Cash still rules in transactions, but mobile is making slight inroads
Cash remains the preferred payment method in the majority of transactions, but the likes of mobile payments are starting to make some very small inroads, according to the results of this year’s annual BRC Payments Survey.
Despite a slight decline cash continued to account for over 52 per cent of all transactions, but the average value of transactions across all payment methods has fallen again this year.
This provides yet more evidence of the continuing structural change in the retail industry. Shoppers have become less reliant on large weekly shops and instead prefer to make more frequent visits to a wider variety of stores. This has increasingly become the norm for many customers and has been supported by continued innovation, including the growth in contactless payment cards being issued and used for lower value purchases. Retailers continue to respond to this changing behaviour by expanding their smaller-format stores bringing convenience to a greater number of customers.
The survey also reveals that UK customers are increasingly embracing non-traditional methods to pay for their shopping. Non card replacement product (payment via app etc.) use has expanded six-fold over the last five years. This method still only represents a small proportion of the payments landscape, but with improvements in technology and constant innovation from retailers and payments providers, these methods of payment will likely increase their prevalence over the coming years. Retailers recognise that as new ways to pay will become more prolific, customers will increasingly expect to be able to pay in the way that suits them best.
Just as loyalty has been won or lost in the past over whether or not a store accepts card payments, so too will customers make positive choices to use retailers who meet expectations and offer a wide choice of ways to pay. This will require considerable investment from retailers but meeting the ever changing needs of increasingly tech-savvy customers will be a key issue in the years ahead.
Despite these technological challenges and changes in customer behaviour, our survey also shows that the cost to UK retailers of handling card payments is still too high. They have therefore welcomed the changes that will take place at the end of the year through the introduction and enforcement of the new EU interchange arrangements. These regulations will limit the interchange levels in respect of debit card transactions to 0.2 per cent and credit cards to 0.3 per cent of transaction value. However, it is clear that more needs to be done in the domestic market to ensure that disproportionate card handling fees do not stifle retailers’ ability to invest and innovate.
BRC Director General, Helen Dickinson, said: “The cost to retailers of accepting debit and credit cards has been increasing for years, so it’s great that European regulations will finally bring some proportionality to these fees and charges. The use of these cards is only going to continue to grow so it’s important that the issues that have persisted in this area are finally being addressed at the EU level. There remains work to be done here in the UK to address these unfair charges, though.
“Cash remains the cheapest method of payment for retailers to process and, for the moment, it remains the most frequently used method of payment too. We’re entering an exciting time for retail as technology continues to have a major impact on everything we do – this is just as true for methods of payment as it is for how products are sold. Meeting new demands from consumers, be it how and where they want to shop or how they wish to pay, retailers will need to innovate in order to continue to meet customer demand. Unnecessary financial burdens will only make this work harder. In order to remain a world leader in retail innovation, we all need to work together to make sure that these burdens are removed.”