UK cash usage reverses downward trend in latest data

Consumer cash payments increased by 8% to 6.3 billion payments in 2022. This was the first-time cash transactions grew since 2012.

Although cash payments are still more than 30% below pre-pandemic levels, the 2022 increase is a change to the prevailing long-run trend observed over the past decade.

A unique set of factors coincided in 2022 to reverse this trend. First, 2022 was the first year since 2019 where the economy was fully open throughout the entire year, which means that there were more occasions where cash payments were an option than in either 2021 or 2020.

Second, concerns about the spread of Covid-19 largely receded after several rounds of vaccination and as new variants of the virus proved to be less lethal.

Equally, concerns about spreading the virus though the handling of cash were also erased as evidence emerged to show that the spread was primarily airborne.

Finally, the year was marked by inflation and a cost-of-living crisis that intensified with the energy crisis caused by Russia’s invasion of Ukraine in February 2022.

There’s evidence, including from consumer research conducted for UK Finance in 2022, that in times of budget tightening, some people turn to cash to help manage their limited finances and keep their spending in check.

“It’s something we do tend to see in times of falling consumer confidence and economic uncertainty,” said Adrian Buckle, UK Finance head of research. “We saw this in 2008.”

The volume of cash payments rose by 7% year on year in 2022 to 6.4 billion. Among 16- to 24-year-olds, traditionally viewed as digitally savvy, more than 15% of payments last year were made with cash.

Although the use of cash has been in decline over the long term, campaigners have argued that it plays a key role in budgeting, especially for those who are less comfortable with digital approaches, and is vital for groups including the elderly and those in rural areas.

Branch numbers are also falling, with more than 600 banks due to close by the end of 2023, leaving about 4,000 across the UK, according to data from ATM provider Link.

In August, the government released its proposals to ensure that provisions to access cash are protected, with the Financial Conduct Authority overseeing banks’ role.

“It is right that millions of consumers across the country find paying digitally easy and convenient, yet, as UK Finance’s report shows, there remains a significant minority of people who are not yet ready or able to make that switch, evidenced by an increase in cash payments over the last year,” said Sam Richardson, deputy editor of Which? Money.

As a proportion of overall payments, cash declined by 1 percentage point to 14%. Buckle said that its use was dwarfed by debit cards, which for the first time accounted for half of all payments, up 2 percentage points year on year.

Contactless payments represented a major part of this increase. They accounted for 37% of all payments in 2022, up from 21% in 2021.

UK Finance attributed this to factors such as the increase in the payment limit to £100 in October 2021, growing consumer familiarity with tapping to pay and the increasing popularity of digital wallets, including Apple or Google Pay.