Retail Payments: 2020 scorecard

Issue 90 | 21 January 2021

Welcome to issue 90 of Payments:Unpacked, this edition looks at the volumes and values of the UK’s retail payment schemes at the end of 2020 (using latest available data).

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Bank of England supply’s ONS with UK debit and credit card transaction data

This morning Finextra reported that The Bank of England will, for the first time, provide the UK's Office for National Statistic (ONS) with credit and debit card transaction data to better inform policy-makers about how people have been spending their money.

The ONS says the new data wil act as "experimental faster indicators" for monitoring UK purchases. They track the daily Chaps payments made by credit and debit card payment processors to around 100 major UK retailers, whether it be online, over the phone or in a store. The Bank of England anonymises and aggregates the data before sharing with the UK's national statistical institute for publication.

ONS retail sales figures provide monthly estimates on what consumers are buying, and how much they are spending on items in stores and online, but the Chaps data brings an additional element to the mix with the capturing of the spends on social activities, such as sporting events, concerts, a meal or drinks in a pub or restaurant, haircuts, beauty treatments and train fares.

The categories allow us to see where money is being spent, and how this has changed over the period of the pandemic," David Matthewson, branch head for faster indicators at the ONS.

The ONS believe that this transaction data represents a big step forward in their ability to see how purchasing habits have changed during all the stages of the pandemic so far and going forward, will continue to provide valuable insights.

Northey Point’s Payment Tracker

Northey Point’s payments tracker acts as "fast indicator" for monitoring the volume and value performance of the UK’s retail payment schemes. This fast indicator provides the ability to track in aggregate how the UK’s payment habits are changing in response to the societal shift to digital payments which is being accelerated as we respond to the COVID pandemic.

2020 Scorecard

Key highlights of the final 2020 payments tracker (using latest available data):

  • In aggregate the Bacs, CHAPS, Faster Payments and cheque / credit clearing schemes operated by Pay.UK increased by 3% in 2020 to a massive 9.5 billion transactions.

  • The lions share of Pay.UK volumes are generated by Bacs (6.5 billion) with the nearest ‘rival’ by volume Faster Payments at 2.8 billion.

  • Just two of Pay.UK’s payment scheme grew in volume during 2020: Faster Payments (+17%) and Direct Debit (+1%).

  • Looking at the wider payment eco system a number of factors (including the COVID pandemic and the societal switch to digital payments) led to payment schemes experiencing a volume reduction: Bacs Direct Credit (-4%), CHAPS (-8%), Cheque / credit clearing (-28%), ATM withdrawals (-47%), Debit Cards (-4.6%) and Credit Cards (-2.8%).

It is also important to note that (over the 12 month to October 2020) the outstanding balances on Credit Cards contracted by 14.7%.

Volumes and Values round up

In this latest round up of retail payments, we see whether the easing of some restrictions following the second national lockdown impacted the volume and value of payments processed in the UK.

Note: All data is publicly sourced and is the latest available: Pay.UK December 2020, Link January 2020 and UK Finance October 2020.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

In the 12 months to the end of December 2020 we see that:

  • Bacs Direct Credit volumes have decreased by 4% (12 months to November 6%)

  • Bacs Direct Debit volumes have increased by 1% (12 months to November 1%)

  • Total Bacs volumes have decreased by 1% (12 months to November 1%)

  • Bacs Direct Credit values have decreased by 1% (12 months to November 2%)

  • Bacs Direct Debit values have decreased by 11% (12 months to November 11%)

  • Total Bacs values have decreased by 4% (12 months to November 4%)

Volumes for Bacs Direct Credits continue to be subdued for the 12 month period, however there has been some recovery following the ending of the national lockdown at the end of November; month on month volumes and overall value had increased after falling back in August – and a further increase was seen in December.

Bacs Direct Credit volumes were greater in December 2020 than in December 2019.

In December 2020 the volume processed was 189,608,000 (December 2019: 165,746,000)

The small growth in Direct Debit volumes has continued although values continue to fall, mainly from the impact from Lockdown 1.0; month on month both volume and value had increased since August albeit falling back slightly in November.

Overall Bacs values and volumes are still on a slight downward trend for the 12 month period – with Lockdown 3.0 now commencing we are likely to see a further fall as the lockdown progresses although as seen in December recovery should be seen when restrictions are lifted.

CHAPS

In the 12 months to the end of December 2020 we see that:

  • CHAPS volumes have decreased by 8% (12 months to November 8%) 

This was made up of a 12% decrease in retail / commercial based payments and a 3% increase in financial institution payments – compared to 11% and 3% respectively for the 12 months to November

  • CHAPS values have increased by 10% (12 months to November 10%)

This month the change was made up of an 13% increase in retail / commercial based payments and a 9% increase in financial institution based payments, compared to 11% and 9% respectively for the 12 months to November.

Whilst overall volumes and values for financial institution payments continued to increase this had flattened in recent months, with a jump seen again in December. Thus the resilience seen throughout the year continues to be displayed.

Retail / Commercial payment activity continued to fall through the year – however for the month of December volumes just crept ahead of December 2019. The trend of a smaller number of higher value payments such that overall values increase, continues to be seen.

Faster Payments

In the 12 months to the end of December 2020 we see that:

  • Single Immediate Payments have increased by 24% (12 months to November 24%)

  • Total Faster Payment volumes have increased by 17% (12 months to November 17%)

  • Total Faster Payment values have increased by 8% (12 months to November 8%)

Thus the trend continues such that monthly volumes remain above pre-Covid levels; the total number of Faster Payments processed in December 2020 was 269,379,000 compared to 226,705,000 in December 2019.

Cheques

In the 12 months to the end of December 2020 we see that:

  • Cheque volumes have decreased by 28% (12 months to November 25%).

  • Cheque values have decreased by 40% (12 months to November 37%).

Thus, despite the introduction of the image-based cheque clearing system, the volumes of cheques have continued to drop over the 12 month period, albeit month on month a recovery continues to be seen since Lockdown 1.0.    Indeed levels during Lockdown 2.0 were higher than in the first Lockdown – however it may not have been long enough to have a further impact on cheque activity during this time. As Lockdown 3.0 is likely to be in place for some weeks, it will be interesting to see if cheque usage stabilises at the current level or falls further as we progress through 2021.

LINK – ATM Withdrawals

Key observations for week ending 17 January:

  • Last week ATM transactions increased by just 0.2 million (when compared to the previous week).

  • Last week’s ATM transactions were 19.8 million less than the equivalent week in 2020.

  • With the impact from Lockdown 3.0 continuing, weekly ATM use has reduced by 47% (compared to the equivalent week at the beginning of 2020).

Source: LINK

The latest figures from LINK show the impact from the UK’s continuing digital payment habits, together with more widespread Tier 4 restrictions which came into effect at the end of last year, followed by a third national lockdown at the start of 2021. However, at the current time, transaction levels do appear to have stabilised at the same level as that seen in Lockdown 1.0.

Source: LINK

Rolling volume change (compared to 2020): 

  • w/e 10 January: -46%

  • w/e 17 January: -47%

Rolling value change (compared to 2020): 

  • w/e 10 January: -37%

  • w/e 17 January: -39%

For more visit out: ATM Tracker.

Debit and Credit Cards

Source: UK Finance

The UK Finance Update for October 2020 reports:

Card transactions by UK cardholders both in the UK and overseas:

  • There were 1.6 billion debit card transactions in October, 4.6 per cent fewer than in September and 3.5 per cent fewer than in October last year. The total spend of £53.2 billion was 9.1 per cent less than in September and 0.2 per cent less than last October.

  • There were 273 million credit card transactions in October, 2.8 per cent fewer than in September and 9.6 per cent fewer than in October last year. The total spend of £14 billion was 1.6 per cent less than in September and 18.6 per cent less than last October.

  • Outstanding balances on credit card accounts have contracted by 14.7 per cent over the twelve months to October, as a result of repayments outstripping new borrowing in the year.

Card transactions made in the UK by cardholders from both the UK and from overseas countries:

  • There were 1.7 billion debit and credit card transactions in the UK in October, 0.4 per cent fewer than in September and 3.6 per cent fewer than in October last year. The total spend of £64.2 billion was 2.5 per cent less than the previous month but 4.9 per cent higher than last October.

  • Contactless payments accounted for 33 per cent of all credit card and 43 per cent of all debit card transactions.

  • There were 687 million contactless card transactions in October, 1.9 per cent fewer than in September and 9.8 per cent fewer than the 762 million last October. The total value of contactless transactions was £8.1 billion in October, a 1 per cent decrease from September but a 15.8 per cent increase on £7 billion last October.

  • The number of contactless credit card transactions was 3 per cent lower than in September and 20.9 per cent lower than last October. The number of contactless debit card transactions was 1.7 per cent lower than September and 7.8 per cent lower than last October.

Current Account Switch Service

Monthly data 2020:

Source: Pay.UK

A total of 6.9 million current accounts have now been switched since the service was launched in September 2013

In 2020 to date 650981 current account switches have been completed. This is a significant (COVID) reduction on the historic number of switches as, for example, for the same period during 2019, 907183 switches were completed.

For more visit our: Current Account Switching Tracker.

Conclusion

In this latest retail payments round up, we continue to see the increasing use of digital and contactless payments.  

The pandemic has hastened the fall in cheque volumes and cash transactions – however there does seem to have been a resilience in the usage at the current levels; Cheque volumes and values have increased since Lockdown 1.0 and ATM transactions remain at a similar level to the first lockdown.

However with Lockdown 3.0 and widespread restrictions now in place and likely to be so for a number of weeks, it will be interesting to see if this causes a further shift towards digital and contactless payments during this time.

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Mike