Cheques and cash decline as consumers switch to cards

The use of cash is in rapid decline as consumers increasingly choose to pay by card, a new study suggests.

And the Payments Council, which oversees the UK's payment systems, estimates that by 2018 cash will be used in fewer than half of all transactions.

The figures come from a report by the council that details payment trends in the UK, The way we pay 2010. Among its key findings, the report shows a decline in the proportion of people being paid in cash - down from 1-in-8 in 1999 to 1-in-20 last year.

In the same period, the proportion of transactions settled in cash has dropped from 73% to 59%. By 2018, the council predicts that cash will be used in just 45% of transactions.

The Payments Council plans to cease the central clearing of cheques on 31 October 2018. In 2008, it says, just 577 million cheques were written by individuals. It predicts that even without action to 'kill off' the cheque, only 248 million would be written in 2018 - representing just 0.8% of transactions.

Small retailers are likely to be concerned by other findings in the report, which reveals the extent to which supermarkets now dominate retail. In 1999, 48 pence of every pound spent in shops was taken by supermarkets, but this has now grown to 55 pence.

The council says that around half of this growth represents market share taken from other retailers as supermarkets have widened their range of goods and opened more stores. It adds that £18.4 billion of spending growth, that would otherwise have been shared among other stores, has been "funnelled into supermarkets".

Challenges

However, Richard Dodd of the British Retail Consortium (BRC) said that it was "unsurprising" that supermarkets' share of the retail sector had gone up. He argued that the biggest challenges to small and town-centre shops came not from supermarkets, but from business rates, rent, and the problems with access presented by poor town-centre planning and parking.

"The idea that growth is funnelled into supermarkets seems to imply they're somehow sucking it in; that something devious or dubious is going on, which is a nonsense," he told More Than Business News.

"It will be the customers who decide whether a new store succeeds or fails, and really you should leave that choice with customers. Ultimately if you say 'we're terrified that if this new store opens people will use it', you're saying that you should deny customers the choice you believe they're actually going to make."

Explaining that it was unlikely that small retailers could compete on price alone, he added: "Some shops like bakers, farm shops or health food shops have actually been going up. And that's because they're in a position to offer customers something that's distinctive and different from what the supermarkets are offering.

"Where small retailers are able to do that they can still thrive."

Too high

Mr Dodd said that the BRC's most recent survey showed the use of cash was "holding steady", and that during the recession it had actually increased. Pointing out that the charges incurred by retailers for handling cash payments were far lower than the equivalent for card transactions, he added: "For things like credit cards, the charges that the retailers face are, as far as we're concerned, too high.

"Card companies are pushing the idea that cards are the future and that cash is somehow dying. We believe that part of their agenda is that they get to charge retailers a lot more for taking payments via card than is the case when payment is made in cash, so it's in those card companies' interests to push the development of new contactless systems."

IMAGE: Martin Keene/PA Wire/Press Association Images


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