In this August round up of volumes and values of retail payments in the UK we explore the immediate impact of the COVID pandemic and look at the first indications of whether (or not) the individual payment systems will recover the volumes and values they processed at the start of 2020.

Note: All data is publicly sourced and is the latest available – Pay.UK July 2020, Link August 2020 and UK Finance May 2020.

Source: Pay.UK Limited

Bacs

In the 12 months to the end of July 2020 we see that:

– Bacs volumes have remained flat – although this is based on a 4% reduction in Direct Credit and a 2% increase in Direct Debit.

– Direct Debit values have decreased by 8%.

Although we would expect payment substitution to Faster Payments to reduce the volumes of Direct Credit, a 4% reduction over the last twelve months is certainly at the top end of predictions. Volumes processed between February and June indicate a monthly COVID impact of at least 20 million items a month but July’s volume suggests that the recovery to previous volume levels will be swift.

After 50 years of continued growth it is pleasing to see that Direct Debit volumes have grown by a further 2%, this might be a small percentage but with 4.5 billion transactions per annum it represents a significant figure. Similar to Direct Credit, July’s data suggests that Direct Debit volumes will bounce back swiftly as regular recurring payments suspended during the ‘lockdown’ start to be recommenced.

CHAPS

In the 12 months to the end of July 2020 we see that:

– CHAPS volumes have decreased by 5% (made up of a 8% decrease in retail / commercial based payments and a 5% increase in financial institution based payments).

Retail / commercial based CHAPS payments were most impacted between April and June with July data suggesting that volumes are starting to pick up, probably due to businesses exiting ‘lock down’ and house purchases recommencing.

Faster Payments

In the 12 months to the end of July 2020 we see that:

– Single Immediate Payments have increased by 24%.

– The increase in Single Immediate Payments has contributed to an overall volume increase for Faster Payments of 17%.

Faster Payments COVID ‘moment’ appears to have been during February, April and May. However as the economy restarts, the data from June and July suggest that the growth in Faster Payments volumes is back on track. A volume increase of 17% may be lower than pre-COVID predictions for 2020 but is still a significant achievement for the world’s first retail ‘instant payments’ scheme.

Cheques

In the 12 months to the end of July 2020 we see that:

– Cheque volumes have decreased by 13%.

– Cheque values have decreased by 14%.

Despite the significant costs incurred in developing an image based clearing system the volumes of cheques continues to suffer double digit reductions. COVID has had a significant impact on cheque usage with a 50% volume drop in April. Whilst volumes have seen some recovery during the period May to July it is clear that the decrease in cheque usage is going to continue to be significant.

The impact of COVID has had a significant and immediate impact on the number of Current Account Switches performed.

Just 29,000 switches were undertaken in July – roughly a quarter of March’s figure.

Partial switches have been similarly impacted with just 812 undertaken in July (a 50% reduction).

LINK – ATM Withdrawals

Source: Link
Source: LINK

Helpfully, LINK publish weekly figures, the latest data covers the week ending 16 August and shows that just 31.5 million ATM transactions were made – the corresponding week in 2019 shows a volume of 48 million transactions.

Whilst the volumes of ATM withdrawals have grown since the UK exited ‘lockdown’ they seem to have stabilised around the 31 million mark.

The above chart shows the decrease in cash usage in the UK since 2017 but it is clear that COVID, the contactless increase to £45 and merchants encouraging people to make cashless payments has accelerated the move away from paying by cash.

It seems plausible that the reduction in cash transactions in 2020 could be circa 30%.

Debit and Credit Cards

Source: UK Finance

Based on May 2020 data we see that:

– Debit Cards held by UK card holders generated 1.3 billion transactions, this is a 18.7% decrease on May 2019.

– Spending on Debit Cards reduced by 7.8% to £47.7 billion.

– 186 million Credit Card transactions were generated by UK card holders, a decrease of 38.5% against May 2019, with a value of £9.6 billion (44% decrease).

– Contactless payments saw a 32% drop in May 2020 as the UK’s spending habits were impacted by COVID.

Conclusion

This short retail payments round up demonstrates a continued clear shift to digital / cashless payments.

Whilst this shift has been disrupted by COVID it appears that the digital payment methods are beginning to recover as the UK exits lockdown, albeit at the expense of cash and cheques.

It seems that the new payment habits that we formed during COVID appear to have become sticky.

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