How often do you withdraw cash these days? Chances are, not as much as you used to. The ease of paying for things with credit or debit cards – no doubt helped by the rise of contactless payments – and the convenience of being able to make payments online means cash is becoming far less commonplace, and research from Halifax has shown just how much its dominance is slipping.
According to Halifax's figures, cash withdrawals accounted for just 16.6% of all current account transactions last year, a drop of 8.3% from 2013. Perhaps unsurprisingly, the proportion of transactions made by cheque also reduced considerably, down by 20% over the year, accounting for just 1.2% of all payments in 2014 (down from 1.5% in 2013).
Conversely, the number of card and electronic payments is continuing to rise: payments by debit card accounted for 56.7% of all consumer transactions in 2014, and cashless payment methods as a whole made up 83.4% of all current account transactions.
The results are marked on a value basis, too. Cash withdrawals account for just £18.33 of every £100 spent (down £1.82 from 2013), while Direct Debits account for £20.84 and cheque payments £8.14. Debit cards continue to lead the way with £29.26 of every £100 spent in this way (up from £28.76 in 2013), but one certain type of cashless payment is displaying particularly strong growth – faster payments.
Despite faster payments only making up a small proportion of transaction volumes (2.7% in 2014), they're seeing the fastest growth rate as well as the largest increase in average spend: last year, £15 of every £100 was processed as a faster payment, up 16% from 2013.
Arguably, the growth of digital banking solutions has been the key driver behind this reduction in cash spending. Contactless technology is becoming increasing widespread, and the recent announcement that the contactless limit will be increased to £30 will potentially boost its appeal even more.
Then there's the rise of online and mobile banking, which offers people a simple, convenient way to manage their day-to-day banking activities. Making payments with a few clicks of the mouse (or taps of the smartphone) is far simpler than traipsing to the bank to arrange things in person, and will have been a clear driver behind the rise in faster payments – and the subsequent decline in cash.
"This trend away from cash is likely to go on as banks innovate and provide customers with more convenient ways to pay for their goods and we continue to see the rise of new, non-traditional entrants into the payments market," said Nick Young, head of Halifax Current Accounts. "Consumers now have much more choice regarding payment methods and have adjusted their spending habits accordingly. As the number of ways to pay on debit card continues to increase, we are likely to continue to see a corresponding decline in the use of cash."
If you're joining the plastic and digital revolution, why not make the most of it? For example, if you're on the hunt for a new current account, make sure it offers debit cards with contactless capabilities to ensure you can really embrace the new landscape.
Make sure you're signed up to your provider's online banking service for the ultimate in convenience, and you may even want to check that it's a member of Paym. This service allows you to make payments to another person using a mobile phone number, and with a huge number of providers now offering this payment method, chances are that you could benefit.
Or, if you prefer to use credit cards to make your daily transactions, don't overlook things like cashback. Cashback credit cards can be a great way to get something back from your everyday spending, and if you make sure to pay off the balance in full each month, you could easily come out on top.
Cash may not be king anymore, but there are plenty of other options looking to take its crown – so make sure to take advantage!
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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