The proportion of transactions using credit cards fell by 12.9 per cent between 2009 and 2010 as shoppers started to better manage their finances, according to new research.
Figures from the British Retail Consortium’s (BRC) Cost of Payment Collection Survey show that customers are more likely to use debit cards to buy goods, with the percentage of sales conducted this way rising by 15.8 per cent.
Director General of the BRC Stephen Robertson said that “cash remains king”, as it is used for more than half of all retail payments, although the overall proportion of cash purchases fell year-on-year.
Transactions involving money will arguably continue to decrease in the years ahead, with recent data published by the Payments Council showing that the cumulative total spent on debit cards outweighed cash payments in the summer of 2010 for the first time ever.
The adoption by retailers of m-commerce and contactless payment technology, which is expected to gather pace this year and next, should also move the UK closer towards becoming a cashless society, fuelled by the growing ubiquity of smartphones and other portable devices.
For now though cash payments remain the most popular method for buying goods, and it is encouraging to see that in these tough economic times there appears to be less reliance on borrowings.
Robertson commented: “Hard-pressed customers are switching to cash and debit cards for the reassurance that they can’t spend what they haven’t got.
“In the face of big pressures on household budgets, people are managing their money carefully while retailers are minimising the costs they can influence by investing in anti-fraud technology.”
The BRC argues, however, that banks are charging too much for processing payments, especially given that businesses have invested heavily in efficient electronic systems.
It found that retailers taking part in the survey paid out a total of £659 million in fees for payment processing and cash collection, with each business paying out an average of 1.7p per cash transaction to have the money transported and banked.
The average charge for processing a credit card payment was 37.1p compared with a debit card average of 9.2p.
“Unjustifiably-high payment charges are still being taken from retailers,” Robertson said.
“The question is should this money be going into increasing banks’ profits or to keeping shop prices down for customers?
“Reducing the charges banks impose so they genuinely reflect the actual costs involved in processing these transactions is the right answer.”