Getting to grips with the UK’s retail payments landscape can seem a complex and daunting task.
The Payments:Unpacked 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.
Join the rapidly growing number of subscribers and navigate the UK’s payments landscape with former Bacs CEO Mike Chambers.
Here’s a few of this weeks shorter insights:
Nine-in-ten of all UK in-store card payments made with contactless
The Coronavirus pandemic has cemented the role of contactless as the preferred way to pay in the UK, accounting for nine-in-ten of all elgible card transactions in 2020.
The biggest milestone for the technology was in April, when the UK limit was raised from £30 to £45, making even more transactions eligible for contactless payments.
Since the introduction of the new limit, the average value of contactless transactions has jumped to £12.38, up almost a third compared to the 2019 average of £9.60, according to figures from Barclaycard.
With many stores unable to open for much of the year due to lockdown restrictions, the total volume of contactless payments fell by 11.8% compared to 2019. However, with the higher average transaction value, the total transaction value actually rose by seven per cent.
Individually, the average user made 141 contactless payments in 2020, worth a total of £1,640. Looking at the spending habits of different age groups, the over-65s were most likely to embrace the technology for the first time, with the age-group seeing a 12% annual growth in the number of active users.
More: Contactless: Nine in ten.
Retail payment tracker
Northey Point’s payments tracker acts as “fast indicator” for monitoring the volume and value performance of the UK’s retail payment schemes. This fast indicator provides the ability to track in aggregate how the UK’s payment habits are changing in response to the societal shift to digital payments which is being accelerated as we respond to the COVID pandemic.
Key highlights of the final 2020 payments tracker (using latest available data):
- In aggregate the Bacs, CHAPS, Faster Payments and cheque / credit clearing schemes operated by Pay.UK increased by 3% in 2020 to a massive 9.5 billion transactions.
- The lions share of Pay.UK volumes are generated by Bacs (6.5 billion) with the nearest ‘rival’ by volume Faster Payments at 2.8 billion.
- Just two of Pay.UK’s payment scheme grew in volume during 2020: Faster Payments (+17%) and Direct Debit (+1%).
- Looking at the wider payment eco system a number of factors (including the COVID pandemic and the societal switch to digital payments) led to payment schemes experiencing a volume reduction: Bacs Direct Credit (-4%), CHAPS (-8%), Cheque / credit clearing(-28%), ATM withdrawals (-47%), Debit Cards (-4.6%) and Credit Cards (-2.8%).
- It is also important to note that (over the 12 month to October 2020) the outstanding balances on Credit Cards contracted by 14.7%.
More: Retail payments tracker.
Cashless payments on the North Isles
Probably the last time I used physical cash was on an inter island ferry at the very Northern tip of the UK. Shetland News are reporting that late last year Shetland Islands Council began trialling card and contactless payments on the Bressay and Whalsay ferries. Shetland’s online newspaper report that card payments would have been introduced on North Isles ferries by now if it wasn’t for coronavirus restrictions, councillor says.
More: Cashless on the North Isles.
Tesco Pay+ surpasses £1 billion in payments since launch
Tesco have revealed that Pay+, the mobile payment app operated by Tesco Bank, surpassed a total of £1 billion in payments shortly before Christmas 2020. The contactless payment app makes shopping in Tesco stores more convenient and rewarding for customers when paying with their smartphone.
Since it launched nationwide in 2017, the Pay+ app has been enhanced to allow Tesco shoppers to make payments, collect Clubcard points and track spending in any UK Tesco store or petrol station with a single scan of their phone, improving customer checkout experience when shopping at Tesco.
Tesco Pay+ now has 1.2 million registered users and a transaction using the app takes place, on average, every 1.4 seconds.
More: Tesco Pay+.
Longer reads
Two longer reads for this week exploring aspects of Request to Pay:
- Learning from M-Pesa: Peter Cornforth (Commercial Director at Answer Pay) takes a look at how the success of M-Pesa might act as a reference point for the UK’s Request to Pay eco-system.
- A European perspective: With the European (SEPA) scheme for the Request-to-Pay now published – Mark Munne and Paul van der Valk encourage us to invest 10 minutes of reading to understand why it could be important to us.
And finally…
- Variable Recurring Payments are back… Sign up to hear Open Banking views on where VRP and Sweeping goes next.
- EC and ECB join forces to investigate digital euro.
- Ireland’s competition watchdog has rejected a plan by four of the country’s biggest banks to create a joint payments app, but says it is willing to “further engage” on the issue.
- Payments Landscape: Unpacked – all you need to know about payments in the UK in a series of informative briefings – subscribe for the whole series or pick and mix topics on a PAYG basis .
- Bank branch closures league table.