Payments Tracker

In this last round up of retail payments in 2021, with Covid restrictions under review, 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 November 2021, Link December 2021 and UK Finance September 2021.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

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

  • Bacs Direct Credit volumes are unchanged (12 months to October decreased by 1%)
  • Bacs Direct Debit volumes have increased by 2% (12 months to October increased by 1%)
  • Total Bacs volumes have increased by 2% (12 months to October increased by 1%)
  • Bacs Direct Credit values have increased by 5% (12 months to October increased by 5%)
  • Bacs Direct Debit values have increased  by 5% (12 months to October increased by 3%)
  • Total Bacs values have increased by 5% (12 months to October increased by 4%)

Volumes for Bacs Direct Credits in November 2021 were 5% greater than November 2020, bringing the year on year change in volumes exactly in line when compared with the 12 months ending November 2020.

The growth in Direct Debit volumes year on year has increased again slightly from 1% back to 2% for the 12 months to November 2021 when compared with the 12 months to November 2020. As Direct Debits account for 70% of Bacs payment volumes, this increase has contributed to the overall growth recorded in Bacs volumes increasing to 2% for this period.

Similarly, month on month values have increased above those seen in November 2020. Year on year growth had been increasing each month but remained steady at 4% for the 12 months to the end of October 2021 when compared with the 12 months ending October 2020. However, with values again increasing in the month, total Bacs values have increased to 5% for the period when compared to the 12 months ending November 2020.

CHAPS

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

  • CHAPS volumes have increased by 7% (12 months to October increased by 6%) 

This was made up of a 9% increase in retail / commercial based payments and a 3% increase in financial institution payments, compared to 7% increase and 3% increase respectively for the 12 months to October.

  • CHAPS values have decreased by 5% (12 months to October decreased by 4%)

This month the change was made up of an 3% decrease in retail / commercial based payments and a 5% decrease in financial institution based payments, compared to 1% increase and 6% decrease respectively for the 12 months to October.

Retail / Commercial payment activity had fallen throughout 2020 – however for the month of December 2020 volumes just crept ahead of December 2019. Volumes fell back again in January but have recovered since as overall activity has increased as restrictions eased in 2021. The comparison in November perhaps reflects the varying conditions as Lockdown 2.0 was in place at this time during 2020. Thus the increased activity this year is reflected with volumes 14% greater in November 2021 compared to November 2020. Values however remain subdued with a fall of 3% for the month of November 2021 compared to November 2020.

The resilience in Wholesale payment volumes has continued although the decrease in value compared to 2020 had continued leading to an overall fall in Wholesale values year on year. This was reversed in November with the value of Wholesale payments for the month showing an increase of 11% compared to November 2020.

Faster Payments

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

  • Single Immediate Payment volumes have increased by 22% (12 months to October 23%)
  • Total Faster Payment volumes have increased by 20% (12 months to October 20%)
  • Single Immediate Payment values have increased by 26% (12 months to October 27%)
  • Total Faster Payment values have increased by 24% (12 months to October 24%)

Thus, the trend has continued in November with both volumes and values significantly ahead of 2020 levels. November 2021 saw an increase of 23% in the volume of Single Immediate Payments processed in the month compared to 2020 and 20% in the value of Single Immediate Payments.

The increased use of faster payments is a digital payment habit that will be here to stay, reinforced throughout each lockdown over the last 12 months and with volumes and values increasing as restrictions have eased. The increased year on year growth for the month of November is as to be expected as conditions differed across the two years. Overall year on year growth is to 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 November 2021 we see that:

  • Cheque volumes have decreased by 20% (12 months to October 22%).
  • Cheque values have decreased by 15% (12 months to October 19%).

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 November were 12% lower than during November 2020. In August the value increased year on year, although it has fallen each month since that time. This has occurred again in November 2021 with values falling by 3% compared to November 2020. Thus although usage is falling as 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 November 2020 the volume of Cheque payments accounted for 2.0% of the total (for Bacs/CHAPS/Faster payments and Image Clearing System) falling to 1.5% in November 2021.

LINK – ATM Withdrawals

Key observations for the week ending 26 December 2021:

  • The volume of ATM transactions decreased by 6% when compared to the previous week in 2021.
  • The volume of ATM transactions increased by 16% when compared to the equivalent week in 2020.
  • The volume of ATM transactions decreased by 18% when compared to the equivalent week in 2019.

Since the Summer, the volume of ATM transactions had been tracking very closely to 2020. However, the paths for 2020 and 2021 diverged at the beginning of November reflecting the difference in conditions as the impact last year from the second lockdown could be seen. The divergence though was caused by the reduction in the volume of transactions in 2020 rather than any growth in the current year. Activity in 2021 remained steady as evidenced in the second graph below.

For the first three weeks in December the graphs were once again merging as caution increased for 2021 in the light of the new variant as well as the re-introduction of some restrictions. Meanwhile 2020 transactions saw an increase as many areas emerged from Lockdown 2.0 albeit with similar levels of restrictions in place to the current time.

Over the last week a seasonal decrease in the volume of transactions can be seen across all three years. In 2020 new restrictions over Christmas were introduced which were soon to be followed by the third national lockdown. The restrictions in 2021 have been less severe contributing to the divergence across the two years.

However, when comparing 2019 and 2021, the trajectory in the current year is flatter and therefore the difference seen across the years has halved from the usual reduction in the region of 36% to a reduction of 18%. This is likely to be a short term difference only with the usual divergence expected to return in January.

With the data from 2020 reflecting the impact of Lockdown 3.0 the percentage increase in the volume of transactions is expected to increase over the next few months – but again caused by a significant fall in 2020 rather than any increase at the current time.

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 with the exception of Lockdown 2.0 in 2020, activity has been very closely matched across the two years and the floor in the volume of transactions has been maintained throughout 2021. Whilst digital payment habits were reinforced during each lockdown, we can clearly see that there continues to be 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 in 2021. We expect to see a similar pattern throughout 2022 assuming restrictions are either at the same level or less than those currently in place.

For more information visit our: ATM Tracker.

Debit and Credit Cards

Source: UK Finance

The UK Finance Update for September 2021 reports:

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

  • There were 1.9 billion debit card transactions in September, 12.6 per cent more than in September 2020 and 20.8 per cent more than September 2019. The total spend of £59.2 billion was 5.1 per cent less than September 2020 but 14.1 per cent higher than September 2019. 
  • There were 321 million credit card transactions in September, 13.9 per cent more than in September 2020 and 7.3 per cent more than September 2019. The total spend of £16.8 billion was 19 per cent higher than September 2020 but 2.3 per cent less than in September 2019. 
  • Outstanding balances on credit card accounts have contracted by 4.5 per cent over the twelve months to September, 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 September, 14.2 per cent more than in September 2020 and 15 per cent more than September 2019. The total spend of £69.1 billion was 4.9 per cent higher than September 2020 and 15.5 per cent higher than September 2019. 
  • Contactless payments accounted for 53 per cent of all credit card and 69 per cent of all debit card transactions.
  • There were 1,260 million contactless card transactions in September, 30.5 per cent more than the 966 million in September 2020 and 70.3 per cent more than the 740 million in September 2019. The total value of contactless transactions was £15 billion in September, a 30.1 per cent increase on £11.5 billion in September 2020 and 114.6 per cent increase on £7 billion in September 2019. 
  • The number of contactless credit card transactions was 28.6 per cent higher than September 2020 and 42.9 per cent higher than September 2019. The number of contactless debit card transactions was 30.7 per cent higher than September 2020 and 75.2 per cent higher than September 2019.

Current Account Switch Service

Monthly data 2020:

Source: Pay.UK

Monthly data: 2021:

Source: Pay.UK

A total of 7.8 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 November – at 89546 this is an increase of around 12% in the number of switches when compared with the same month 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 November remains at the low level seen in recent months.

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 increased in November 2021 compared to 2020, particularly reflecting the differing levels of restrictions in place over the two years. Despite similar conditions during December we would expect this trend to continue over the remaining month of 2021.

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 by a lessening amount – annual cheque volumes have reduced by 20%, with the comparison for the month of November 2021 compared to November 2020 showing a fall of 12%.

ATM cash transactions are now tracking ahead of 2020 – however the variance is caused by a fall in 2020 as the activity reflects the impact of the second lockdown rather than a significant increase this year. ATM Transaction Volumes remain at a consistent level thus reflecting the level of cash usage 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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