reaching 13.1bn payments, while 86 percent of consumers used contactless at least once a month.

At the end of the year, there were 142m contactless cards in circulation, with 91 percent of debit cards and 89 percent of credit/charge cards in the UK having contactless functionality.

Contactless owes much of its acceleration to payment trends during the pandemic, as well as their rollout on the London transport system, which normalised contactless payments in the capital at least.

Transport for London (TfL) even announced in June that it will be expanding contactless payments to nearby stations, such as Windsor, Guildford and Milton Keynes, for commuter settlements.

“Payment trends generally tend to change slowly, as we all form habits about the way we pay for things and these don’t change easily,” said Adrian Buckle, UK Finance’s research chief. “However, the pandemic accelerated the pace of change in 2020.”

Cash payments

Buckle added that cash usage fell slightly.

Although it does remain the UK’s second most popular payment method, at 15 percent, behind debit cards.

Cash payments declined extensively in 2020, as lockdowns closed many parts of the economy that tended to exhibit high cash use, and as many retailers encouraged customers to use contactless payment methods to help support social distancing.

In 2021, as the economy reopened, the rate of decline in cash usage slowed. However, it is a long way off its heights of the 62 percent share of overall payment methods in 2006.

Cash’s decline has made the payment method more political. Liz Truss, the favourite to be the UK’s Prime Minister in a few weeks, said at a debate recently that she wants to see consumers be able to make cash payments without the payment method being rejected by merchants.

In addition, the UK’s Cooperative retail stores have committed to maintaining access to cash in its shop network, pointing out that it still has a high rate of usage in regions such as the North East and Northern Ireland.

Commenting on UK Finance’s findings, consumer group Which? said: “Whether it’s to pay for everyday essentials or to keep track of spending amid a cost of living crisis, cash remains a vital lifeline for millions of consumers across the country.”

“However, with banks continuing to close branches at a rapid pace, those who rely on cash, as well as face-to-face banking services, are at risk of being cut adrift,” warned the spokesperson.

This was also the first time that UK Finance has taken account of buy now, pay later (BNPL) in its payment statistics.

According to the trade association, around one in eight people in the UK, or 12 percent of adults, used BNPL services to purchase something in 2021.

In spite of companies such as Klarna targeting millennials with their campaign strategies, the age group that made most use of these services was actually 35-44 year-olds, with one in five adults in this age group using BNPL services during 2021.

In contrast, just 4 percent of people aged 65 or over used these services in 2021.

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