In this sixth round up of retail payments in 2022, we see the impact on the volume and value of payments processed in the UK following the removal of Covid restrictions, compared now with similar conditions in the equivalent months in 2021 as we emerged from Lockdown 3.0

Note: All data is publicly sourced and is the latest available: Pay.UK May 2022, Link June 2022 and UK Finance February 2022.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

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

  • Bacs Direct Credit volumes have increased by 1% (12 months to April decreased by 1%)
  • Bacs Direct Debit volumes have increased by 4% (12 months to April increased by 3%)
  • Total Bacs volumes have increased by 3% (12 months to April increased by 2%)
  • Bacs Direct Credit values have increased by 4% (12 months to April increased by 4%)
  • Bacs Direct Debit values have increased by 8% (12 months to April increased by 9%)
  • Total Bacs values have increased by 5% (12 months to April increased by 5%)

Volumes for Bacs Direct Credits in May 2022 increased by 14% when compared with May 2021. This now differs from 2021 when the volume of Bacs Direct Credits fell by 3% when compared with the previous year despite Covid restrictions easing during the month.

Growth in Direct Debit volumes year on year is still seen, now at 4% for the 12 months to May 2022 when compared with the 12 months to May 2021. Similarly Volumes for Bacs Direct Debits for the month itself increased by 9% when compared with May 2021. As Direct Debits account for 70% of Bacs payment volumes, this has helped to increase the growth seen over the year to 3% for the 12 months to May 2022 when compared to the 12 months ending May 2021.

Year on year growth for the value of Bacs Direct Credits has remained at 4% for the 12 months ending May 2022. The value of Bacs Direct Credits processed in the month itself also increased by 11% for May 2022 when compared with May 2021.

Growth in the value of Direct Debits is also seen with the value processed in May 2022 being 15% greater than in May 2021.

CHAPS

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

  • CHAPS volumes have increased by 10% (12 months to April increased by 9%) 

This was made up of a 11% increase in retail / commercial based payments and a 6% increase in financial institution payments, compared to 11% increase and 5% increase respectively for the 12 months to April.

  • CHAPS values have increased by 1% (12 months to April decreased by 2%)

This month the change was made up of an 1% increase in retail / commercial based payments and a 1% increase in financial institution based payments, compared to 1% decrease and 2% decrease respectively for the 12 months to April.

Retail / Commercial payment activity had fallen throughout 2020 recovering in December before falling back again in January 2021. Volumes have since recovered and May continued this trend with the volumes increasing by 18% in May 2022, compared with May 2021. Values also recovered increasing by 26% in May 2022 when compared with May 2021.

The underlying resilience in Wholesale payment volumes has continued with volumes in May 2022 increasing by 16% when compared with May 2021. Wholesale CHAPS values for May 2022 compared with May 2021 have also increased by 24%. This has now led to year on year increase In values with Wholesale payment values increasing by 1% for the year to May 2022 compared to the year to May 2021 – in April the reduction had been 2%.

Faster Payments

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

  • Single Immediate Payment volumes have increased by 20% (12 months to April 19%)
  • Total Faster Payment volumes have increased by 19% (12 months to April 19%)
  • Single Immediate Payment values have increased by 24% (12 months to April 24%)
  • Total Faster Payment values have increased by 24% (12 months to April 23%)

Thus, the trend has continued in May with both volumes and values significantly ahead of 2021 levels. May 2022 saw an increase of 33% in the volume of Single Immediate Payments processed in the month compared to 2021 and 41% 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 continuing to increase month on month. Although the trajectory has flattened a little particularly when similar conditions have been in place, an overall significant increase year on year looks set to continue for some while to come – particularly with inflationary pressures also having an impact on the value of payments processed.

Cheques

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

  • Cheque volumes have decreased by 14% (12 months to April 14%).
  • Cheque values have decreased by 4% (12 months to April 3%).

Volumes processed by the Image Clearing System in May were 4% lower than during May 2021 but values had increased by 2%. Although volumes are falling as many have undoubtedly switched to digital payment options, there is clearly still an underlying level of usage which continues to be seen in this method of payment.

With volumes of digital payments continuing to increase, the share of legacy payments within the total continues to fall. For the twelve months to May 2021 the volume of Cheque payments accounted for 1.7% of the total (for Bacs/CHAPS/Faster payments and Image Clearing System) falling to 1.4% for the 12 months to May 2022. For the month of May itself the percentage had fallen further to 1.2%

Key observations for the week ending 19 June 2022:

The volume of ATM Transactions decreased by 26% when compared to the final week before the first COVID lockdown.

  • The volume of ATM transactions increased by 0% when compared to the previous week in 2022.
  • The volume of ATM transactions increased by 2% when compared to the equivalent week in 2021.
  • The volume of ATM transactions increased by 13% when compared to the equivalent week in 2020.

Last week there was a total of 31.2 million ATM transactions which represents an increase of 0 million ATM transactions over the previous week.

In 2022, there was an increase of 0.6 million transactions or 2% when compared with the equivalent week in 2021.

In the first few months of the year, volumes in 2022 were consistently greater than 2021 reflecting the differing conditions across the two years.

In the second half of April 2021, the easing of restrictions led to a spike in activity at that time and the gap between 2021 and 2022 narrowed to a difference of just 2%. However with indoor hospitality not returning until the third week of May, the early May bank holiday failed to provide any further boost last year. In 2022, however, with all restrictions removed and warmer weather returning, this did boost the volume of ATM Transactions to the highest level seen so far this year and the gap widened again.

This swing was evident again in the approach to the Jubilee weekend – matched this time in 2021 albeit with the bank holiday weekend a week earlier at its normal time.

Last week, again as expected, the Volume of transactions was very close to the same period in 2021. Both are still above 2020 but the gap is narrowing following the re-opening of non essential shops after the first lockdown.

Source: LINK

Through Lockdowns to Plan B, Plan A and now living with Covid:

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.

In the first few weeks of 2022 the volume of ATM Transactions continued to track above 2021 but initially well below the pre-pandemic levels seen in 2020. Since the end of March, the overall weekly volume of ATM transactions has been above both 2021 and 2020 given the lockdown restrictions in place for the equivalent weeks in both years.

From mid April the graphs for 2021 and 2022 were beginning to merge as restrictions were reduced in April 2021. Apart from a spike over the early May bank holiday the gap is continuing to narrow following the further easing of restrictions which occurred in May last year.

The volume of transactions in 2022 is likely to remain above those for the equivalent weeks in 2020 until the end of July when the ‘Eat out to help out’ scheme boosted trading in 2020 after the first Lockdown. All 3 graphs are expected to merge from that time.

Source: LINK

With such a sharp drop in ATM transactions during 2020 a further significant shift from cash to digital may have been the logical expectation for 2021 but the volume of ATM transactions remained remarkably consistent once restrictions were lifted.

This consistency has continued into 2022 and as we approach the Summer months we expect the graphs showing the Volume of ATM transactions across the three years to merge reflecting the easing of restrictions and similar conditions in place.

This shows that although we are unlikely to see the volume of ATM Transactions return to pre-pandemic levels, 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 and we expect to see a similar underlying volume of ATM transactions throughout 2022.

For more information visit our: ATM Tracker.

Debit and Credit Cards

This section will be updated when the information for March 2022 is released.

Source: UK Finance

The UK Finance Update for February 2022 reports:

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

  • There were 1.7 billion debit card transactions in February, 32.9 per cent more than in February 2021 and 15.1 per cent more than February 2020. The total spend of £54.5 billion was 11 per cent higher than February 2021 and 5.4 per cent higher than February 2020.
  • There were 284.1 million credit card transactions in February, 40.1 per cent more than in February 2021 and 2.8 per cent more than February 2020. The total spend of £15.8 billion was 43.8 per cent higher than February 2021 and 0.7 per cent higher than in February 2020.
  • Outstanding balances on credit card accounts have grown by 6.5 per cent over the twelve months to February.

Card transactions made in the UK by cardholders from both the UK and from overseas countries:

  • There were 1.7 billion debit and credit card transactions in the UK in February, 40.5 per cent more than in February 2021 and 10.5 per cent more than February 2020. The total spend of £62.9 billion was 20.4 per cent higher than February 2021 and 14.4 per cent higher than February 2020.
  • Contactless payments accounted for 57 per cent of all credit card and 71 per cent of all debit card transactions.
  • There were 1.2 billion contactless card transactions in February, 76.3 per cent more than the 668 million in February 2021 and 32.4 per cent more than the 889 million in February 2020. The total value of contactless transactions was £16.7 billion in February, a 102.6 per cent increase on £8.3 billion in February 2021 and 99.1 per cent increase on £8.4 billion in February 2020.
  • The number of contactless credit card transactions was 109.4 per cent higher than February 2021 and 23.3 per cent higher than February 2020. The number of contactless debit card transactions was 72.1 per cent higher than February 2021 and 33.9 per cent higher than February 2020.

Current Account Switch Service

Monthly data: 2021:

Source: Pay.UK

Monthly data 2022

Source: Pay.UK

A total of 8.2 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.

In January 2021, Lockdown 3.0 was clearly impacting as the number of switches was the fourth lowest over the previous 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 were still evident in the first two months of 2022 with the number of switches significantly ahead of 2021. Activity was beginning to increase in March 2021 but numbers were still subdued compared to the current year – 62632 in March 2021 compared to 77542 in March 2022.

Since April the similarity in conditions across the two years continues to be evident with switches in April 2022 just 3% ahead of April 2021 and in May 2022 just 4% ahead of May 2021.

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.

The pandemic hastened the fall in cheque volumes and ATM cash transactions during the first lockdowns in 2020. The volume of cheques processed continues to fall with volumes in May 2022 compared to May 2021 showing a fall of 4%. Values had been more resilient and indeed the value processed in May 2022 was 2% greater than May 2021. It remains clear though that despite the move to digital payments there is an underlying level of usage for those who prefer or need this payment method for household or business use.

ATM cash transactions had been tracking ahead of the early weeks in 2021 as usage in the current year is stable but had fallen back in the Lockdown conditions in 2021. With Lockdown conditions now easing in the equivalent weeks in 2021 the gap has now narrowed. Again therefore, 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.

Nevertheless, with the overall growth in the volume and value of digital and contactless payments, we expect to see the share of these legacy payment methods within the overall activity to continue to decline.