The Pound in your pocket

It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.

Almost 50 years ago (November 1967) the then Prime Minister, Harold Wilson, was facing a crisis and was defending his decision to devalue the pound saying it will tackle the “root cause” of Britain’s economic problems.

The government announced that it was lowering the exchange rate so the pound would be worth $2.40, down from $2.80, a cut of just over 14%.

The decision came after weeks of increasingly feverish speculation and a day in which the Bank of England spent £200m trying to shore up the pound from its gold and dollar reserves.

In a radio and television broadcast this evening, the Prime Minister said devaluation would enable Britain to ” break out from the straitjacket” of boom and bust economics.

It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.

Prime Minister Harold Wilson

How do we spend the ‘pound in our pocket’ today?

Much has happened to our pound (and country) over the last 50 years but this led me to think about how do we spend the ‘pound on our pocket’ that Harold Wilson was so keen to defend.

Today, the ‘pound in our pocket’ will be both physical (cash) and digital – for the purposes of this rough and ready calculation let’s assume that in our digital ‘wallet’ we have a debit card, a credit card, make use of Bacs’ Direct Debit and Direct Credit, pay people with Faster Payments, some of us might use a cheque every now and again and, perhaps, once or twice in our lifetime make a retail CHAPS payment.

Data: Annual volumes processed by the UK’s ‘retail’ payment schemes.

Given the significant transition to paying for everyday purchases digitally it is not surprising to see Debit Cards at the top of the tree. A societal move from cash, the increase of the contactless limit to £45 and the growing use of virtual wallets on our smartphones will only drive this figure higher. Adding the newly formed sticky payment habits that we acquired during the first COVID lockdown into the mix will only increase the portion of the pound in our pocket being represented by a Debit Card. 

Bacs, the stalwart of digital payments, was the ‘new kid on the block’ in Wilsons day and at the very start of its journey to become part of the fabric of the UK’s payment habits.

Faster Payments annual growth trajectory can be measured in double digits and its rise has only been marginally thrown off course by COVID. The growth of app / web banking, overlay services such as Request to Pay, fraud prevention tools like Confirmation of Payee and Open Banking disintermediating card rails through utilisation of Faster Payments will ensure that, in the words of Yazz, the only way is up.

BTW maybe Yazz’s song also has a hidden ‘lockdown’ message for us today:

Things may be a little hard now 

But we’ll find a brighter day

Yazz, The Only Way Is Up

To an extent the Credit Card’s claim on the pound in our pocket will mirror the progress of our Debt Card experience, albeit to a lesser volume.

With cheques the less said the better – managed retreat has given over to terminal decline.

Finally, for the man on the Clapham omnibus, Faster Payments should meet all our (near) real time payment needs to render a CHAPS payment something we need not worry ourselves with.

Payments Tracker

For a monthly insight into the volumes and values of the UK’s retail payments landscape subscribe to this newsletter to visit:

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Getting to grips with the UK’s retail payments landscape can seem a complex and daunting task.

The Payments, Payments, Payments newsletter from Mike Chambers at Northey Point explores a wide range of the UK’s payment news including: Open Banking, Request to Pay, Direct Debit, Confirmation of Payee, Bacs, CHAPS, Faster Payments, LINK, cash, cards and cheques and unpacks the eco-system that supports the operation of these systemically important payment systems.

The newsletter is an independent and informed insight into the UK’s payments landscape – exclusive payment insights, hot topic briefings and fundamentals unpacked. 

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