In this October round up of retail payments, as restrictions have eased but caution remains, 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 September 2021, Link October 2021 and UK Finance July 2021.
Source: Pay.UK Limited
Bacs Direct Debit and Direct Credit
In the 12 months to the end of September 2021 we see that:
- Bacs Direct Credit volumes have decreased by 1% (12 months to August decreased by 2%)
- Bacs Direct Debit volumes have increased by 2% (12 months to August increased by 2%)
- Total Bacs volumes have increased by 1% (12 months to August increased by 1%)
- Bacs Direct Credit values have increased by 5% (12 months to August increased by 4%)
- Bacs Direct Debit values have increased by 2% (12 months to August increased by 1%)
- Total Bacs values have increased by 4% (12 months to August increased by 3%)
Volumes for Bacs Direct Credits in September were again just below September 2020 although with a further recovery seen reducing the year on year fall in volumes from 2% for the year to August 2021, when compared to the 12 months ending August 2020, to 1% for the year to September 2021, again when compared to the 12 months ending September 2020.
The growth in Direct Debit volumes year on year has been maintained, with an increase of 2% recorded again for the year to September 2021. As Direct Debits account for 70% of Bacs payment volumes, this increase has again contributed to the overall growth recorded in Bacs volumes of 1% for this period.
The growth in the value of both Bacs Direct Credits and Direct Debits continues contributing to a 4% growth overall for the year ending September 2021, when compared with the previous 12 months ending September 2020. Assuming the current level of restrictions remain in place, we would expect to see continued recovery throughout the remainder of this year.
CHAPS
In the 12 months to the end of September 2021 we see that:
- CHAPS volumes have increased by 5% (12 months to August increased by 4%)
This was made up of a 5% increase in retail / commercial based payments and a 2% increase in financial institution payments, compared to 4% increase and 3% increase respectively for the 12 months to August.
- CHAPS values have decreased by 4% (12 months to August decreased by 2%)
This month the change was made up of an 1% increase in retail / commercial based payments and a 6% decrease in financial institution based payments, compared to 3% increase and 4% decrease respectively for the 12 months to August.
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. The comparison in September reflects similar conditions across the two years but again shows the increasing activity this year with volumes 12% greater in September 2021 compared to September 2020.
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 September with the value of Wholesale payments showing a reduction of 8% for September 2021 compared to September 2020.
Faster Payments
In the 12 months to the end of September 2021 we see that:
- Single Immediate Payment volumes have increased by 24% (12 months to August 26%)
- Total Faster Payment volumes have increased by 21% (12 months to August 22%)
- Single Immediate Payment values have increased by 27% (12 months to August 27%)
- Total Faster Payment values have increased by 24% (12 months to August 25%)
Thus, the trend has continued in September with both volumes and values significantly ahead of 2020 levels. September 2021 saw an increase of 9% in the volume of Single Immediate Payments processed in the month compared to 2020 and 17% 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 but also continuing as restrictions have eased. The resilience of this particular payment habit coupled with likely increased activity in 2021 suggests that further year on year growth would be expected over the remainder of the year – albeit the trajectory of growth now appears to be flattening.
Cheques
In the 12 months to the end of September 2021 we see that:
- Cheque volumes have decreased by 23% (12 months to August 24%).
- Cheque values have decreased by 23% (12 months to August 26%).
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 September were 21% lower than during September 2020. In August the value increased year on year, however for September the value again fell by 12% for September 2021 compared to September 2020. Thus although amounts are falling and although many have undoubtedly switched to digital payment options, there is some underlying resilience which continues to be seen in this method of payment.
However, with volumes of digital payments continuing to increase, the share of legacy payments within the total continues to fall. For the twelve months to September 2020 the volume of cheque payments again accounted for 1.8% of the total (for Bacs/CHAPS/Faster payments and Image Clearing System) falling to 1.4% in September 2021.
LINK – ATM Withdrawals
Key observations for the week ending 24 October 2021:
- Last week the volume of ATM transactions decreased by 2% when compared to the previous week in 2021.
- Last week the volume of ATM transactions increased by 2% when compared to the equivalent week in 2020.
- Last week the volume of ATM transactions decreased by 36% when compared to the equivalent week in 2019.
The volume of ATM transactions is still tracking very closely to 2020. However, the paths for 2020 and 2021 are now starting to diverge and may continue to do so over the next few weeks, if restrictions are not re-introduced this year, as conditions will again differ across these two years.
The reduction in ATM Transaction volumes for 2021 compared to 2019 is however unlikely to see any significant change. New research from LINK published on 20 October shows consumers are withdrawing £100 million less per day since before the pandemic.
The following quote from Nick Quin, Head of Financial Inclusion, LINK, was included within the report:
“People are choosing new ways to pay for things, and COVID has turbocharged the switch to digital.
When we conducted similar analysis this time last year, we had an incomplete picture because before the vaccine rollout people generally were staying local, working from home and many leisure locations were still temporarily closed. ATM use in some city centres had declined by as much as 80% overnight. Now that life is returning to normal, people are still visiting ATMs much less often and taking out more each time.
Crucially, even though we’re withdrawing almost £100m less per day, millions still rely on cash, especially in the most deprived areas of the country. It is important we continue to protect access to cash across the country.”
Source: LINK
This next 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 mid April as restrictions were eased at each of these stages and increased activity over the May bank holidays with fairly consistent volumes seen since that time.
Since July activity has been very closely matched across the two years. It therefore looks like this floor in the volume 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.
Source: LINK
Although more may move to digital solutions over time, we can see that 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 17 Oct: +3%
- w/e 24 Oct: +2%
Rolling value change (compared to 2020):
- w/e 17 Oct: +4%
- w/e 24 Oct: +3%
For more information visit our: ATM Tracker.
Debit and Credit Cards
Source: UK Finance
The UK Finance Update for July 2021 reports:
Card transactions by UK cardholders both in the UK and overseas:
- There were 1.9 billion debit card transactions in July, 21 per cent more than in July 2020 and 16.6 per cent more than July 2019. The total spend of £60.7 billion was 3.1 per cent lower than July 2020 but 12.4 per cent higher than July 2019.
- There were 312 million credit card transactions in July, 19.1 per cent more than in July 2020 but 4.6 per cent fewer than July 2019. The total spend of £16 billion was 15.6 per cent higher than July 2020 but 13.7 per cent less than July 2019.
- Outstanding balances on credit card accounts have contracted by 7.3 per cent over the twelve months to July, 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 1.9 billion debit and credit card transactions in the UK in July, 21.9 per cent more than in July 2020 and 8.5 per cent more than July 2019. The total spend of £69.4 billion was 5.5 per cent higher than July 2020 and 8.3 per cent higher than July 2019.
- Contactless payments accounted for 52 per cent of all credit card and 67 per cent of all debit card transactions.
- There were 1,222 million contactless card transactions in July, 37.8 per cent more than the 887 million in July 2020 and 59.6 per cent more than the 766 million in July 2019. The total value of contactless transactions was £14.9 billion in July, a 37.9 per cent increase on £10.8 billion in July 2020 and 107.4 per cent increase on £7.2 billion in July 2019.
- The number of contactless credit card transactions was 46 per cent higher than July 2020 and 30.9 per cent higher than July 2019. The number of contactless debit card transactions was 36.6 per cent higher than July 2020 and 64.9 per cent higher than July 2019.
Current Account Switch Service
Monthly data 2020:
Source: Pay.UK
Monthly data: 2021:
Source: Pay.UK
A total of 7.6 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 September – and at 87525 this is again an increase of around 40% in 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 August remains 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 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 September 2021 compared to 2020 and we would expect this trend to continue assuming the current restrictions remain in place and activity levels continue to increase.
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 – annual cheque volumes have reduced by 23%, with the comparison for the month of September 2021 compared to September 2020 also showing a fall of 21%.
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.