Debit card payments rise but so does use of cash, BRC survey shows

Debit cards, however, remained far and away the most common method of payment, increasing to 62.0% of transactions (66.7% by spending).

Taken together with credit cards, card payments accounted for over 75% of transactions and 85% of spending.

Overall, customers visited shops more frequently but made smaller purchases, as the cost of living crisis continued to pinch in 2023. The total number of transactions rose from 19.6 billion to 21.0 billion while the average amount spent (per transaction) fell from £22.43 to £22.03.

Meanwhile, card fees paid by retailers continued to grow. The total amount paid by retailers to banks and card schemes rose by over 25% in 2023, at an extra cost of £380m. This brought the total card fees paid to £1.64bn.

Card companies continue to raise these fees and retailers hope that the Payment Systems Regulator (PSR) will now implement meaningful reforms to tackle the lack of competition and rising costs identified in their current market reviews.

Cash remains a vital form of payment for a sizeable minority of the population, particularly for its role in budgeting. This has made it important to many households during the recent cost of living squeeze.

Martin Quinn from Campaign for Cash commented: “Retailers and especially small shops are being continuously squeezed by ever growing card charges which are eating into ever smaller profit margins.

“All retailers should continue to prefer to accept cash for payment as its better for them and better for the customer given the ongoing cost of living pressures”

All large retailers are committed to accepting cash in their stores, which has a lower processing cost than other forms of payment and we welcome the new FCA rules introduced this year to support consumers’ continued access to cash.

However, the dominance of cards as the preferred payment method highlights the urgency for reform on costs.

The BRC is calling for the following actions to reduce costs for hard-pressed retailers:

• Meaningful reforms in the PSR’s final reports into card fees: The Payment Systems Regulator must implement meaningful reforms through its final reports into cross border interchange fees and scheme and processing fees to increase competition and reduce costs in the payment market.
• A Commercial Cards Market Review: Given the 14% rise in commercial card fees (by turnover), we call on the PSR to initiate a market review into Commercial Card interchange fees, which continue to rise unchecked, to ensure the whole payment market is functioning effectively.
• Open banking: We want to see the growth of Open Banking in the UK, without replicating the harms in the existing card system. Open Banking should be a viable alternative to cards both online and at point of sale, at a fairer price to retailers.

Chris Owen, payments policy advisor, British Retail Consortium said: “Persistent inflation and the cost of living crisis continued to affect households across the country and many consumers used cash to budget more effectively.

“However, the dominance of card payments continues apace, accounting for over 85% of spending. Card fees continue to rise at a substantial rate and the PSR must act upon the harms it has identified in its current market reviews. It must move swiftly to reform the market and implement remedies including price caps on fees and price rebalancing measures.”