Nuapay CEO Comments on Soaring Credit – Debit Card Usage as Pandemic Alters UK Consumer Habits

Recently, the British Retail Consortium (BRC) published a report that indicated usage of credit and debit cards are soaring – fueled in part due to COVID-19 and its impact on how society operates. This should come as no surprise as digital money becomes the norm and cash declines as a method for day-to-day payments. The BRC’s most recent Payments Survey claims that cash usage fell to a mere 15% of all transactions. A pretty dramatic drop from 202o when cash transactions stood at 30%. Concurrently, 82% of payments were made using a credit or debit card, up from 67% in 2020. Breaking it down further, over four-in-five card transactions were made using debit cards, with the rest made up of credit and charge cards.

As a proportion of total money spent, cash accounted for 8% of consumer spending almost halving from 15% year prior. Credit card usage rose to 23%, and debit cards rose significantly to 67% – up from 59% in 2020.

Of course, online shopping played a role as 48.6% of non-food purchases took place online – a percentage that declined this year to 39.9% as consumers returned to in-person shopping.

There is a cost affiliated with using cards that does not exist for cash transactions. Debit cards saw fees rise by 28% compared to 2020, and total Merchant Service charges increased by 12%. This translates into an additional £141 million in costs imposed by card firms onto retailers to process debit card transactions.  In total retailers were dinged for £1.3  billion in card transaction fees.

Brian Hanrahan, CEO of Nuapay – an open banking platform, commented on the BRC report:

The British Retail Consortium’s (BRC) recent data on UK consumer spending habits point to the soaring use of card payments to explain why retailers incurred costs of £1.3 billion just to accept card payments from consumers in 2021.

Whilst card payments are a familiar and relatively safe option for retailers, merchants should consider leveraging open banking for customer payment processes. For merchants, open banking serves as an easy and efficient method for facilitating consumer transactions in comparison to cash or cards and is more cost-effective. This is because open banking enables A2A payments, which have significantly lower per-transaction costs than card payments. Looking ahead to the economic headwinds that retailers will face in the coming year, merchants should look at all opportunities to reduce their operational costs, including implementing open banking.”

Another idea to consider going forward is the potential for digital money or stablecoins to slash card fees while improving transaction times and security. In the end, retailers do not pay these card transaction fees – the consumer does – as they are just passed on. A more modern digital payment process could save money for all.

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