The rise of contactless payments in the UK

By Alara Basul | 8 September 2017

The Guardian recently reported that contactless payments have taken debit and credit card use in the UK to an all-time high.

UK Finance stated that almost 1.4 billion card payments were made during June 2017. In 2016, there was a total of 164 million payments card, of which, 100 million were debit cards and 59 million credits card. Over the last ten years, debit card holding has increased by 45%.

What makes contactless payments so popular?

Generation Z

Recent data from social money transfer app, Moneymailme, says that 62% of British 18 to 25-year-olds feel frustrated if they are forced to make purchases with cash. Nearly half of Generation Z (49%) give friends up to £10 at least once a month but more than one in five (22%) wouldn’t use a bank transfer for less than £10.

Vicky Beckett, Editor of our sister website GTNews, says that “contactless payments are not only easier to use than chip and pin, they are in many ways more practical than small change and small notes.

“Contactless payments also have the added value of fuelling other payment solutions such as Apple and Google pay and other wearable technology – which can’t be done as easily with chip and pin.”

Richard Koch, Head of Cards at UK Finance commented: “By the end of 2016, four in 10 card transactions were either online or made using a contactless card, compared to a quarter the previous year.

“At the same time, we’re seeing the advent of new technology such as in-app purchasing and the fusing of social media and messaging formats with payment capabilities, which work along the rails of the card payments system.

“Over the next decade our forecasts show the number of card payments will grow substantially. By 2026, we expect the volume of debit card purchases to grow by 57% to 18.2 billion.”

Game of phones

According to recent data from Worldpay, mobile contactless payments totalled a staggering £370m in the UK for the first six months of 2017.

Mobile payments have increased by 336% in 2017 compared to last year. Londoners spend the most on their mobile phones compared to other regions in the UK, which is likely due to contactless payments availability  such as in-stores and on transportation methods.

Visa’s annual Digital Payments study reinforces the UK’s leading position in driving contactless payments. Millennial shoppers (aged 18-35) have embraced contactless payments most enthusiastically, with over three quarters (76%) making a purchase with their contactless card – up 11% from 2016 (65%).

Will contactless payments overtake cash?

Last year at Davos, Deutsche Bank’s Chief Executive John Crayon predicted that cash probably wouldn’t exist in ten years’ time. According a recent report, eight out of ten young adults don’t carry any cash on them.

Andrea Dunlop, CEO of Acquiring and Card Solutions at Paysafe, comments: “Contactless has been the biggest innovation in payments since the introduction of chip and pin but while the latter was for security, contactless has been all about, ease and convenience for low value payments.

“And what an innovation impact with over 100 million cards and 500,000 terminals in less than 10 years. Now some £4bn is being spent on contactless every month and this has made a huge dent into cash payments, where we now see everyday payments of less than £30 increasingly on a card.”

It’s easy to understand why contactless has made an impact in the UK payments ecosystem. Tap-and-go payments enable users to pay for items without any friction, providing speed and convenience and delivering value to busy shoppers across the country.

Ready, set, tap and go

According to recent data from UK Cards Association, there are now over 101m contactless debit and credit cards in Briton’s wallets. UK Cards Association has released new figures that show contactless spending has hit £25bn in 2016, up 222% from the previous year. There were staggering 14.8 billion card transactions recorded in 2016, which is equal to 40.5 million per day and 469 transactions per second.

“Not all disruption ultimately proves to be a positive development but contactless payments have certainly whetted the public’s appetite for convenience,” says Monica Eaton-Cardone, co-founder of The Chargeback Company says.

“Contactless is enjoying another boost with wearables like Fitbit announcing they are adopting the payment technology, but it is still largely early adopters jumping on board rather than the wider public.”

“Most consumers don’t want to be the guinea pig in testing new technologies where risk is involved, which is why I believe tokenisation and two-factor authentication should be built into contactless payments, to ensure the trust needed for mass adoption is put in place,” she adds.

Kevin Jenkins, Managing Director for Visa UK & Ireland believes that contactless payments will continue to play a key role in the way a consumer pays. “The introduction of contactless cards in the UK ten years ago was a watershed moment for consumers. Whether buying lunch, commuting without having to top-up, queuing at bars and festivals, or donating to charity, Brits have come to expect a painless payment experience.

“Yet there’s still room for the uptake of contactless to grow, particularly outside London and the South East. The next ten years looks set to see contactless payments become an even greater part of our day to day lives.”

This article was originally published on our sister website PaymentEye. 

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