The British Retail Consortium (BRC) has released its 2024 Payments Survey, shedding light on evolving consumer payment behaviours and mounting challenges faced by retailers.
The report highlights a second consecutive year of increased cash usage alongside surging card processing fees that are straining the retail sector.
Cash Makes a Comeback
Cash usage has risen for the second year in a row, accounting for 19.9% of transactions in 2023, up from 18.8% in 2022.
Cash also accounted for a slightly larger share of turnover/ sales, at 11.2%, up from 11.0% in 2022, marking a continued shift back to physical currency.
For many households navigating the cost-of-living crisis, cash remains a critical budgeting tool.
Retailers have also acknowledged the lower processing costs associated with cash, reaffirming their commitment to accepting it as a payment option.
This trend underscores the resilience of cash, particularly for economically vulnerable groups, despite the ongoing dominance of card payments.
Card Payments Dominate Spending
Debit cards remained the most widely used payment method, accounting for 62.0% of transactions and 66.7% of total spending.
Combined with credit cards, card payments comprised over 75% of transactions and a staggering 85% of consumer spending.
These figures highlight the continued reliance on card payments, driven by their convenience and ubiquity.
However, rising card fees are creating significant financial burdens for retailers.
The total fees paid by retailers surged by over 25% in 2023, amounting to £1.64 billion – a £380 million increase compared to the previous year.
The lack of transparency and competition in card fee structures remains a key concern.
Impact of Economic Pressures
The survey also reveals that while shoppers made more frequent visits to stores, their average transaction value declined from £22.43 to £22.03.
This reflects cautious consumer spending patterns amid inflationary pressures, further challenging retailers’ profit margins.
The BRC is advocating for swift action to address these challenges.
Among its key recommendations are:
- Regulation of Card Fees: The Payment Systems Regulator (PSR) must implement reforms to cap interchange and processing fees, fostering competition and easing cost pressures on retailers.
- Commercial Card Market Review: A thorough investigation into unchecked fee increases for commercial cards is necessary to ensure a fair and functional payments ecosystem.
- Advancing Open Banking: Promoting Open Banking as an alternative to traditional card payments can introduce greater competition and cost-efficiency, both online and at points of sale.
“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,” says Chris Owen, Payments Policy Advisor at the BRC.
“It must move swiftly to reform the market and implement remedies including price caps on fees and price rebalancing measures.”
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