In this first round up of retail payments in 2022, with increased Covid restrictions still in place for the period 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 December 2021, Link January 2022 and UK Finance October 2021.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

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

  • Bacs Direct Credit volumes decreased by 1% (12 months to November unchanged)
  • Bacs Direct Debit volumes have increased by 2% (12 months to November increased by 2%)
  • Total Bacs volumes have increased by 1% (12 months to November increased by 2%)
  • Bacs Direct Credit values have increased by 4% (12 months to November increased by 5%)
  • Bacs Direct Debit values have increased  by 6% (12 months to November increased by 5%)
  • Total Bacs values have increased by 4% (12 months to November increased by 5%)

Volumes for Bacs Direct Credits in December 2021 fell back by 5% when compared with December 2020, possibly due to increasing restrictions during the month, contributing to the year on year fall in volumes when compared with the 12 months ending December 2020.

The growth in Direct Debit volumes year on year has remained steady at 2% for the 12 months to December 2021 when compared with the 12 months to December 2020. As Direct Debits account for 70% of Bacs payment volumes, this has helped to maintain some growth during the year albeit reducing to 1% over the 12 months to December 2021.

Similarly, month on month values have decreased below those seen in December 2020. Year on year growth had been increasing each month but remained steady in October increasing again in November. However, with values only just ahead in the month, the increase in total Bacs values has reduced slightly to 4% for the period when compared to the 12 months ending December 2020.

CHAPS

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

  • CHAPS volumes have increased by 8% (12 months to November increased by 7%) 

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

  • CHAPS values have decreased by 6% (12 months to October decreased by 5%)

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

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 2021 but had recovered since as overall activity increased as restrictions eased during 2021. This has continued with volumes for December 2021 4% ahead of those in December 2020. Values however remain subdued with a fall of 3% for the month of December 2021 compared to December 2020.

The underlying resilience in Wholesale payment volumes continued throughout the year although values were decreasing month on month. This had reversed in November but the volumes have fallen back again in December 2021 by 3% leading to the increased fall in values for the year.

Faster Payments

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

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

Thus, the trend has continued in December with both volumes and values significantly ahead of 2020 levels. December 2021 saw an increase of 16% in the volume of Single Immediate Payments processed in the month compared to 2020 and 15% 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 18 months and with volumes and values increasing as restrictions have eased. The increased year on year growth for the month of December is as to be expected as conditions became more in line across the two years. Overall year on year growth is as expected for 2021 – albeit the trajectory of growth now appears to be flattening.

Cheques

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

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

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 December were 17% lower than during December 2020. 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 December 2020 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 December 2021.

LINK – ATM Withdrawals

Key observations for the week ending 16 January 2022:

  • The volume of ATM transactions increased by 11% when compared to the previous week in 2022.
  • The volume of ATM transactions increased by 23% when compared to the equivalent week in 2021.
  • The volume of ATM transactions decreased by 35% when compared to the equivalent week in 2020.

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 2021 with activity remaining steady as evidenced in the 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 saw an increase in volumes as many areas emerged from Lockdown 2.0 albeit with similar levels of restrictions in place to the current time. A seasonal fall can then be seen at the end of December across all the years.

Activity in 2022 is now starting to pull away from 2021 as expected given the Lockdown restrictions last year. We would expect to see this continue for the next few weeks with the paths merging again from around April or May.

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. Then a gradual increase from January to March can be seen followed by the spikes at the end of March and mid April as restrictions were eased at each of these stages.

This was followed by increased activity over the May bank holidays with fairly consistent volumes seen since that time. Since the Summer months 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 although overall activity this year is also likely to have been further dampened by the overall Covid restrictions in place and cautious behaviour.

After a slow start to January the volume of ATM transactions has accelerated in the last week although it remains well below pre-pandemic levels.

ATM Transactions are likely to increase back to the recent volumes seen and thus whilst digital payment habits have been reinforced during each lockdown, 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.

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 October 2021 reports:

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

  • There were 1.9 billion debit card transactions in October, 18.2 per cent more than in October 2020 and 18.7 per cent more than October 2019. The total spend of £60.3 billion was 1.8 per cent higher than October 2020 and 13.2 per cent higher than October 2019.
  • There were 317 million credit card transactions in October, 15.9 per cent more than in October 2020 and 5.2 per cent more than October 2019. The total spend of £16.7 billion was 19.8 per cent higher than October 2020 but 3.2 per cent less than in October 2019.
  • Outstanding balances on credit card accounts have contracted by 2.8 per cent over the twelve months to October, 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 October, 20.3 per cent more than in October 2020 and 16 per cent more than October 2019. The total spend of £71.5 billion was 11.3 per cent higher than October 2020 and 16.8 per cent higher than October 2019.
  • Contactless payments accounted for 52 per cent of all credit card and 69 per cent of all debit card transactions.
  • There were 1.3 billion contactless card transactions in October, 34.1 per cent more than the 992 million in October 2020 and 74.5 per cent more than the 762 million in October 2019. The total value of contactless transactions was £16.3 billion in October, a 35.9 per cent increase on £12 billion in October 2020 and 131.9 per cent increase on £7 billion in October 2019.
  • The number of contactless credit card transactions was 37.2 per cent higher than October 2020 and 45 per cent higher than October 2019. The number of contactless debit card transactions was 33.7 per cent higher than October 2020 and 79.7 per cent higher than October 2019.

Current Account Switch Service

This section will be updated when the December statistics become available.

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 increased in November 2021 compared to 2020 reflecting the differing levels of restrictions in place over the two years. With similar conditions during December there is still an increase year on year but the trajectory is flattening.

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 19%, with the comparison for the month of December 2021 compared to December 2020 showing a fall of 16%.

ATM cash transactions are now tracking ahead of 2020 and the early months of 2021 – however the variance is caused by a fall in 2020/2021 as the activity reflects the impact of the Tier restrictions and the third lockdown rather than a significant increase this year. However ATM Transaction Volumes are remaining at a consistent level reflecting the level of cash usage for those who choose 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.