Cash usage in the UK increased for the second time this year as consumers opted for physical currency at the register to better manage their budgets.
Data from the British Retail Consortium (BRC) reveals that cash accounted for nearly one in five purchases, reaching 19.9% of transactions in 2023, up from 18.8% in 2022. Meanwhile, debit cards remained the preferred payment method, making up 62.0% of transactions (66.7% by spending), and when combined with credit cards, card payments represented over 75% of transactions and 85% of spending.
As the cost of living crisis continued, shoppers frequented stores more often but made smaller purchases. The total number of transactions climbed from 19.6 billion to 21.0 billion, while the average amount spent per transaction decreased from £22.43 to £22.03.
Cash continues to play an essential role for a significant portion of the population, particularly for budgeting purposes, which has been crucial for many households during this financial squeeze.
However, with card payments continuing to lead, the BRC has called for market reforms. The total fees retailers pay to banks and card schemes surged by over 25% in 2023, costing an additional £380 million, bringing total card fees to £1.64 billion.
Chris Owen, BRC payments policy advisor, stated, “Card fees continue to rise at a substantial rate, and the Payment Systems Regulator (PSR) must act upon the concerns identified in its current market reviews. It must move swiftly to implement reforms, including price caps on fees and measures for price rebalancing.”
The BRC is pushing for “meaningful” reforms from the PSR’s investigation into card fees, along with a review of the commercial cards market. Additionally, the BRC supports the broader adoption of open banking payments.
“We aim to see the growth of Open Banking in the UK without replicating the issues present in the current card system,” the BRC emphasized. “Open Banking should offer a viable alternative to cards, both online and at points of sale, while providing a fairer cost structure for retailers.”