Article

Debit card spending exceeds cash spending in the U.K.

New report signals a changing of the spending guard in the United Kingdom.

December 2, 2010

There is a changing of the spending guard in the United Kingdom.

For the first time ever in the United Kingdom, spending on debit cards exceeded spending made with cash, the U.K. Payments Council reported today.

The Payments Council, an organization that sets the strategy for payments in England, Northern Ireland, Wales and Scotland, believes that debit's leadership in spending over cash and certainly over credit cards and checks may be permanent.

The Payments Council reported that total debit card spending in the U.K. economy was 272 billion pounds (U.S. $363.9 billion) based on a rolling 12-month period that began Oct. 1, 2009, and ended Sept. 30, 2010. During the same one-year period, the cumulative amount of cash spent in the U.K. economy was 269 billion pounds (U.S. $359.8 billion), said Mark Bowerman, a spokesmen for the Payments Council, which is based in London.

"Debit cards are growing at breakneck speed. The number of purchases rose 10 percent this summer compared to last, an additional 1.6 million transactions on debit cards every day between July and September," Payments Council officials said. "The amount spent rose almost 11 percent. Debit cards were used three times more frequently than credit cards in 2010's third quarter." The third quarter includes July, August and September.

U.K. consumers have changed their attitudes about when they pay with a debit card and when they pay with cash, Bowerman said. "At one time, consumers paid cash for a cup of coffee and a newspaper. Now they pay for these small purchases with debit cards," he said.

Consumers receive most of their cash by withdrawing funds from ATMs. Withdrawals from cash machines, however, fell 1.5 percent in the third quarter compared with the same period in 2009, a decline of almost 5 percent, the council said. 

In 2010's third quarter, banks, building societies and independent ATM sales organizations deployed 63,294 ATMs compared with 63,400 ATMs during the same three-month period in 2009, according to Link, the U.K.'s ATM organization.

There were 719 million cash withdrawals in 2010's third quarter compared with 738 million cash withdrawals in 2009's third quarter. Link also reported that cash withdrawals reached 48.36 billion pounds in 2010's third quarter compared with 49.50 billion pounds in 2009 third quarter.

Sandra Quinn, director of communications for the Payments Council, attributed the popularity of debit over cash to debit's convenience.

"Cash is too cumbersome for many consumers these days—they prefer a card for anything more than the smallest transactions," Quinn said. "We now expect our debit cards to be accepted everywhere we go—in pubs and clubs, at the corner shop, online on high street. Having quickly supplanted cheques, and then claimed the scalp of credit cards, they [debit cards] now have usurped cash's throne too."

Quinn noted that 104 million fewer checks were written in the past 12 months and credit card spending during the year has barely changed. Since 2005, the number of credit cards has fallen from 70.6 million to 60.7 million, Quinn said. The number of credit cardholders has decreased from 31.7 million to 30 million during the same five-year period.