Which UK payment scheme has grown by 19% over the last 12 months?

Issue 127 | 27 May 2021

Welcome to issue 127 of Payments:Unpacked, in this edition we take a look at the volume and value performance of the UK’s payment schemes.

1: Bacs Direct Debit and Direct Credit, Faster Payments, CHAPS and cheque clearing

We’ll start with the Bacs, Faster Payments, CHAPS and cheque clearing schemes and focus on the value and volume changes in the 12 months to end April 2021.

Source: Pay.UK Limited

Bacs Direct Debit and Direct Credit

In the 12 months to the end of April 2021 we see that:

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

  • Bacs Direct Debit volumes have remained at the same level (12 months to March also unchanged)

  • Total Bacs volumes have decreased by 1% (12 months to March 2%)

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

  • Bacs Direct Debit values have decreased by 10% (12 months to March 13%)

  • Total Bacs values have decreased by 3% (12 months to March 4%)

The recovery in volumes for Bacs Direct Credits has been sustained with the percentage reduction year on year remaining at 4% – the same level seen at the end of Lockdown 2.0. 

The small growth in Direct Debit volumes year on year ended with a reduction of 1% recorded for the year to January 2021. The increase in volumes seen in March 2021 has been sustained in April and the percentage change in overall volumes is again negligible year on year. 

Overall Bacs volumes and values remain on a downward trend for the 12 month period. However, with restrictions easing mid way through April, we are continuing to see a recovery in both volumes and values and the trajectory is decreasing – we would expect to see further recovery as restrictions are eased further over the coming weeks.

CHAPS

In the 12 months to the end of April 2021 we see that:

  • CHAPS volumes have decreased by 7% (12 months to March 10%) 

This was made up of a 9% decrease in retail / commercial based payments and a zero change in financial institution payments – compared to the 12% and zero change respectively seen for the 12 months to March.

  • CHAPS values have increased by 6% (12 months to March 8%)

This month the change was made up of an 9% increase in retail / commercial based payments and a 4% increase in financial institution based payments, compared to 12% and 7% respectively for the 12 months to March.

Volumes for wholesale payments have reduced in April but remain 7% ahead of April 2020. This has kept the year on year volume unchanged and the resilience seen throughout the last 12 months continues to be displayed. 

Retail / Commercial payment activity had fallen throughout the year – however for the month of December volumes just crept ahead of December 2019. Volumes fell back again in January but have recovered since. This was again seen in April with volumes 22% ahead of April 2020 . We would now expect this trend to continue but it is likely to take some time for year on year volumes to recover.

Faster Payments

In the 12 months to the end of April 2021 we see that:

  • Single Immediate Payment volumes have increased by 25% (12 months to March 22%)

  • Total Faster Payment volumes have increased by 19% (12 months to March 16%)

  • Single Immediate Payment values have increased by 18% (12 months to March 14%)

  • Total Faster Payment values have increased by 14% (12 months to March 9%)

Thus, the trend has continued in April with both volumes and values significantly ahead of 2020 levels; April 2021 saw an increase of 43% in the volume of Single Immediate Payments processed and 48% in the value of Single Immediate Payments.

The increased use of faster payments seems to be a digital payment habit that will be here to stay, reinforced throughout each lockdown over the last 12 months.

Cheques

In the 12 months to the end of April 2021 we see that:

  • Cheque volumes have decreased by 29% (12 months to March 33%).

  • Cheque values have decreased by 43% (12 months to March 46%).

Despite the introduction of the image-based cheque clearing system, the volumes have continued to drop over the 12 month period.

Monthly volumes processed by the Image Clearing System in April are again greater than those during Lockdown 1.0 and the year on year percentage rate of decline has now decreased.

In April this also applied to values and the percentage decline in values has also reduced. Therefore the underlying level of resilience in cheque usage continues to be seen.

2: LINK – ATM Withdrawals

Key observations for the week ending 23 May 2021

  • Last week the volume of ATM transactions increased by 1% when compared to the previous week in 2021.

  • Last week the volume of ATM transactions increased by 13% when compared to the equivalent week in 2020.

  • Last week the volume of ATM transactions decreased by 45% when compared to the equivalent week in 2019.

ATM usage remains ahead of 2020 as restrictions have eased this year with the equivalent period in 2020 still reflecting activity during the first lockdown.

The volume of transactions this year has marginally increased but still remains just behind the initial spike seen in mid April when non essential stores and outdoor hospitality first re-opened.

Source: LINK

The latest figures from LINK show the impact from the UK’s continuing digital payment habits, reinforced by the Tier 4 restrictions towards the end of last year, followed by the third national lockdown at the start of 2021. 

However, if the volume of transactions remain in line or just ahead of 2020 then it continues to look likely that the same floor in the number of transactions seen in 2020 will be seen during 2021.

Whilst digital payment habits were reinforced during each lockdown, we continue to expect to see a consistent underlying level of cash usage throughout this year by those who need to rely on cash or by those who choose to rely on cash.

Source: LINK

For more information visit our: ATM Tracker.

3: Debit and Credit Cards

Source: UK Finance

The UK Finance Update for February 2021 reports:

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

  • There were 1.2 billion debit card transactions in February, 2 per cent more than in January and 16 per cent fewer than in February 2020. The total spend of £47 billion was 1.8 per cent less than in January and 1.9 per cent less than February 2020.

  • There were 201 million credit card transactions in February, 2.6 per cent more than in January but 27.2 per cent fewer than in February 2020. The total spend of £11 billion was 2.9 per cent higher than in January but 30.1 per cent less than February 2020.

  • Outstanding balances on credit card accounts have contracted by 22 per cent over the twelve months to February, 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 February, 0.9 per cent more than in January but 21.4 per cent fewer than in February 2020. The total spend of £52.3 billion was 1.6 per cent less than the previous month and 4.9 per cent lessthan February 2020.

  • Contactless payments accounted for 38 per cent of all credit card and 58 per cent of all debit card transactions.

  • There were 668 million contactless card transactions in February, 3.5 per cent more than in January but 24.9 per cent fewer than the 889 million in February 2020. The total value of contactless transactions was £8.3 billion in February, a 2.9 per cent increase from January but a 1.2 per cent decrease on £8.4 billion in February 2020.

  • The number of contactless credit card transactions was 4.8 per cent higher than in January but 41.1 per cent lower than February 2020. The number of contactless debit card transactions was 3.4 per cent higher than January but 22.2 per cent lower than February 2020.

4: Current Account Switch Service

It is quite clear that the COVID pandemic had a significant effect on Current Account Switches in 2020 - this is highlighted by the monthly data for 2020:

Source: Pay.UK

Although numbers are still somewhat subdued it appears that the number of people switching their current account in 2021 is beginning to rise:

Source: Pay.UK

A total of 7.2 million current accounts have now been switched since the service was launched in September 2013

In 2020 691,489 current account switches were completed – a significant (COVID) reduction on the historic number of switches seen – in 2019 for example 978,400 switches were completed.

Lockdown 3.0 was clearly impacting as the number of switches in January 2021 was the fourth lowest over the last 12 month period – very close to the May, June and July ‘lockdown lows’ of 2020. The number of total switches in Q1 2021 decreased by 51,297 compared to the previous quarter as social distancing measures were re-introduced across the U.K.

As restrictions have eased this increased again between February 2021 and March 2021 – from 42,398  to 63,724. The number of switches has remained at this level for April – at 62,012 this equates to a doubling of the number of switches when compared with January of this year.

A high number of switches for Small Business and Charity accounts had been seen in January and February. However, this has fallen back in March and April to a more usual level of 8.9% and 6.2% respectively.

For more information visit our: Current Account Switching Tracker.

Conclusion

In this latest retail payments round up, we continue to see our digital payment habits evidenced most clearly in the continued rise of both the volume and value of single immediate Faster Payments. Volumes and values of these payments have increased significantly in April 2021 compared to 2020 and we would expect this trend to continue as restrictions are lifted and overall activity increases.

The pandemic hastened the fall in cheque volumes and ATM cash transactions during 2020. However we have not seen a further significant decline in the latest lockdown with volumes and values for both in line with that seen during Lockdown 1.0. In April we have seen increases month on month in both cheque volumes and values and ATM transactions and we could see a further uplift as more restrictions are lifted over the coming weeks.

However, the growth in the volume and value of digital and contactless payments is likely to outstrip any uplift in cheque and cash transactions and therefore we would expect their share in overall activity to continue to decline.

Note: All data is publicly sourced and is the latest available: Pay.UK April 2021, Link May 2021 and UK Finance February 2021.

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The Payments:Unpacked newsletter from Mike Chambers at Northey Point explores a wide range of the UK’s payment news including: Open Banking, Request to Pay, Direct Debit, Confirmation of Payee, Bacs, CHAPS, Faster Payments, LINK, cash, cards, cheques and Central Bank Digital Currencies (CBDCs) and unpacks the eco-system that supports the operation of these systemically important payment systems.

The newsletter is an independent and informed insight into the UK’s payments landscape – exclusive payment insights, hot topic briefings and fundamentals unpacked.

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