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Cash has long been king when it comes to payment methods, but new figures from UK Finance suggest that its crown may be starting to slip – and it's largely expected to fall further in the years ahead.
The figures show that the number of cash payments fell by 11% between 2015 and 2016, with consumers and businesses making 15.4 billion cash payments in 2016, down from 17.2 billion in 2015. Despite this, cash remains the most frequently-used payment method in the UK – it was used 25% more often than debit cards, the second most frequently-used method with 11.6 billion transactions.
Even so, cash accounted for 44% of all payments made by consumers over the 12-month period, marking the second year in a row where consumers used cash for fewer than 50% of all payments. The value of that spending is also dropping, with cash payments totalling £240 billion, accounting for 15% of the total value of consumer spending, a decline of 5% year-on-year.
Cash usage is expected to fall even further over the next decade, with the number of cash payments forecast to fall by 43% to 8.7 billion in 2026, and the total value of those payments predicted to fall by 23% to £185 billion.
Much of the shift away from cash is thought to be driven by the rise of contactless technology, with more and more people migrating to this convenient method of payment. Still, 26% of consumer cash payments last year were for a value of £1 or less, and 61% were for £5 or less, so it's clear that people still like using up their small change at the till.
However, cards are increasingly being used to make low-value payments, too, so much so that there were 2.9 million consumers who rarely used cash in 2016, equating to around 6% of the UK's adult population. This trend is particularly prevalent among younger consumers, with more than one in 10 of those aged 25-34 making just one cash payment each month, or no cash payments at all.
At the other end of the scale, 2.7 million people (or 5% of the adult population)
relied almost entirely on cash to make their everyday payments last year, so it's clear that for many, cash has kept its crown.
"It is clear that over the past few years we have witnessed a significant shift away from cash use in this country, with contactless cards undoubtedly causing a decrease in the use of notes and coins," said Adrian Buckle, chief economist at UK Finance.
"However, we don't believe that the UK is on the verge of becoming cashless, as some reports have claimed. People will always want to choose the payment methods that best suit them and, for the foreseeable future, in lots of cases that will continue to be cash."
Make the most of your payment method, no matter which one you choose. If you're focusing on cash, why not get the best savings account to boost your spending power? Alternatively, if you prefer card payments, make sure you've got the best current account (and debit card) possible, or consider a cashback credit card to get more from your spending. Just make sure your credit score is as good as it can be, and that you can pay the balance off in full each month.
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