In this September 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 August 2021, Link September 2021 and UK Finance June 2021.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

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

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

Volumes for Bacs Direct Credits in August were again just behind 2020 although with a small recovery seen reducing the year on year fall in volumes from 3% for the year to July 2021, when compared to the 12 months ending July 2020, to 2% for the year to August 2021, again when compared to the 12 months ending August 2020.

The growth in Direct Debit volumes year on year has continued though, with an increase of 2% recorded for the year to August 2021. As Direct Debits account for 70% of Bacs payment volumes, this increase has contributed to the overall growth now 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 3% growth overall for the year ending August 2021, when compared with the previous 12 months ending August 2020. Assuming the current easing of restrictions continues we would expect to see continued recovery throughout the remainder of this year.

CHAPS

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

  • CHAPS volumes have increased by 4% (12 months to July increased by 1%) 

This was made up of a 4% increase in retail / commercial based payments and a 3% increase in financial institution payments, compared to 1% increase and 1% increase respectively for the 12 months to July.

  • CHAPS values have decreased by 2% (12 months to July also decreased by 2%)

This month the change was made up of an 3% increase in retail / commercial based payments and a 4% decrease in financial institution based payments, compared to 5% increase and 4% decrease respectively for the 12 months to July.

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 had fallen back to just 6% and the increase year on year to August to just 4%.

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 August although the reduction year on year has remained at 4%.

Faster Payments

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

  • Single Immediate Payment volumes have increased by 26% (12 months to July 25%)
  • Total Faster Payment volumes have increased by 22% (12 months to July 21%)
  • Single Immediate Payment values have increased by 27% (12 months to July 25%)
  • Total Faster Payment values have increased by 25% (12 months to July 22%)

Thus, the trend has continued in August with both volumes and values significantly ahead of 2020 levels and with the percentage rise in values increasing again month on month. August 2021 saw an increase of 32% in the volume of Single Immediate Payments processed in the month compared to 2020 and 33% 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 ease. 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.

Cheques

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

  • Cheque volumes have decreased by 24% (12 months to July 25%).
  • Cheque values have decreased by 26% (12 months to July 31%).

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 August were 12% lower than during August 2020, however the value was 4% higher 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 of digital payments continuing to increase the share of legacy payments within the total continues to fall. For example, for the twelve months to August 2020 the volume of cheque payments accounts for 1.8% of the total (for Bacs/CHAPS/Faster payments and Image Clearing System) falling to 1.4% in 2021.

LINK – ATM Withdrawals

Key observations for the week ending 19 September 2021:

  • Last week the volume of ATM transactions decreased by 1% when compared to the previous week in 2021.
  • Last week the volume of ATM transactions decreased by 3% 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.

Thus the volume of ATM transactions has tracked very closely to 2020 over the Summer period, 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. Many had also begun to return to offices at this point last year as in the case in the current year providing a similar boost across both 2020 and 2021.

Although restrictions have now been lifted, many people are still proceeding with caution and social distancing remains in place in many outlets and venues. This has limited the uplift which may otherwise have been expected and at present volumes seem to have settled just below that seen last year.

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 indeed across the two years. The volume of ATM transactions in the previous five weeks had remained either plus or minus 1% of the volume seen in the equivalent weeks in 2020 – over the last week this has again dropped a little more to 3% lower although values remain more in line.

As stated in the recent LINK 2020/2021 Annual report, consumers’ overall need for cash has reduced and is changing but many people use cash and LINK’s own research shows that more than half of people have used cash in the past two weeks, even if 48% are expecting to use less cash in future.

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 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 12 Sep: -2%
  • w/e 19 Sep: -3%

Rolling value change (compared to 2020): 

  • w/e 12 Sep: +0.2%
  • w/e 19 Sep: -0.6%

For more information visit our: ATM Tracker.

Debit and Credit Cards

Source: UK Finance

The UK Finance Update for June 2021 reports:

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

  • There were 1.9 billion debit card transactions in June, 46.6 per cent more than in June 2020 and 25.4 per cent more than June 2019. The total spend of £60.5 billion was 13.2 per cent higher than June 2020 and 22.3 per cent higher than June 2019.
  • There were 309 million credit card transactions in June, 35.5 per cent more than in June 2020 and 9.3 per cent more than June 2019. The total spend of £16 billion was 32.5 per cent higher than June 2020 but 1.5 per cent less than June 2019.
  • Outstanding balances on credit card accounts have contracted by 6.9 per cent over the twelve months to June, 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 June, 42.4 per cent more than in June 2020 and 15.8 per cent more than June 2019. The total spend of £67.4 billion was 19.1 per cent higher than June 2020 and 16 per cent higher than June 2019.
  • Contactless payments accounted for 51 per cent of all credit card and 66 per cent of all debit card transactions.
  • There were 1,169 million contactless card transactions in June, 73.8 per cent more than the 673 million in June 2020 and 69.6 per cent more than the 689 million in June 2019. The total value of contactless transactions was £14.2 billion in June, a 66.2 per centincrease on £8.5 billion in June 2020 and 122.4 per cent increase on £6.4 billion in June 2019.
  • The number of contactless credit card transactions was 92.4 per cent higher than June 2020 and 39.9 per cent higher than June 2019. The number of contactless debit card transactions was 71.4 per cent higher than June 2020 and 75 per cent higher than June 2019.

Current Account Switch Service

Monthly data 2020:

Source: Pay.UK

Monthly data: 2021:

Source: Pay.UK

A total of 7.5 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 August – and at 61547 this is still 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 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 August 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 24%, however the reduction for July has only been by 12% 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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