Cash payments in the UK rose for the first time in a decade, last year, as consumers grapple with inflation fears and the rising cost of living.

The total number of cash payments made in the UK during 2022 increased from 6.1 billion to 6.4 billion, bucking a long-running trend of continued decline, UK Finance has revealed.

Yet, due to the higher total volume of payments, the share of payments made using cash still fell slightly, from 15 per cent to 14 per cent. A decade ago, 54 per cent of all payments were made with cash.

Despite this, cash remains the second most frequently used payment method. According to UK Finance’s latest Payment Markets Report there were 21.6 million people who used cash only once a month or not at all in 2022, down from 23.1 million the year before.

There were 0.9 million consumers who mainly used cash in 2022, down from 1.1 million in 2021 and 2.2 million five years previously in 2017. These consumers use cash when doing their day-to-day shopping, although the majority still use other payment methods to pay their regular bills.

Debit card milestone

Among other findings, the research shows that for the first time, half of all payments (50 per cent) in the UK were made using debit cards reflecting its status as the most popular payment method. In total, 45.7 billion payments were made, up from 40.4 billion in 2021. Debit card’s payment volumes increased by 18 per cent during the year to just over 23 billion payments while the number of contactless payments rose by 30 per cent to 17 billion.

In fact, 87 per cent of people made contactless payments at least once a month or more frequently throughout the year while the average value of contactless payments continued to grow at £15.10, up from £12.66 in 2021.

The next decade

Looking forward, UK Finance said its expect to see a continuation of current trends over the next decade with debit cards becoming ever more popular and cash usage falling.

It forecasts debit card payment volumes will increase to over 27 billion by 2032, which will likely be driven through contactless payments, online shopping, and the ever-increasing levels of card acceptance among businesses of all sizes.

Cash payments are expected to continue to fall in the long run as the cost of living crisis eases but the rate of decline could slow as its use is already concentrated among those who strongly prefer to use cash. It is estimated that there will be around 3.3 billion cash payments made in the UK in 2032, accounting for around eight per cent of all payments.

Adrian Buckle, Head of Research at UK Finance, said: “During 2022 we saw increased use of contactless, online banking and mobile payments, although cost-of-living challenges meant that some people preferred to use cash to help with their budgeting.

“Changes to shopping and travel habits, particularly related to the rise of hybrid working, led to a big jump in the volume of transactions made. Debit cards remain the most popular way of paying, with them now accounting for half of all payments made in the UK.

“There is a wide variety of payment methods available in the UK and each provides specific benefits to the people using them. Over the next decade we are forecasting further growth in the use of card and mobile payments and market developments such as Open Banking may bring further changes to the payments landscape.