In this third round up of retail payments in 2022, we see the impact on the volume and value of payments processed in the UK with the easing of Covid restrictions, compared to Lockdown 3.0 conditions in 2021.
Note: All data is publicly sourced and is the latest available: Pay.UK February 2022, Link March 2022 and UK Finance December 2021.
Source: Pay.UK Limited
Bacs Direct Debit and Direct Credit
In the 12 months to the end of February 2022 we see that:
- Bacs Direct Credit volumes were unchanged (12 months to January also unchanged)
- Bacs Direct Debit volumes have increased by 4% (12 months to January increased by 3%)
- Total Bacs volumes have increased by 2% (12 months to January increased by 2%)
- Bacs Direct Credit values have increased by 3% (12 months to January increased by 3%)
- Bacs Direct Debit values have increased by 10% (12 months to January increased by 8%)
- Total Bacs values have increased by 5% (12 months to January increased by 4%)
Volumes for Bacs Direct Credits in February 2022 increased by just 0.1% when compared with February 2021 thus contributing to the year on year stability with volumes being unchanged when compared to the 12 months ending February 2021.
The growth in Direct Debit volumes year on year is 4% for the 12 months to February 2022 when compared with the 12 months to February 2021. As Direct Debits account for 70% of Bacs payment volumes, this has helped to maintain the growth seen over the year at 2% for the 12 months to February 2022.
The month on month value of Direct Credits has increased with the value processed in February 2022 4% greater than February 2021. Year on year growth has therefore stabilised at 3% for the 12 months ending February 2022. Similarly growth in the value of Direct Debits is seen with the value processed in February 2022 10% greater than in February 2021.
CHAPS
In the 12 months to the end of February 2022 we see that:
- CHAPS volumes have increased by 11% (12 months to January increased by 10%)
This was made up of a 13% increase in retail / commercial based payments and a 6% increase in financial institution payments, compared to 12% increase and 5% increase respectively for the 12 months to January.
- CHAPS values have decreased by 6% (12 months to January decreased by 6%)
This month the change was made up of an 4% decrease in retail / commercial based payments and a 6% decrease in financial institution based payments, compared to 4% decrease and 7% decrease respectively for the 12 months to January.
Retail / Commercial payment activity had fallen throughout 2020 recovering for just December before falling back again in January 2021. Volumes have since recovered and February continued this trend with the volumes increasing by 7% in February 2022, compared with February 2021. Values also recovered increasing by 9% in February 2022, compared with February 2021. This is not unsurprising given the restrictions in place during February 2021.
The underlying resilience in Wholesale payment volumes has continued although values had been decreasing month on month. However, values for February 2022 compared with February 2021 increased by 11%. This has reduced the year on year fall with Wholesale payment values reducing by 6% for the year to February 2022 compared to the year to February 2021. Previously, in January the year on year fall had been 7%.
Faster Payments
In the 12 months to the end of February 2022 we see that:
- Single Immediate Payment volumes have increased by 23% (12 months to January 23%)
- Total Faster Payment volumes have increased by 22% (12 months to January 22%)
- Single Immediate Payment values have increased by 26% (12 months to January 27%)
- Total Faster Payment values have increased by 26% (12 months to January 26%)
Thus, the trend has continued in February with both volumes and values significantly ahead of 2021 levels. February 2022 saw an increase of 21% in the volume of Single Immediate Payments processed in the month compared to 2021 and 20% 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 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 February 2022 we see that:
- Cheque volumes have decreased by 13% (12 months to January 15%).
- Cheque values have decreased by 3% (12 months to January 7%).
Volumes processed by the Image Clearing System in February were 11% lower than during February 2021 and values just 5% lower. 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 February 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 February 2022.
LINK – ATM Withdrawals
Key observations for the week ending 20 March 2022:
- The volume of ATM transactions increased by 1% when compared to the previous week in 2022.
- The volume of ATM transactions increased by 18% when compared to the equivalent week in 2021.
- The volume of ATM transactions decreased by 17% when compared to the equivalent week in 2020.
Last week there was a total of 30.1 million ATM transactions which represents an increase of 0.3 million ATM transactions over the previous week.
In 2022, there was an increase of 4.6 million transactions or 18% 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 difference across the three years is now also seen to be narrowing as 2020 heads towards the first Lockdown. Many venues were already takeaway only at this stage or closed with ATM transaction volumes rapidly reducing as a result of the restrictions in place.
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. Overall weekly volumes remain below pre-pandemic levels but will shortly be above 2020 for the first time as levels two years ago reflect the first lockdown restrictions in place.
Graham Mott, Director of Strategy, LINK, said in their 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.
‘Cash is still vital to so many people,’ says Nick Quin, head of financial inclusion at cash machine network Link. ‘Millions of people are choosing new ways to pay but, last year, on average, every adult in the UK still withdrew almost £1,500 from cash machines across the country.’
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 December 2021 reports:
Card transactions by UK cardholders both in the UK and overseas:
- There were 2 billion debit card transactions in December, 19 per cent more than in December 2020 and 15.2 per cent more than December 2019. The total spend of £63.5 billion was 0.5 per cent higher than December 2020 and 11.5 per cent higher than December 2019.
- There were 349.7 million credit card transactions in December, 19.7 per cent more than in December 2020 and 1.9 per cent more than December 2019. The total spend of £17.3 billion was 17.9 per cent higher than December 2020 but 5.6 per cent lower than in December 2019.
- Outstanding balances on credit card accounts have grown by 0.4 per cent over the twelve months to December.
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 December, 19.6 per cent more than in December 2020 and 8.2 per cent more than December 2019. The total spend of £70.5 billion was 9.4 per cent higher than December 2020 and 10.2 per cent higher than December 2019.
- Contactless payments accounted for 56 per cent of all credit card and 69 per cent of all debit card transactions.
- There were 1.3 billion contactless card transactions in December, 40.3 per cent more than the 939 million in December 2020 and 76.5 per cent more than the 746 million in December 2019. The total value of contactless transactions was £20.2 billion in December, a 65.5 per cent increase on £12.2 billion in December 2020 and 172.5 per cent increase on £7.4 billion in December 2019.
- The number of contactless credit card transactions was 57.5 per cent higher than December 2020 and 60.8 per cent higher than December 2019. The number of contactless debit card transactions was 37.9 per cent higher than December 2020 and 79.3 per cent higher than December 2019.
Current Account Switch Service
Monthly data: 2021:
Source: Pay.UK
Monthly data 2022
Source: Pay.UK
A total of 7.9 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.
The differing conditions are evident in February 2022 with 70764 compared to 41233 during Lockdown 3.0 in February 2021. The impact from the pandemic is still seen however as this was 23490 lower than pre-pandemic volumes in February 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 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 13%, with the comparison for the month of February 2022 compared to February 2021 showing a fall of 11%.
ATM cash transactions are now tracking ahead of the early weeks in 2021 – usage in the current year is stable but had fallen back in the Lockdown conditions in 2021 hence the year on year increase seen. ATM Transaction Volumes are therefore 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 we expect to see the share of these legacy payment methods within the overall activity continue to decline.