Debit card use in the United Kingdom has surpassed other payment types as the preferred payment method, causing credit card, cash payments and especially check use to decline, the UK Payments Council reported on Sept. 9.
Check use declined by £21.5 billion (US$33.3 billion or 26.3 billion euros) during the second quarter ended June 30, representing a 10% drop from the same period last year. The council, which attributes the decrease to consumers and merchants switching to card and electronic payments, generally did not provide data for 2009 in its report for comparisons.
Because check use has been declining for years, the council plans to eliminate central check clearing by Oct. 31, 2018 (
Debit cards seem to have taken over as consumers’ preferred method of payment. During the second quarter, debit card use increased by £7.9 billion compared with the same period last year, while “faster” payments such as person-to-person funds transfer increased by 67%, to £16.9 billion, according to council.
P2P payments are increasing because both consumers and merchants prefer the ability to make instant funds transfers, the council believes.
UK consumers ultimately prefer to use P2P payments or debit cards because “they are more convenient and quicker to transact with than cash,” a council spokesperson tells PaymentsSource, noting consumers have stopped carrying checkbooks because “many merchants no longer accept payments by check.”
“There seems to have been a movement toward paying for goods using money consumers have in their accounts rather than with money they are borrowing,” the spokesperson adds.
Plus, if consumers pay bills with a check, “the company has the cost and inconvenience of having to post it,” the spokesperson adds. As such, many billing companies now offer incentives for consumers to pay electronically, the spokesperson notes. The council declined to comment on the specific fees associated with processing checks.
Consumers also want to have more control over their finances, so they pay less on credit. Moreover, many issuers are limiting the amount of credit they offer consumers, Matt Simester, director of Auriemma Consulting Group in the United Kingdom, tells PaymentsSource.
During the second quarter, UK consumers initiated 196 million check transactions, down 11.7% from 222 million during the same quarter last year, according to the council’s quarterly statistical report. In contrast, they initiated 1.6 billion debit card purchases and 500 million credit and charge card purchases during the quarter, according to the report.
By the end of June, plastic card purchases accounted for 67.3% of all retail purchases compared with 64.7% at the same time last year. Debit card payments accounted for 76% of all plastic card payments, up slightly from 74.6% last year, according to the report.
Additionally, credit card spending rose only 3.9% during the quarter, barely ahead of inflation, the council said.
In 2009, banks issued 79.3 million debit cards and 64.4 million credit and charge cards issued, according to the report.
Because of debit’s popularity, cash payments also have declined this year. The amount of cash withdrawn from ATMs during the second quarter decreased 32% compared with the same period last year. Additionally, consumers made 734 million cash withdrawals, according to the report.
In Ireland, National Irish Bank is encouraging consumers to use debit cards to reduce their use of cash, according to a recent report from the bank, which is urging the Irish government to reduce both cash and check use by 95% by 2013.
Moreover, the bank believes the government should establish a single ATM network, and merchants should look for opportunities to reduce cash purchases through card-only lanes and loyalty card bonuses for consumers paying electronically.
Irish National Bank believes Ireland may save 1 billion if consumers switch from paper-based payment systems to electronic systems.
Overall, it makes sense that consumers, merchants and financial institutions no longer are interested in checks because they are so expensive to process, Simester says. And who will replace checks is “the younger consumer who is much more tech savvy and wants to make purchases using a mobile phone,” he adds.
Plus, debit cards hold more mass-market appeal than paper checks, especially because the funds come out of the same account instead of a line of credit, Simester explains.
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