According to the report, the pandemic changed the way customers pay, with cash accounting for just 15 per cent of all transactions in 2021 and 90 per cent of retail spending and 82 per cent of transactions used debit or credit card.
The report revealed that in 2021, as stores closed for lockdowns and the public was advised to use contactless payments, cash usage fell to just 15 per cent of all transactions (down from 30 per cent in 2020), while 82 per cent were made on credit or debit cards (up from 67 per cent in 2020). More than 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 just 8 per cent of consumer spend (down from 15 per cent), while credit cards rose slightly to 23 per cent, and debit cards rose significantly to 67 per cent (up from 59 per cent in 2020).
The rise in the use of card payments in part reflects the increase in online shopping in 2021, when 48.6 per cent of non-food items were purchased online. This figure has fallen to 39.9 per cent in the first 11 months of 2022, as more people returned to the high street as the pandemic eased.
The BRC said the government will need to look at solutions to make sure cash still remains a viable option for consumers as the decline in cash has made it harder for many firms to use cash efficiently — increasing the costs associated with handling physical money.
Retailers incurred costs of £1.3 billion just to accept card payments from customers in 2021. Debit cards, which accounted for the majority of transactions, saw scheme fees rise by 28 per cent compared to 2020 and total merchant service charges increased by 12 per cent. This translated into an additional £141 million in costs imposed by card firms onto retailers just to process debit card transactions.
Amid a backdrop of mounting costs from rising energy prices, rising commodity prices, rising transport costs, a tight labour market, and other supply chain disruptions, these excessive card fees add further cost pressures to retailers.
The BRC, along with other business groups, said it has been calling for intervention in anti-competitive practices in card payments in order to protect British businesses.
It said the government must consider implementing a number of actions including stopping card fees from rising, removing interchange fees, and a Treasury review into the cost of accepting card payments.
Hannah Regan, payments policy adviser, at British Retail Consortium, said with card usage soaring, already hard-pressed retailers had to pay huge sums to accept these payments.
“We need urgent intervention from the Payments Systems Regulator and the Treasury to stop card schemes from abusing their dominant market position,” she said.
