Retail payments tracker

Issue 59 | 22 October 2020

Welcome to issue 59 of Payments, Payments, Payments, this edition features the latest round up of volumes and values of retail payments in the UK.

This month we look at the continuing impact of COVID-19 and consider whether local lockdowns have interrupted the recovery in processed volumes and values.

All data is publicly sourced and is the latest available: Pay.UK September 2020, Link October 2020 and UK Finance July 2020.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

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

  • Bacs Direct Credit volumes have decreased by 5% (12 months to August 4%)

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

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

  • Bacs Direct Credit values have decreased by 1% (12 months to August 0%)

  • Bacs Direct Debit values have decreased by 9% (12 months to August also 9%)

  • Total Bacs values have decreased by 3% (12 months to August also 3%)

As expected the payments substitution to Faster Payments is continuing with a further increase in volumes and value in September.  The switch from Direct Credit to Faster Payments thus remains at the top of end of predictions with a further 5% reduction in September.   

The continued growth in Direct Debit volumes can be seen with highest number of transactions processed by this method – values have reduced but part of this could be capital repayment holidays agreed as a result of the pandemic.   With many now finishing we would expect values to rise accordingly over the coming months.

The overall Bacs volumes remains one to watch as a further year on year reduction – albeit just 1% – is recorded.

CHAPS

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

  • CHAPS volumes have decreased by 7% again, as in August, made up of a 10% decrease in retail/commercial based payments and a 4% increase in financial institution payments.

  • CHAPS values have again increased by 8% as in August, made up of a 6% increase in retail/commercial based payments and a 9% increase in financial institution based payments.

Although values are increasing, the increase in volume of retail/commercial based CHAPS payments seen in July has not been repeated as volumes continue on or around levels seen prior to lockdown.

Faster Payments

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

  • Single Immediate Payments have increased by 23% (12 months to August also 23%)

  • Total Faster Payment volumes have increased by 16% (12 months to August also 23%)

  • Total Faster Payment values have increased by 7% (12 months to August 6%)

September has been a strong volume month for Faster Payments as monthly volumes have now overtaken pre-COVID levels.

The volume of Faster Payments at 2,719,486,000 also exceeded Direct Credit volumes of 1,953,081,000 albeit the total value remains much lower – a possible explanation is a greater switch for smaller businesses using mobile and digital options hence we are seeing a higher number of lower value payments.

Cheques

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

  • Cheque volumes have decreased by 19% (12 months to August 16%).

  • Cheque values have decreased by 27% (12 months to August 21%).

Thus, despite the introduction of the image-based cheque clearing system, the volumes of cheques continue to suffer a double-digit decrease. 

COVID continues to impact cheque usage with a further significant decrease in cheque usage – possibly exaggerated by working from home and the replacement of accessible digital alternatives.

LINK – ATM Withdrawals

Key observations for week ending 18 October:

  • Lowest weekly ATM use and amount of cash withdrawn for the last ten weeks.

  • ATM volumes have reduced in this week by a further 2%, a 36% reduction compared to 2019.

  • Cash withdrawn from ATM’s last week has reduced by a further 2%, a reduction of 28% compared to 2019.

  • Weekly ATM use is not following the peak and troughs experienced in previous years.

  • Digital payment habits formed during COVID continue to remain sticky.

  • Will increased COVID restrictions across the UK lead to further reductions in ATM use?

Rolling volume change (compared to 2019): 

  • w/e 11 October 2020: -34% (baseline)

  • w/e 18 October 2020: -36% (2% reduction)

Rolling value change (compared to 2019): 

  • w/e 11 October 2020: -26% (baseline)

  • w/e 18 October 2020: -28% (2% reduction)

Source: LINK

Debit and Credit Cards

Source: UK Finance

UK Finance’s Update for July 2020 reports:

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

  • There were 1.5 billion debit card transactions in July, 20.8 per cent more than in June but 4.3 per cent fewer than in July last year. The total spend of £59.1 billion was 17.9 per cent higher than in June and 9.4 per cent higher than last July. 

  • There were 261 million credit card transactions in July, 15 per cent more than in June but 20.2 per cent fewer than in July last year. The total spend of £14 billion was 15 per cent higher than in June but 24.8 per cent less than last July. 

  • Outstanding balances on credit card accounts have contracted by 13 per cent over the twelve months to July, 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 1.2 billion debit and credit card transactions in the UK in July, 18% more than in June but 30.4 % fewer than in July last year.  The total spend of £53.6 billion was 15.2 % more than the previous month but 16.4 % less than last July.

  • Contactless payments accounted for 39 % of all credit card and 58 % of all debit card transactions.   There were 662 million contactless card transactions in July, 27.7% more than in June but 13.5% fewer than the 766 million last July. The total value of contactless transactions was £8 billion in July, a 22.5 % rise from June and a 11.1% increase on £7.2 billion last June. 

The number of contactless credit card transactions was 34.6% higher than in June but 31.8% lower than last July. The number of contactless debit card transactions was 26.8% higher than June but 10.2% lower than last July. 

This data suggests the pandemic has accelerated the shift towards internet shopping, with card spending online reaching a record high in July.

We are also seeing a marked increase in debit card spending, driven by the growing use of contactless as shoppers take advantage of the new £45 payment limit to make higher value transactions. Credit card spending has recovered slightly but continues to be impacted by ongoing economic uncertainty and fewer opportunities to spend on high value items such as holidays. “The banking and finance industry’s clear plan continues to support customers during this difficult time, as we work closely with the government and regulators to ensure people can pay in a way that suits them.

Eric Leenders, Managing Director of Personal Finance, UK Finance

Current Account Switch Service

The quarter 3 2020 Current Account Switching dashboard is expected to be released in the next few weeks. Click here for the latest CASS dashboard.

Conclusion

In this third retail payments round up the shift to digital and contactless payment continues together with the recovery in Faster Payments and card volumes.  

With the reinstatement of local lockdowns it is likely that these new digital payment habits will continue to stick.

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You’ll always find the latest Payments Tracker (as well as an ATM Tracker together with an Account Switching Tracker) at www.northeypoint.com.

Thanks

Mike