In the results of a survey published today, the British Retail Consortium (BRC) has identified an increase in the use of cash in retail, for the second year in a row.
Cash now accounts for 19.9% of transactions, it revealed, with debit cards still the most popular method at 62%. Overall, customers visited shops more frequently but made smaller purchases, as the cost of living crisis continued to pinch in 2023. The total number of transactions rose from 19.6 billion to 21.0 billion while the average amount spent (per transaction) fell from £22.43 to £22.03.
Meanwhile, card fees paid by retailers continued to grow. The total amount paid by retailers to banks and card schemes rose by over 25% in 2023, at an extra cost of £380 million. This brought the total card fees paid to £1.64 billion. Card companies continue to raise these fees without transparency or justification, the BRC says, and retailers hope that the Payment Systems Regulator (PSR) will now implement meaningful reforms to tackle the lack of competition and rising costs identified in their current market reviews.
Cash remains a vital form of payment for a sizeable minority of the population, particularly for its role in budgeting. This has made it important to many households during the recent cost of living squeeze.
The BRC is calling for the following actions to reduce costs for hard-pressed retailers:
- Meaningful reforms in the PSR’s final reports into card fees: The PSR must implement meaningful reforms through its final reports into cross border interchange fees and scheme and processing fees to increase competition and reduce costs in the payment market
- A Commercial Cards Market Review: Given the 14% rise in commercial card fees (by turnover), the BRC calls on the PSR to initiate a market review into Commercial Card interchange fees, which continue to rise unchecked, to ensure the whole payment market is functioning effectively
- Open banking: The growth of Open Banking in the UK is needed, without replicating the harms in the existing card system. Open Banking should be a viable alternative to cards both online and at point of sale, at a fairer price to retailers
Chris Owen, the BRC’s payments policy advisor, said: “Persistent inflation and the cost of living crisis continued to affect households and many consumers used cash to budget more effectively. However, the dominance of card payments continues apace, accounting for over 85% of spending.
“Card fees continue to rise at a substantial rate and the PSR must act upon the harms it has identified in its current market reviews. It must move swiftly to reform the market and implement remedies including price caps on fees and price rebalancing measures.”
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