According to the latest Digital & Card Payment Yearbooks, in recent years, the UK payments landscape has undergone a dramatic transformation, driven by technological advancements and changing consumer behaviours.
The introduction of the Faster Payments service, the rise of mobile and contactless payments, and the implementation of the revised Payment Services Directive (PSD2) have all played pivotal roles in reshaping the industry.
Let’s delve into the key highlights and trends shaping payments in the UK in 2024, backed by some compelling statistics.
The Rise of Digital Payments
The COVID-19 pandemic accelerated the shift towards digital payments in the UK. By 2022, there was a noticeable decline in cash transactions as consumers increasingly embraced contactless, online, and mobile wallet payments.
Notably, contactless spending surged to £231 billion in 2022, marking a 16% rise in card payments. T
his trend is expected to continue, with mobile banking and payment apps evolving to offer a comprehensive suite of services, including account management, personal finance tools, and value-added digital services such as location finders and digital vouchers.
Competing Payment Ecosystems
The UK payment ecosystem is characterized by two primary segments: the card payment ecosystem and the cardless Open Banking payment ecosystem.
In 2022, 85.67% of cards were contactless, highlighting the dominance of card payments.
The Open Banking framework under PSD2 has facilitated seamless account-to-account (A2A) payments directly from bank accounts, further boosting the FinTech sector.
Digital A2A payments were substantial, with 6.83 billion credit transfers valued at £106.66 trillion processed in 2022.
Legal Framework and Regulations
The legal landscape for payment services in the UK is heavily influenced by European regulations, even post-Brexit. The PSD2 remains a cornerstone of the regulatory framework, promoting secure and efficient digital payments across borders.
Key elements of PSD2 include strong customer authentication, regulated access to payment accounts, and comprehensive consumer protection measures.
The General Data Protection Regulation (GDPR) also plays a crucial role in safeguarding consumer data, ensuring transparency and control over personal information.
Market Dynamics and Key Players
The UK’s payment market is highly competitive, with over 30 major card issuers, 14 active acquirers, and numerous payment service providers (PSPs).
As of 2022, there were 171.68 million payment cards in circulation, with debit cards accounting for 101.96 million and credit cards for 56.84 million.
Leading players such as Barclaycard, Lloyds Bank, HSBC, and NatWest Group dominate the market, offering a wide range of credit and debit card products.
Additionally, the emergence of digital challengers and FinTech firms has intensified competition, driving innovation in payment solutions.
Emerging Trends and Technologies
Several emerging trends are shaping the future of payments in the UK. These include the growing adoption of mobile payment solutions such as Apple Pay, Samsung Pay, and Google Wallet, as well as the increasing use of QR codes and biometric authentication for secure transactions.
The Faster Payments service continues to gain traction, processing 3.93 billion transactions valued at £3.2 trillion in 2022, facilitating immediate payments for consumers and businesses alike.
Consumer Preferences and Behaviours
UK consumers have shown a strong preference for digital banking apps that provide a holistic view of their finances. They value the convenience of managing multiple accounts within a single app and appreciate features that enable direct payments from their bank accounts.
The demand for secure, cost-effective, and user-friendly payment solutions is driving the adoption of digital payments, further diminishing the reliance on cash. In 2022, POS payments via all cards reached 27.70 billion transactions, valued at £955.49 billion.
Conclusion
The UK’s payment landscape is at the forefront of digital innovation, driven by regulatory frameworks like PSD2, technological advancements, and evolving consumer preferences.
With mobile and digital payment solutions continuing to evolve, the UK is poised to maintain its position as a leader in the global payments industry, offering consumers and businesses alike a secure, efficient, and convenient payment ecosystem.
Key Statistics
Contactless Payments: Contactless spending reached £231 billion in 2022, a 16% increase from previous years.
Payment Cards: Over 28 billion payment card transactions were processed in 2022, reflecting a 15.59% growth from 2021.
Faster Payments: The Faster Payments service processed over 3.9 billion transactions worth £3.2 trillion in 2022, marking a 23% increase in transaction value from 2021.
Debit Cards: There were approximately 104.7 million debit cards in circulation in the UK by the end of 2022.
Credit Card Use: Credit card transactions reached a value of £235.8 billion in 2022, with an average transaction value of £61.65.
The Digital & Card Payment Yearbooks provide the latest data on the European and Eurasian digital payment and card payment markets at granular country and regional level.
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