Cash-still a key method for consumers to pay merchants

In the last 10 years we would be forgiven for thinking that the use of cash to pay for things has been declining so rapidly that it is now a minor payment method (with debit and credit cards being the dominant force in western society these days). However, even in 2011/12, the figures just do not back these up with cash and debit having about 40% of the total pie, with credit cards a long way behind with only 15%.

The UK Payments Council publishes a full report on “the way we pay for things” as consumers in the economy, in April of every year. In summary, their latest research suggests that cash accounts for about two-thirds of all financial transactions in the economy and about one third of the value of the transaction (meaning that cash is typically used for lower value transactions). In fact, there are around 21 billion consumer payments in cash, but close to 80% of these are below £10. Around two-thirds of these cash payments are made in retail environments (such as supermarkets, service stations, shops and pubs etc).

For our regular commitments (bills etc), cash payments account for about 10% of the transactions and around 7% of the value.

Many individuals choose to use cash to shop on-line (often citing security and risk issues with credit and debit cards as the reason). However, many other have no choice but to use cash when they are trying to purchase goods or services (whether these are on or off line). 

Although the numbers vary, the population of people in the UK who do not have a bank account (often called the unbanked) is around 2 million people or about 1.4 million households. This is therefore around 7.5% of the entire UK adult working population and is therefore hard to ignore if you are a merchant or a payment provider.  Of course, this includes many people who are socially disadvantaged or poor in society but even they have to buy products or services or pay their bills. This is not easy to do without a bank account and can only be accommodated if payment providers recognise their need.