UK PAYMENT

MARKETS
SUMMARY 2022
August 2022
 UK Finance UK Payment Markets 2022 1

UK PAYMENTS IN 2021
AND FORECASTS TO 2031
Payment markets have historically tended to evolve slowly over time. As a result of these measures, 2020 saw a significant fall in the number
People are creatures of habit, and this is no less true for the way that of payments made in the UK. However, as lockdown restrictions were
we pay for things than it is for other aspects of day-to-day life. Once lifted during 2021, the economy reopened and the total number of
we have found a set of payment methods that we are comfortable payments made returned to pre-pandemic levels.
using and that help us manage our finances effectively, it can take a
great deal for us to change to a different way of doing things. A question remains, however. The pandemic not only led to a reduction
in the total number of payments made in the UK, it also led to changes
In the last couple of years, however, the global Covid-19 pandemic in the types of payments that were used. People made greater use
and associated lockdowns have led to significant changes in patterns of contactless payments, online banking and mobile wallet channels,
of payments in the UK. Lockdowns resulted in large sections of the largely at the expense of cash payments. This led to the question
economy shutting down completely for parts of the year. In those of whether these observed changes in payment patterns reflected
parts of the economy which remained operational, many businesses permanent changes to people’s behaviour, or whether people’s payment
switched to home working arrangements, reducing expenditure on preferences would return to pre-pandemic patterns as lockdown
travel and city centre spending. restrictions were eased.

Chart 1.1 Payment volumes (millions) 2011 to 2021

25,000

20,000
Number of payments (millions)

15,000

10,000

5,000

0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Cash Cheque Direct Debit

Standing Order Bacs Direct Credit Faster Payments and other remote banking
Credit/charge/purchasing card Debit Card Other
UK Finance UK Payment Markets 2022 2

Consumer Business
34.8 billion 5.5 billion
payments payments
40.4 billion
Spontaneous payments in total Business to business
29.0 billion 3.0 billion

Regular Business to individual

5.8 billion 2.5 billion

Data from 2021 suggest that trends in payments behaviour have returned Over the next decade further market developments, such as those
towards their pre-pandemic patterns. brought about through Open Banking and the anticipated New
Payments Architecture for the UK, may bring extensive changes to the
Both debit card and credit card payments, which had declined in UK’s payments landscape. UK Finance will continue to monitor and
2020, rose once again in 2021. Further, the share of payments made analyse how these developments may affect future payment markets.
using cards, which had increased to 52% of all payments during 2020,
continued to increase in 2021, with 57% of all payments in the UK
being made using cards in 2021. Contactless payments continued to
be popular, with almost a third (32%) of all payments made in the
UK during 2021 being made using contactless.
57%
In 2021 57% of all payments in the UK
were made using cards
Considering cash, the experience of the past couple of years has
shown interesting impacts due to the pandemic. The long-run trend
in cash payments over the past decade has been of a continuing
decline, with payments transitioning in particular to debit cards. Payment volumes (millions) 2011 to 2021
In 2020, the pandemic resulted in cash use falling by 35% compared
to the previous year. Since 2017 cash use had been declining by around
A total of 40.4 billion payments were made in the UK during 2021.
15% each year, so 2020 represented an acceleration of this decline.
This represented a return to pre-pandemic payment volumes,
In 2021, it appears that there was a reduction in the rate of decline
after a significant fall in 2020 due to the successive Covid-19-related
in cash use. Much of this was to be expected; many parts of the
lockdowns. Nearly nine out of ten payments were made by consumers.
economy with traditionally high levels of cash usage were closed or
Spontaneous purchases accounted for 83% of payments made by
heavily restricted during lockdown, and in those parts of the economy
consumers, with the other 17% of their payments being made for
that remained open, many retailers encouraged the use of contactless
regular bills and commitments.
payment options, amid fears about cash being a vector for Covid-19
transmission. The reopening of the economy and lessening of fears
Commercial organisations, government and not-for-profit organisations
about Covid-19 transmission appear to have led to a reduction in the
(collectively referred to using the shorthand “businesses” throughout
rate of decline, particularly when compared with the experience of
this report) made just over 5.5 billion payments during 2021, a 14%
2020. Having said this, the total number of cash payments made in the
increase compared with 2020. Payments to individuals accounted for
UK during 2021 still declined by 1.7% compared with 2020. Cash remains
46% of all payments made by businesses, with the other half being
the second most frequently-used payment method in the UK, being
payments to other businesses.
used for 15% of all payments made during 2021.
There are a wide variety of payment methods available in the UK.
Throughout the Covid-19 pandemic, strong growth was seen in Faster
Each payment method provides specific benefits to the participants in
Payments, and this continued in 2021. Both businesses and consumers
the transaction. Payers generally choose the method that best meets
increasingly used online and mobile banking to make payments and to
their needs in any given situation, albeit sometimes influenced by the
transfer money. Mobile banking in particular continued to grow strongly
preferences of the payee.
among consumers, with customers extending their use beyond just
checking balances to now making payments and managing their finances
more generally.
UK Finance UK Payment Markets 2022 3

Debit cards By 2031 credit card payment volumes are forecast to reach 4.2 billion
payments. Future growth will be closely tied with wider economic
conditions, which determine consumer appetite for taking on
unsecured debt.

48%
Debit cards accounted for 48%
Contactless payments
of all payments in the UK
Percentage of all payments made via contactless cards

Overall debit card payment volumes had declined in 2020 due to the
pandemic, but payment volumes rebounded in 2021 with growth of 3% 19% 32%
2015 2018 2021
over 23% to reach a total of 19.5 billion payments. As a result, debit
cards consolidated their position as the most frequently used payment
method in the UK, responsible for nearly half (48%) of all payments
made in the UK during 2021. The overwhelming majority of the
During 2021 the number of contactless payments made in the UK
population (97%) now hold a debit card and the majority of people use
increased by 36% compared with 2020, to reach 13.1 billion payments.
them to make payments
This was driven by:
Throughout 2021, contactless payments continued to grow in popularity,
• contactless limit increase to £100
contributing to the ongoing increase in use of debit cards and the
• some retailers continuing to encourage consumers to use
migration of payments away from cash. Debit cards are also one of the
contactless at point-of-sale
main payment methods used to pay for online shopping, something
• the continued roll-out of card acceptance devices especially among
which was boosted by periods of lockdown in the UK.
smaller businesses
• consumers becoming increasingly comfortable and familiar with
Over the next decade, debit card payment volumes are forecast to making contactless payments
continue to increase in use. They are predicted to pass the threshold of • continuing growth in popularity of mobile contactless payment
accounting for more than half of all payments in the UK, reaching over services such as Apple Pay and Google Pay
24 billion payments in 2031. This growth will be driven by the continuing
rise of contactless payments, the ongoing growth of online shopping At the end of 2021 there were 142 million contactless cards in circulation,
and ever-increasing levels of card acceptance amongst businesses of all with 91% of debit cards and 89% of credit/charge cards in the UK having
sizes, but particularly amongst smaller businesses. contactless functionality.

Credit cards Since January 2020, every bank-issued payment terminal in the UK
has been capable of accepting contactless payments. Along with many
smaller businesses now accepting card payments, this has increased
the number of locations where consumers can pay using contactless.

66%
of adults in the UK have a credit card
During 2021 supermarkets were the most popular location to make
contactless payments payments, accounting for accounting for
two-fifths (41%) of all contactless payments. Retail in total accounted
for three quarters (75%) of all contactless payments made in the UK.

There were 3.4 billion payments made using credit cards in 2021, an Contactless payments are used extensively throughout the UK in 2021,
increase of 21% compared to the previous year, reflecting credit card with 86% of people making contactless payments at least once a month
payments returning almost to their pre-pandemic levels. Spending or more frequently. People of all ages used contactless payments, and
had previously declined due to (a) lockdowns closing sectors of the even when considering people of retirement age, around eight out of
economy with high credit card spend (such as holidays, travel and ten (78%) used contactless at least once a month. The group showing
entertainment), (b) restrictions on international travel that affected both the highest rate of use was the 25-34 age group, where nine out of
the leisure and business travel sectors, and (c) reductions in consumer ten (92%) of people regularly made contactless payments. Though
confidence. As lockdowns were relaxed during 2021, opportunities to differences remain across age group and region, the majority of people
make payments using credit cards increased. Having said this, consumer in all age groups and across all regions make contactless payments. We
confidence has not returned to pre-pandemic levels, and cost-of-living expect the popularity of contactless payments to continue to grow
fears in particular may be making consumers more cautious about taking over the next decade.
on additional unsecured debt. Concerns about energy and food price
increases in particular first emerged in the autumn of 2021 and may have
had an impact on use of consumer credit.
UK Finance UK Payment Markets 2022 4

Cash

1/3
almost a third of all payments in the UK
Cash as a % of all payments

were made via contactless methods in 2021

62% 55% 40% 15%
2006 2011 2016 2021
Apple Pay, Google Pay and Samsung Pay
As well as using contactless cards, other devices such as mobile phones
and watches can be used to initiate contactless payments, or to make Cash payments declined extensively in 2020, as lockdowns closed many
payments for online shopping. parts of the economy that tended to exhibit high cash use, and as many
retailers encouraged customers to use contactless payment methods in
Nearly a third (32%) of the adult population reported being registered order to help support social distancing.
for at least one mobile payments service in 2021. Of those registered
for mobile payments 92% of these people used the services to make In 2021, as the economy reopened, the rate of decline in cash usage
payments during the year. Seven out of ten (70%) of these registered slowed. Despite this, the total volume of cash payments still fell slightly
users made payments every month. in 2021, and as a result the proportion of UK payments made using cash
fell to 15%. Cash remains the second most frequently-used payment
Similar to most new technological innovations, UK Finance market method in the UK, behind debit cards.
research found that younger people are more likely than older people
to use one of Apple Pay, Google Pay or Samsung Pay. We expect that, During 2021 there were 23.1 million consumers who used cash only
over the next decade, older age groups will start to catch up with once a month or not at all, instead relying on cards and other payment
younger age groups in terms of adoption of mobile payments, a pattern methods to manage their spending. This was a significant increase from
that is regularly seen following the introduction of new payment and 13.7 million consumers the previous year, itself a significant increase
IT services. compared with the year before. It appears that the pandemic and
associated lockdowns have accelerated some peoples’ movement
towards living increasingly cashless lives.
Chart 1.2 Proportion of each age group registered to use mobile
payments, 2021 At the same time there were 1.1 million consumers who mainly used
cash, choosing this payment method when doing their day-to-day
60% shopping (although the majority still use other payment methods to
60%
!"# pay their regular bills). This was a slight decline as compared with 2020,
50% when 1.2 million people mainly used cash. It should be noted that,
44% while these people prefer to use cash when paying for things, they are
not necessarily unwilling or unable to use other methods of payment.
40% $$#
36% The majority of them have a debit card. Nevertheless, there remains
%!# great diversity in the way in which different people in the UK prefer to
30% 29%
manage their finances and conduct their day-to-day spending.
&'# 22%
20% Over the next decade the number of cash payments in the UK is
&&#
expected to continue to fall, as consumers turn to alternative payment
12%
10% methods, although the rate of decline is expected to slow as use
(&# becomes concentrated amongst people who have a strong preference
for cash and in situations where cash has advantages over other
0%
payment methods.
16-24 25-34 35-44 45-54 55-64 65+

Traditionally, cash has been used as a budgeting tool by people who

are managing limited budgets. However, increasingly we see younger
people budgeting using mobile banking and other technology-based
services, rather than using physical cash to manage their spending.
This change in behaviour is something that we are monitoring, but
which has implications for the future use of cash in the UK.

In 2031 there are forecast to be fewer than three billion cash payments
made in the UK, accounting for around 6% of all payments. Rather than
the UK becoming a cash-free society over the next decade, the UK will
transition to an economy where cash is less important than it once was
but remains valued and preferred by many.
UK Finance UK Payment Markets 2022 5

Buy Now Pay Later Faster Payments and other remote banking

Faster Payments and other remote banking (millions)

1/8
One in eight people used Buy Now Pay Later
in 2021
422 1,317 3,633
2011 2016 2021

Around one in eight people in the UK (12% of adults) used Buy Now
Pay Later (BNPL) services to purchase something during 2021. There Remote banking remained popular in the UK in 2021, with 86% of all
wasn’t a significant difference in use between male and female UK adults using at least one form of remote banking during 2021 (online
consumers in our survey. The age group that made most use of these banking via a computer, mobile banking via an app on a smartphone
services was 35-44 year olds, with one in five adults in this age group or tablet, or calling their bank via a telephone banking service). The
using BNPL services during 2021. In contrast, just 4% of people aged majority of people in all age groups used remote banking in 2021, ranging
65 or over used these services in 2021. from 72% of those aged 65 and over to 92% of people aged 35-44.

The number of people using mobile banking in particular continued to

Direct Debit grow, reaching 57% of all UK adults. There was a slight fall in the proportion
of UK adults using online banking (via a computer), as increasing numbers
Volume of direct debit payments moved across to using only mobile banking. Despite this, almost two-
thirds (65%) of UK adults used online banking during 2021.

4.6 billion
Direct Debit payments in 2021
Related to the ongoing popularity of remote banking services in the
UK, the number of remote banking payments processed via the Faster
Payments Service (or cleared in-house by banks) during 2021 continued
to grow strongly in 2021. The number of payments increased by 23%
compared with the previous year, to reach 3.6 billion payments.

In 2021 there were 4.6 billion payments made by Direct Debit, with an
overall value of £1,243 billion. Direct Debit is a familiar, long established
and widely trusted method for paying regular bills, and is used by nine
out of ten UK consumers. In 2021, Faster Payments and other remote
banking overtook Bacs Direct Credit as the
As a well-established method of payment, growth in Direct Debit payment method used most frequently by
payment volumes tends to reflect growth in population figures and businesses to make payments
household numbers. While the volume of Direct Debit payments grew
in 2021 this was at a slow and stable rate. During lockdowns, there were
decreases in payments for things like gym memberships, and some
customers opted to take a payment deferral for their mortgage, loan
Use of remote banking by businesses also contributed to the strong
and/or credit card. As the economy reopened again, we increasingly saw
growth in the volume of Faster Payments. In 2021, 39% of all payments
consumers return to making these types of payments that perhaps had
made by businesses were made using Faster Payments and other remote
been on hold during the previous year.
banking, overtaking Bacs Direct Credit for the first time as the most-
used payment method among businesses.
Direct Debit payment volumes also tend to be linked to some extent
to the economic cycle and consumer confidence. When people feel less
secure in their finances, they are likely to try to reduce their outgoing
spending. Some things such as mortgage payments or utility bills must
always be paid, but other less essential services (such as subscription
services or gym memberships) may be reduced by consumers in order
57%
of all adults used mobile banking in 2021
to save money, and therefore we sometimes see small changes in Direct
Debit volumes in response to changes in economic circumstances.

Consumers are far more likely to use Direct Debit than businesses.
Use of Faster Payments and other remote banking is expected to see
Businesses tend to prefer to retain more direct control over the timing
strong growth over the next decade as both consumers and businesses
and amount of their outgoing payments, although may still use Direct
increase their use of online and mobile banking. By 2031 remote banking
Debits to pay for business-critical services.
payments processed via the Faster Payments Service or cleared in-house
are forecast to rise to 5.7 billion.
Due to the established nature of Direct Debit, there is expected to be
slow and stable growth over the next decade, with 5.7 billion payments
forecast in 2031.
UK Finance UK Payment Markets 2022 6

Another potential driver for Faster Payments and remote banking over CHAPS
the next few years may come from the continued development of
Open Banking products and services. Open Banking raises the potential
CHAPS payments in 2021
for services that would allow consumers to pay for online shopping (or
indeed in-store shopping) using account-to-account payments rather

0.1% 90%
than paying using a card or PayPal (or similar service).

As such Faster Payments could become an alternative to card payments of volume of value
(and/or PayPal payments). Having said this, these services have yet to be
communicated or marketed to consumers on a wide scale, and it is not
clear what the consumer appetite might be to change their established
payments behaviour, particularly where the benefits to consumers CHAPS is used primarily by financial institutions to make wholesale
(rather than businesses) are not obvious. Therefore, we remain cautious financial payments and by large corporates to make corporate treasury
in our forecasts at present for the potential volume of online (and real payments. As a result, in 2021 CHAPS accounted for just 0.1% of the total
world) shopping payments that could migrate to Faster Payments. volume of payments in the UK but 90% of the total value of payments.
There were 48 million CHAPS payments processed in 2021, worth a total
Standing orders of £86.3 trillion. CHAPS payment volumes are closely related to the
state of the UK economy. As such, future CHAPS payment volumes will
Standing orders tend to be used in circumstances where a regular depend largely on the economic outlook for the UK and the future of
payment of a fixed amount must be made, for example, for paying rent cross-border trade and investment post-Brexit.
or making regular transfer payments from current accounts to savings
accounts. In 2021 there were 552 million standing orders, similar to the Cheques
previous year. This is expected to grow to 573 million payments in 2031.
Cheques used to make payments (millions)
Bacs Direct Credit

Bacs Direct Credit payments

1,678 923 471 150
2006 2011 2016 2021

1.9 billion
Bacs Direct Credit payments in 2021
The number of cheques used to make payments continued to decline
over the past year, falling by 19% compared with 2020 to reach a total
of 150 million cheques. Both businesses and consumers continue to
choose alternative payment methods instead of using cheques. Cards
Bacs Direct Credit is a popular and cost-effective method for businesses and remote banking transfers in particular are increasingly being used
and government to make bulk payments, where both the value and where previously a cheque may have been written. Despite this decline
timing of the payment are known in advance. For example, Bacs cheques remain valued by those who choose to use them, as they
Direct Credit is a very popular method for paying wages and salaries. provide a convenient and secure method of paying someone when you
The government also uses Bacs Direct Credit to pay nearly all state do not know the recipient’s bank account details.
benefits and pensions in the UK. Over a third (35%) of all payments
made by businesses in 2021 were made via Bacs Direct Credit. Despite The Image Clearing System (ICS) was introduced by the Cheque and
this, Bacs Direct Credit was overtaken by Faster Payments and other Credit Clearing Company in October 2017 and fully rolled out in
remote banking as the most frequently-used payment method among September 2019. One of the main benefits from this is the cheque
businesses in 2021. clearing process will now complete much faster, so cheque recipients
will see the money appear in their account more quickly. It also
The total number of Bacs Direct Credit payments is expected to fall allows for cheques to be deposited via a mobile phone with a camera
slightly over the next ten years, chiefly due to the transition of certain (using mobile banking services). Despite this introduction, cheque use
welfare benefits to Universal Credit. This reduces the total number continues to decline across the UK and is expected to continue to do
of welfare payments made by the government and is expected to be so over the next decade, reaching 70 million payments in 2031.
completed in the next couple of years. There are forecast to be 1.8
billion Bacs Direct Credit payments in 2031.
 UK Finance UK Payment Markets 2022 7

Forecasts for payments in the UK to 2031 • Continued increase in debit card payments
• Continued decline in cash payments, albeit at a reducing rate
The Covid-19 pandemic had a significant impact on payment totals over time
in the UK. Trends over time show the clear fall in many types of • Ongoing growth in Faster Payments and other remote banking
payments in 2020, and how these payment volumes then responded payments
throughout 2021 as the economy reopened.

It appears that consumer behaviour is returning towards the long- Our forecasts for development of payment volumes over the next
run trends that were seen prior to the pandemic; in particular: ten years can be seen in the chart below.

Chart 1.3 Payment volumes (millions) 2011 to 2031

30,000
observed forecast

25,000
Number of payments (millions)

20,000

15,000

10,000

5,000

0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

Cash Cheque Direct Debit

Standing Order Bacs Direct Credit Faster Payments and other remote banking
Credit/charge/purchasing card Debit Card Other

The forecasts developed by UK Finance and

presented in this report are:
• objective
• based on past trends and observed data on about payments
behaviour
• adjusted to take account of available evidence on planned
future product launches and/or likely future adoption of
products that have already been launched
• only based on information about services that are already
well-defined and have been publicly announced, and not
including those that are more speculative or not yet clearly
defined.

Unforeseen developments in technology, consumer preferences

or the nature of society (including such things as pandemics)
cannot be taken into account but may affect future payments
behaviour.
UK Finance UK Payment Markets 2022 8

Total payment volumes in the UK (millions) 2021 vs 2031 forecasts (excluding CHAPS)

Total: 40,352 2021 (millions) 2031 (forecasts) (millions) Total: 46,273

19,506 (of which contactless 11,470) Debit card 24,119 (of which contactless 16,997)

5,971 Cash 2,882

4,603 Direct Debit 5,749

3,424 (of which contactless 1,635) Credit / charge / 4,220 (of which contactless 2,353)
purchasing card

1,920 Bacs Direct Credit 1,800

3,633 Faster Payments* 5,707

552 Standing order 573

594 Other 1,153

150 Cheque 70
UK Finance UK Payment Markets 2022 9

PAYMENT MARKETS
HEADLINES

40.4 bn payments made in 2021,

a return to pre-pandemic levels

2021 2031 (PROJECTED)

• Debit cards were the most used payment method with 19.5 billion • Debit cards expected to exceed 24 billion payments in 2031
payments, accounting for 48% of all payments in the UK • Contactless debit and credit card payment volumes expected to
• Contactless debit and credit card payment volumes totalled reach 19.4 billion payments
13.1 billion • Cash use to decline to the point where 6% of payments are made
• Cash payments decreased by 2% to 6.0 billion, accounting for using cash
15% of payments. Cash remained the second most frequently • Faster Payments and other remote banking to grow to 5.7 billion
used payment method in the UK payments
• Faster Payments and other remote banking totalled just over • Cheques to continue to decline to account for just 0.2% of payments
3.6 billion in 2021
• 93% of adults will use remote banking
• Faster Payments overtook Bacs Direct Credit as the payment
• Bacs Direct Credit expected to decline slightly to 1.8 billion payments
method most frequently used by businesses to make payments
• Direct Debit forecast to grow to 5.7 billion payments
• 43 million adults used cash machines in 2021 but frequency of use
fell, with 64% of them using cash machines at least once a month
• Cheque volumes continued to fall in 2021 and accounted for less
than half a per cent of payments made in the UK
• 86% of adults used remote banking. 65% of UK adults used online
banking and 57% used mobile banking
57%
• Bacs Direct Credit volumes fell by 1% to 1.9 billion payments In 2021 card payments accounted
• Direct Debit volumes rose 2% to 4.6 billion payments for 57% of all payments in the UK
• 12% of people used Buy Now Pay Later services
• The value of CHAPS payments was £86.3 trillion
• Infographic: In 2021 card payments accounted for 57% of all
61%
payments in the UK In 2031 card payments forecast
to account for 61% of all
payments in the UK
*excluding CHAPS

This summary document presents key findings from the UK Finance report “UK Payment Markets 2022”.
The full report is available free of charge for members of UK Finance. It is also available for purchase by non-members.
More details can be found at: www.ukfinance.org.uk