In this August round up of retail payments, as restrictions continue to ease, we see the impact on the volume and value of payments processed in the UK.

Note: All data is publicly sourced and is the latest available: Pay.UK July 2021, Link August 2021 and UK Finance May 2021.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

In the 12 months to the end of July 2021 we see that:

  • Bacs Direct Credit volumes have decreased by 3% (12 months to June decreased by 2%)
  • Bacs Direct Debit volumes have increased by 1% (12 months to June increased by 1%)
  • Total Bacs volumes have remained unchanged (12 months to June also unchanged)
  • Bacs Direct Credit values have increased by 3% (12 months to June also 3%)
  • Bacs Direct Debit values have decreased by 1% (12 months to June decreased by 3%)
  • Total Bacs values have increased by 2% (12 months to June increased by 1%)

The recovery in volumes for Bacs Direct Credits has fallen back slightly in July following growth seen in June; the number of payments processed in the month has reduced by 2% compared to the equivalent month in 2020 and this has contributed to the year on year 3% decrease.

The small growth in Direct Debit volumes year on year seen throughout 2020 has continued though, with an increase of 1% again recorded for the year to July 2021. As Direct Debits account for 70% of Bacs payment volumes this increase has meant that overall Bacs volumes remain unchanged year on year.

Although volumes and values for the month of July have fallen back slightly compared to 2020, the recovery in both volumes and values continues to be seen in the trajectory for the twelve month comparisons. Assuming the current easing of restrictions continues, despite the slight interruption to the pattern in July, we should see continued recovery throughout the remainder of this year.

CHAPS

In the 12 months to the end of July 2021 we see that:

  • CHAPS volumes have increased by 1% (12 months to June decreased by 1%) 

This was made up of a 1% increase in retail / commercial based payments and a 1% increase in financial institution payments, compared to 2% decrease and 1% increase respectively for the 12 months to June.

  • CHAPS values have decreased by 2% (12 months to June increased by 1%)

This month the change was made up of an 5% increase in retail / commercial based payments and a 4% decrease in financial institution based payments, compared to 7% increase and 2% decreased respectively for the 12 months to June.

Retail / Commercial payment activity had fallen throughout 2020 – however for the month of December volumes just crept ahead of December 2019. Volumes fell back again in January but have recovered since as overall activity has increased as restrictions have eased in 2021. This was again seen in June with volumes 32% ahead of June 2020. However the increase year on year for July has fallen back to just 6%.

The resilience in Wholesale payment volumes has continued although values have decreased compared to 2020 for each month in the last quarter and this has led to an overall fall in Wholesale values year on year. This has continued in July increasing the fall to 4% year on year.

Faster Payments

In the 12 months to the end of July 2021 we see that:

  • Single Immediate Payment volumes have increased by 25% (12 months to June 26%)
  • Total Faster Payment volumes have increased by 21% (12 months to June also 21%)
  • Single Immediate Payment values have increased by 25% (12 months to June 24%)
  • Total Faster Payment values have increased by 22% (12 months to June 20%)

Thus, the trend has continued in July with both volumes and values significantly ahead of 2020 levels with the percentage rise in values continuing to increase month on month. July 2021 saw an increase of 14% in the volume of Single Immediate Payments processed in the month compared to 2020 and 22% in the value of Single Immediate Payments.

The increased use of faster payments seems to be a digital payment habit that will be here to stay, reinforced throughout each lockdown over the last 12 months and continuing as restrictions ease. With differing conditions likely over the remainder of the year, the resilience of this particular payment habit coupled with likely increased activity in 2021 suggests that further year on year growth would be expected.

Cheques

In the 12 months to the end of July 2021 we see that:

  • Cheque volumes have decreased by 25% (12 months to June 26%).
  • Cheque values have decreased by 31% (12 months to June 33%).

Thus, despite the introduction of the image-based cheque clearing system, the volumes have continued to drop over the 12 month period. Volumes processed by the Image Clearing System in July were 17% lower than during July 2020 with the value also 2% lower for the month. Therefore, although many have undoubtedly switched to digital payment options, there is some underlying resilience, particularly in the value of cheques processed, which continues to be seen in this method of payment.

However, with both volumes and values of digital payments continuing to increase the share of legacy payments within the total continues to fall. For example, for the twelve months to July 2020 the volume of cheque payments accounts for 2.4% of the total (for Bacs/CHAPS/Faster payments and Image Clearing System) falling to 1.7% in 2021; the value accounted for 0.3% of these payments for the 12 months to July 2020 and 0.2% for the 12 months to July 2021.

LINK – ATM Withdrawals

Key observations for the week ending 29 August 2021:

  • Last week the volume of ATM transactions increased by 7% when compared to the previous week in 2021.
  • Last week the volume of ATM transactions decreased by 1% when compared to the equivalent week in 2020.
  • Last week the volume of ATM transactions decreased by 34% when compared to the equivalent week in 2019.

Thus ATM usage continues to track very closely to 2020 volumes, which is not unexpected as the equivalent period last year still reflects very similar conditions – i.e. with non essential retail stores and indoor hospitality having re-opened.

Although restrictions have now been lifted, many people are still proceeding with caution and this has limited the uplift which may otherwise have been expected. In typical British style, the “Summer” weather during August 2021 may also have dampened activity a little.

During August 2020 the “Eat out to help out” campaign was also boosting hospitality trade and may have contributed to 2020 volumes albeit the two years are still very closely matched.

Source: LINK

This second graph shows the impact at the beginning of Lockdown 3.0 and then a gradual increase from January to March followed by the spikes at the end of March and in mid April as restrictions were eased at each of these stages.

The spike at the beginning of May co-incided with good weather over the first bank holiday and whilst the results from the further easing mid May were also dampened by the weather, a further spike occurred over the second bank holiday and weekly transactions have settled around this level.

From July activity has been very closely matched across the two years. The volume of ATM transactions in the previous four weeks has remained either plus or minus 1% of the volume seen in the equivalent weeks in 2020.

It therefore looks like this floor in the number of transactions will be maintained during the remainder of 2021. Whilst digital payment habits were reinforced during each lockdown, there is a consistent underlying level of cash usage by those who need to rely on cash and by those who choose to rely on cash. Indeed, with the exception of a 2% reduction in both the third week in July and the last week of August, the value of ATM Transactions has remained either in line with or ahead of that seen since the first Lockdown in 2020.

Source: LINK

Although more may move to digital solutions over time, a considerable number are still reliant on or are choosing to rely on traditional payment methods including cash. This is reflected in the consistent underlying level of ATM cash transactions seen and – for 2021 at least – a further significant year on year reduction is not expected to occur.

Rolling volume change (compared to 2020): 

  • w/e 22 Aug: -1%
  • w/e 29 Aug: -1%

Rolling value change (compared to 2020): 

  • w/e 22 Aug: +2%
  • w/e 29 Aug: -2%

For more information visit our: ATM Tracker.

Debit and Credit Cards

Source: UK Finance

The UK Finance Update for April 2021 reports:

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

  • There were 1.7 billion debit card transactions in May, 43.1 per cent more than in May 2020 and 6.3 per cent more than May 2019. The total spend of £57.0 billion was 18 per cent higher than May 2020 and 8.6 per cent higher than May 2019.
  • There were 281 million credit card transactions in May, 50.1 per cent more than in May 2020 but 7.2 per cent fewer than May 2019. The total spend of £14.9 billion was 55.9 per cent higher than May 2020 but 14.6 per cent less than May 2019.
  • Outstanding balances on credit card accounts have contracted by 7.9 per cent over the twelve months to May, as a result of repayments outstripping new borrowing in the year.

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

  • There were 1.8 billion debit and credit card transactions in the UK in May, 64.4 per cent more than in May 2020 and 5.5 per cent more than May 2019. The total spend of £68.4 billion was 42.5 per cent higher than May 2020 and 9.9 per cent higher than May 2019.
  • Contactless payments accounted for 49 per cent of all credit card and 65 per cent of all debit card transactions.
  • There were 1,105 million contactless card transactions in May, 102.3 per cent more than the 546 million in May 2020 and 52.8 per cent more than the 723 million in May 2019. The total value of contactless transactions was £13.7 billion in May, a 91.9 per cent increase on £7.1 billion in May 2020 and 104.4 per cent increase on £6.7 billion in May 2019.
  • The number of contactless credit card transactions was 123.4 per cent higher than May 2020 and 22 per cent higher than May 2019. The number of contactless debit card transactions was 99.7 per cent higher than May 2020 and 58.2 per cent higher than May 2019.

Current Account Switch Service

Monthly data 2020:

Source: Pay.UK

Monthly data: 2021:

Source: Pay.UK

A total of 7.4 million current accounts have now been switched since the service was launched in September 2013

In 2020 691489 current account switches were completed – a significant (COVID) reduction on the historic number of switches seen – in 2019 for example 978400 switches were completed.

Lockdown 3.0 was clearly impacting as the number of switches in January 2021 was the fourth lowest over the last 12 month period – very close to the May, June and July ‘lockdown lows’ of 2020. The number of total switches in Q1 2021 decreased by 51,297 compared to the previous quarter as social distancing measures were re-introduced across the U.K.

As restrictions eased this increased again between February 2021 and March 2021 – from 42398  to 63724. The number of switches has increased again in July – and at 60146 this is still just over double the number of switches when compared with the same period in 2020.

A high number of switches for Small Business and Charity accounts had been seen in January and February. However, this had fallen back in March and April and the level in July is now at the lowest seen since February 2019.

For more information visit our: Current Account Switching Tracker.

Conclusion

In this latest retail payments round up, we continue to see our digital payment habits evidenced most clearly in the continued rise of both the volume and value of single immediate faster payments. Volumes and values of these payments have continued to increase in June 2021 compared to 2020 and we would expect this trend to continue as restrictions are lifted and overall activity increases.

The pandemic hastened the fall in cheque volumes and ATM cash transactions during 2020. The volume of cheques processed has continued to fall in 2021 although now by a lesser amount month on month – annual cheque volumes have reduced by 25%, however the reduction for July has only been by 17% compared to 2020.

ATM cash transactions are currently tracking almost exactly in line with 2020 – not unsurprising as a similar level of restrictions have been in place across the two years and shows the persistent level of cash usage which remains for those who choose or need to rely on cash.

However the growth in the volume and value of digital and contactless payments are likely to outstrip any uplift in cheque and cash transactions and therefore we expect to see the share of these legacy payment methods within the overall activity to continue to decline.

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