Payments Tracker

In this second round up of retail payments in 2022, we see the impact on the volume and value of payments processed in the UK now Covid restrictions are easing, compared to Lockdown 3.0 conditions in 2021.

Note: All data is publicly sourced and is the latest available: Pay.UK January 2022, Link February 2022 and UK Finance November 2021.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

In the 12 months to the end of January 2022 we see that:

  • Bacs Direct Credit volumes were unchanged (12 months to December decreased by 1%)
  • Bacs Direct Debit volumes have increased by 3% (12 months to December increased by 2%)
  • Total Bacs volumes have increased by 2% (12 months to December increased by 1%)
  • Bacs Direct Credit values have increased by 3% (12 months to December increased by 4%)
  • Bacs Direct Debit values have increased by 8% (12 months to December increased by 6%)
  • Total Bacs values have increased by 4% (12 months to December increased by 4%)

Volumes for Bacs Direct Credits in January 2022 fell back by just 0.1% when compared with January 2021, as restrictions eased, contributing to the year on year volumes being unchanged when compared with the 12 months ending January 2021.

The growth in Direct Debit volumes year on year has now seen an increase to 3% for the 12 months to January 2022 when compared with the 12 months to January 2021. As Direct Debits account for 70% of Bacs payment volumes, this has helped to increase the growth seen over the year back to 2% for the 12 months to January 2022.

Month on month values have again decreased with January 2022 values 5% below January 2021. Year on year growth had been increasing each month but with monthly values reducing the increase has now begun to flatten falling back to 3% for the 12 months ending January 2022. Total Bacs values for January 2022 were also lower than January 2021 but overall growth has remained at 4% for Total Bacs values for the 12 months ending January 2022.

CHAPS

In the 12 months to the end of January 2022 we see that:

  • CHAPS volumes have increased by 10% (12 months to December increased by 8%) 

This was made up of a 12% increase in retail / commercial based payments and a 5% increase in financial institution payments, compared to 9% increase and 3% increase respectively for the 12 months to December.

  • CHAPS values have decreased by 6% (12 months to December decreased by 6%)

This month the change was made up of an 4% decrease in retail / commercial based payments and a 7% decrease in financial institution based payments, compared to 5% decrease and 6% decrease respectively for the 12 months to December.

Retail / Commercial payment activity had fallen throughout 2020 recovering for just December before falling back again in January 2021. Volumes have since recovered and January continued this trend with the volumes increasing by 10% in January 2022, compared with January 2021. Values also recovered increasing by 10% in January 2022, compared with January 2021. This is not unsurprising given the restrictions in place during January 2021.

The underlying resilience in Wholesale payment volumes has continued although with values decreasing month on month. Values for January 2022 compared with January 2021 had decreased by 2% contributing to the further year on year fall in values by 7% for the year ending January 2022.

Faster Payments

In the 12 months to the end of January 2022 we see that:

  • Single Immediate Payment volumes have increased by 23% (12 months to December 22%)
  • Total Faster Payment volumes have increased by 22% (12 months to December 20%)
  • Single Immediate Payment values have increased by 27% (12 months to December 25%)
  • Total Faster Payment values have increased by 26% (12 months to December 24%)

Thus, the trend has continued in December with both volumes and values significantly ahead of 2021 levels. January 2022 saw an increase of 29% in the volume of Single Immediate Payments processed in the month compared to 2021 and 26% in the value of Single Immediate Payments.

The widespread use of faster payments is a digital payment habit that will be here to stay, reinforced throughout each lockdown and with volumes and values increasing each time restrictions have eased. In the first 3 months of 2022 we would expect to see increasing growth given the differing conditions in place with the trajectory flattening as conditions across both years become more in line.

Cheques

In the 12 months to the end of January 2022 we see that:

  • Cheque volumes have decreased by 15% (12 months to December 19%).
  • Cheque values have decreased by 7% (12 months to December 12%).

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 January were just 6% lower than during January 2021. Thus although volumes are falling as many have undoubtedly switched to digital payment options, there is an underlying level of usage 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 January 2021 the volume of Cheque payments accounted for 2% of the total (for Bacs/CHAPS/Faster payments and Image Clearing System) falling to 1.5% in January 2022.

Key observations for the week ending 20 February 2022:

  • The volume of ATM transactions decreased by 5% when compared to the previous week in 2022.
  • The volume of ATM transactions increased by 13% when compared to the equivalent week in 2021.
  • The volume of ATM transactions decreased by 35% when compared to the equivalent week in 2020.

Last week there was a total of 27.5 million ATM transactions which represents a decrease of 1.4 million ATM transactions over the previous week.

In 2022, there was an increase of 3.2 million transactions or 13% when compared with the equivalent week in 2021.

After the usual seasonal fall at the end of December and a slow start to January, activity in 2022 had pulled away from 2021 as expected given the Lockdown restrictions last year. The latest figures have shown a greater mid-month fall than would have been expected but this was mainly caused by the impact from Storm Eunice on all activity at the end of last week as many heeded the warnings to stay at home.

Source: LINK

This graph shows the impact on ATM Transactions throughout the first year of lockdowns in 2020 and initially at the beginning of 2021 with Lockdown 3.0. This was followed by a gradual increase in volumes in 2021 as restrictions eased throughout the Summer.

From the Summer months onwards activity across both 2020 and 2021 was very closely matched with the exception of the comparison with Lockdown 2.0 in November 2020.

The usual seasonal fall at the end of December is clearly evidenced in the graph below which follows a usual pattern that can also be seen in 2020 and 2019.

After a slow start to January, the volume of ATM transactions in 2022 continues to track above 2021 (with the exception of the impact on Friday from the storm) although overall volumes remain well below pre-pandemic levels.

ATM Transactions are likely to increase back to the volumes seen in last Summer. Whilst digital payment habits have been reinforced during the pandemic, there is still a consistent underlying level of cash usage by those who need to rely on cash and by those who choose to rely on cash.

Graham Mott, Director of Strategy, LINK said in the report published on 21 January that: “Anecdotally, locations such as markets or even pubs that pre-pandemic only accepted cash, now all have card readers and continue to actively encourage contactless payments. Therefore, some consumers who are confident using digital or contactless payments, now use cash less often than they did pre-pandemic and seem unlikely to ever revert back. However, we know that there are still more than five million people who rely on cash and digital payments are not an option. It’s therefore good news that while ATM and cash use may have fallen, LINK is committed to protecting access and the Government says it will be bringing forward legislation to support access to cash.”

Source: LINK

Thus, although the volume and value of digital payments are continuing to grow, 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 as restrictions were lifted during 2021. Although levels are not expected to return to pre-pandemic levels, we expect to see a similar underlying volume of ATM transactions throughout 2022.

For more information visit our: ATM Tracker.

Debit and Credit Cards

Source: UK Finance

The UK Finance Update for November 2021 reports:

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

  • There were 2 billion debit card transactions in November, 29.5 per cent more than in November 2020 and 22.6 per cent more than November 2019. The total spend of £62.4 billion was 8.2 per cent higher than November 2020 and 20.5 per cent higher than November 2019.
  • There were 353 million credit card transactions in November, 29.1 per cent more than in November 2020 and 14.7 per cent more than November 2019. The total spend of £18.6 billion was 28.5 per cent higher than November 2020 and 8.2 per cent higher than in November 2019.
  • Outstanding balances on credit card accounts have contracted by 0.2 per cent over the twelve months to November, 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 2 billion debit and credit card transactions in the UK in November, 33.7 per cent more than in November 2020 and 17.1 per cent more than November 2019. The total spend of £70.9 billion was 20.6 per cent higher than November 2020 and 21 per cent higher than November 2019.
  • Contactless payments accounted for 53 per cent of all credit card and 69 per cent of all debit card transactions.
  • There were 1.3 billion contactless card transactions in November, 59.4 per cent more than the 817 million in November 2020 and 75.9 per cent more than the 740 million in November 2019. The total value of contactless transactions was £17.7 billion in November, a 77.7 per cent increase on £9.9 billion in November 2020 and 155.3 per cent increase on £6.9 billion in November 2019.
  • The number of contactless credit card transactions was 83 per cent higher than November 2020 and 54 per cent higher than November 2019. The number of contactless debit card transactions was 56.2 per cent higher than November 2020 and 79.9 per cent higher than November 2019.

Current Account Switch Service

Monthly data: 2021:

Source: Pay.UK

Monthly data 2022

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.

As restrictions eased this increased again between February 2021 and March 2021 – from 42398  to 63724. The number of switches had increased again in November but reduced again in December due to usual seasonal fall as well as the impact from increased restrictions. Overall though the total number of switches increased by 36302 in Q4 2021 compared with Q3.

Although a seasonally lower month the number of switches in January 2022 was 13613 greater than January 2021. The impact from the pandemic is still seen however as this was 25288 lower than pre-pandemic volumes in January 2020.

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 rise of both the volume and value of single immediate faster payments. With restrictions easing compared to lockdown conditions last year the digital habits are well and truly embedded with digital activity increasing in line with increased overall activity.

The pandemic hastened the fall in cheque volumes and ATM cash transactions during the first lockdowns in 2020. The volume of cheques processed continued to fall in 2021 although by a lessening amount – annual cheque volumes have reduced by 15%, with the comparison for the month of January 2022 compared to January 2021 showing a fall of 6%.

ATM cash transactions are now tracking ahead of the early weeks in 2021 – usage in the current year is stable (with the exception of the impact from Storm Eunice) but had fallen back in the Lockdown conditions in 2021 hence the year on year increase seen. However ATM Transaction Volumes are remaining at a consistent level reflecting the level of cash usage for those who choose to or need to rely on cash.

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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