In this September round up of volumes and values of retail payments in the UK we explore the impact of the COVID pandemic and look at whether the individual payment systems will recover the volumes and values they processed at the start of 2020.

This is the second retail payments roundup – for last months round up click here.

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

Source: Pay.UK Limited.

Bacs Direct Debit and Direct Credit

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

  • Bacs Direct Credit volumes have decreased by 4% (no change for 12 months to July).
  • Bacs Direct Debit volumes have increased by 1% (12 months to July 2%).
  • Total Bacs volumes have decreased by 1% (12 months to July 0%).
  • Bacs Direct Debit values have decreased by 9%.
  • Total Bacs values have decreased by 3%.

Although we would expect payment substitution to Faster Payments to reduce the volumes of Direct Credit, a 4% reduction over the last 12 months is certainly at the top end of predictions. Although July’s monthly volume showed a recovery to pre-COVID levels August volumes have reverted to the monthly COVID related drop of 20 million items.

After 50 years of continued growth it is pleasing to see that Direct Debit volumes have grown (albeit only by 1%), this might be a small percentage but with 4.5 billion transactions per annum it represents a significant figure. Although July’s monthly volume showed a recovery to pre-COVID levels, August volumes were the second lowest over the last 12 months.

With a 1% decrease in total Bacs volumes the annual combined Bacs volumes will be ‘one to watch’ over the coming months. We’d expect to see the volumes to show a slight increase but will payment substitution and the impact of COVID see the first volume decrease in 50 years? 

CHAPS

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

  • CHAPS volumes have decreased by 7% (made up of a 10% decrease in retail / commercial based payments and a 4% increase in financial institution based payments).
  • CHAPS values have increased by 8% (made up of a 5% increase in retail / commercial based payments and a 9% increase in financial institution based payments).

July’s increase in retail / commercial based CHAPS payments has not been repeated as volumes have returned to those experienced during lockdown.

Faster Payments

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

  • Single Immediate Payments have increased by 23% (24% in 12 months to July).
  • Total Faster Payment volumes have increased by 16%.
  • Total Faster Payment values have increased by 6%.

June and July seem to have been strong volume months for Faster Payments but Faster Payments growth is looking promising as monthly volumes seem to have returned to pre-COVID levels.

Cheques

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

  • Cheque volumes have decreased by 16% (12 months to July 13%).
  • Cheque values have decreased by 21% (12 month to July 14%).

Despite the significant costs incurred in developing an image based cheque clearing system the volumes of cheques continue to suffer a double digit decrease. COVID had a significant impact on cheque usage with a 50% decrease in April, there has been some recovery during May to July but it is clear that the decrease in cheque usage is going to continue to be significant.

Current Account Switch Service

The number of people switching bank accounts is starting to recover. 43,377 Current Account Switches occurred in August 2020 – a significant uplift when compared to the past three months, similar to April but still a far cry from the 111,327 switches that occurred in March.

LINK – ATM Withdrawals

LINK publish weekly figures, the data for the week ending 13 September shows that 32.3 million ATM transactions were made – the corresponding week in 2019 shows a volume of 49.3 million transactions.

The trend from 2017 to 2020 is very dramatic:

Source: LINK

Volumes are currently down a consistent 34% on 2019 and values down 25% as people are withdrawing less.

Debit and Credit Cards

Source: UK Finance

UK Finance’s June update reports:

Card transactions by UK cardholders both in the UK and overseas:

  • There were 1.3 billion transactions on debit cards in June 2020, 18.1 per cent fewer than in June 2019 and 2.8 per cent fewer than in May 2020 reflecting a total spend of £48.1 billion. This was 7.3 per cent lower than in the same period in 2019 and 0.4 per cent higher than in the previous month.
  • There were 227 million transactions on credit cards in June, 19.7 per cent fewer than in June 2019 but 22 per cent more than in May 2020 reflecting a total spend of £12.2 billion. This was 25 per cent less than in the same period a year earlier but 25.9 per cent higher than the previous month.
  • The annual growth rate of outstanding balances on credit cards contracted by 13.4 per cent in June 2020 as consumer repayments outstrip new lending.

Card transactions made in the UK by cardholders from both the UK and from overseas countries:

  • There were 933 million debit and credit card transactions in June 2020, 43.1 per cent fewer than a year ago and 2.7 per cent fewer than May 2020. This reflected a total spend of £43.5 billion, 27.8 per cent less than in the same period in 2019 and 1.1 per cent less than the previous month.
  • 33 per cent of credit card transactions and 56 per cent of debit card transactions in the UK were made using contactless cards.
  • In total there were 519 million contactless card transactions in June 2020, a 24.7 per cent reduction from 689 million in the same month a year earlier but a 17.8 per cent increase from May 2020. The volume of contactless credit card transactions was 43 per cent lower than in the same period a year earlier, but 23 percent higher than the previous month, and contactless debit card transactions was 21.5 per cent lower than the same period a year earlier but 17.2 per cent higher than the previous month.
  • The total value of all contactless transactions was £6.5 billion in June 2020, a 2.4 per cent increase from £6.4 billion in the same month in 2019 and a 15.5 per cent increase from the previous month.

“While card activity is still significantly below pre-lockdown levels, there has been steady growth in the value of purchases using payment cards in recent months. Despite non-essential shops re-opening in England in mid-June, there was actually a drop in the number of card transactions in the UK compared to the previous month.
“Lower spending and maintained repayment levels suggest that customers may have used the opportunity to pay down their credit card bills and reduce any debts – as the annual growth in outstanding balances contracted by 13.4 per cent in the year to June 2020.

“As shops encouraged customers to pay by contactless card coupled with the contactless limit increase to £45, contactless transactions totalled £6.5 billion in June, a 15.5 per cent increase on May and above the level seen a year ago.”

Eric Leenders, Managing Director of Personal Finance, UK Finance

Conclusion

In this second retail payments round up we see a continued clear shift to digital / cashless payments with Faster Payments and card volumes showing a post COVID recovery.

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

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