Insight 37 - Magazine - Page 19
COST OF LIVING DRIVES
RETURN TO CASH
A
survey published by the British
Retail Consortium (BRC) published
recently has shown that cash
usage has grown for the first time in a
decade.
The BRC Payments Survey 2023 showed
UK retail sales rose 4.3% to £439.5bn in
2022, although this was largely due to
rising prices resulting from increased costs
throughout the supply chain. The number
of transactions rose from 17.2bn in 2021
(47.2m per day) to 19.6bn in 2022 (53.7m
per day).
Average Transaction Value fell from
£24.49 to £22.43, as consumers shopped
around more and made more regular,
but smaller, purchases. This reverses a
trend seen during the pandemic, towards
less frequent, bigger, shopping trips – as
people tried to avoid going out as often.
Cash usage grew to 19% of all transactions
(from 15% in 2021). This reflects a choice
by many households to use cash to budget
more carefully during the onset of the
cost of living crisis, as well as a natural
return to cash usage following the move to
contactless during Covid. Card payments
were used for 76% of transactions (83%
in 2021), with debit cards accounting for
four-fifths of these transactions.
Cards accounted for the overwhelming
proportion (85%) of money spent, with
debit cards taking three-quarters of this
spending. They are used more often
than credit cards but for smaller value
transactions. Meanwhile, cash increased to
11% of consumer spend (8% in 2021).
The increase in cash usage – both by
spend and transaction numbers – is
welcome. BRC members are committed
to accepting cash payments, supporting
vulnerable groups and those using cash
to budget. Government should ensure
that cash acceptance is a viable option
for merchants and customers across the
whole ecosystem.
The dominance of card payments has
come at a significant cost to retailers.
Retailers spent £1.26 billion on card
processing fees; this includes a 27%
increase in scheme fees and a 7%
increase in interchange fees (as
"The dominance of card
payments has come
at a significant cost to
retailers. Retailers spent
£1.26 billion on card
processing fees; this
includes a 27% increase
in scheme fees and a 7%
increase in interchange
fees (as percentages of
turnover) in 2022"
percentages of turnover) in 2022.
Alternative payment methods saw a rise
in popularity in 2022, from 2.0% to 4.9%
of transactions. Methods such as Open
Banking and Buy-Now Pay-Later (BNPL)
are starting to offer some competition to
card payments.
The BRC is calling for the following actions
to reduce costs for hard-pressed retailers:
• Reforms in the payment market:
The Payment Systems Regulator must
implement meaningful reforms to
increase competition and reduce costs
in the payment market.
• Treasury Review: We call on the
Treasury to conduct a full review of
interchange fees to examine if they are
fit for purpose in the UK market.
• Open banking: We want to see the
growth of Open Banking in the UK,
without replicating the existing card
system.
Hannah Regan, Payments Policy Advisor,
British Retail Consortium said: “We
are now seeing a return to many of
the pre-pandemic trends in payments,
including smaller but more frequent
purchases, and a slight return of cash
payments. Unfortunately, what has not
changed, is the ever-increasing scale of
fees paid by retailers in order to accept
card payments. Though alternative
payment methods could provide much
needed competition to the market, the
dominance of card payments means it is
essential that action is taken to prevent
fees rising further.”
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