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Comment: New figures reflect shift in the way we pay

The UK Cards Association recently reported that the number of debit and credit card transactions made in a single month passed one billion for the first time in August this year, with consumers making 1.006 billion transactions. This equates to an increase of 9.2% on the same month last year.  

This also reflects a shift in the way we pay. Increasingly people are choosing to use cards instead of cash for face-to-face transactions while continuing to use cards online in preference to other payment types.

These headlines also highlight the important role cards play for consumers, providing convenience, safety and familiarity in their payment choice as the economy improves and confidence returns.

It is interesting to note that while the number of transactions has risen, the value of transactions has not grown at the same rate. It seems that consumers are using their cards more frequently but for lower value payments. Average transaction values (ATV) on all cards fell to £47.14 in July and August and compares to an ATV of £46.68 a year ago. ATVs for debit cards decreased by 11p to £43.46 while the ATV for credit cards dropped by 26p to £59.34.

There has been a persistent decline in ATVs over the last three years. This is likely to be due to the migration of low value cash payments to cards, alongside increasing use of contactless cards. It is also likely that online spending is boosting the number of smaller value transactions, particularly for payments made using smartphones and tablets.

Growth is seen across both the retail and service sectors. In the retail sector, sales grew by £119 million to £23.5 billion; major increases were seen in the Food and Drink and Household sub-sectors backed by a strong summer season and the strengthening housing market. There was also significant growth in spending in electronic and furniture stores. In the service sector there was an equally impressive set of growth figures published, showing the sector growing by £79 million to £23.8 billion with strong contributions from the restaurant and gambling sub-sectors.

The evidence suggests that, slowly but surely, cards are being used in preference to cash within the retail space and we now have products that can be used in most retail environments. Of particular note is the growth in spending on the contactless card, with a million transactions now being undertaken each day. Consumers are now used to paying using their contactless cards and as more major retailers embrace the technology we can expect to see this growth continue.

The phenomenal success of contactless cards on Transport for London buses and now the underground illustrate how the speed and convenience of contactless cards can help generate new business. We expect other similar implementations in the transit sector and elsewhere as we continue to harness the potential for contactless card payments to provide an alternative to cash for smaller value transactions.

Cards continue to be the payment instrument of choice for the majority when it comes to online payments. There is little sign that the growth in eCommerce experienced over the last few years will slow. One of the factors driving this growth is the increased use of mobile devices to make smaller value payments. As with cards the speed and convenience of using mobile to access payment products is driving a new business at lower transaction values.

What is clear is that consumers and retailers are now finding ways to make use of the technologies that the card payment industry has developed in recent years to complement the standard contact card payment.

In many cases the opportunity has come from a desire to fulfil a consumer demand rather than simply adopting the 'vanilla' product offered by the card schemes. The Transport for London contactless card implementation is a shining example of how the industry can work with a retailer to adapt its products to meet a need without altering the basic interaction at the point of acceptance. Work went on behind the scenes to dovetail the payment service with the specific needs of a rapid transit network – all of which is unseen by the consumer.

The challenge that we now face is to identify other opportunities to support retailers as they seek to extend their consumer engagement into to the digital channels. Where there is sufficient demand and a clear benefit to both parties, it would be foolish not to seek ways to use trusted card systems to enable new business. We hope that this more collaborative approach will allow us to extend the reach of cards into new business areas, fuelling the continuing growth in card payments seen this summer.

David Baker is head of the payment innovations unit for The UK Cards Association. He writes a regular column for Essential Retail on the evolving payments landscape and its impact on the retail industry.

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The UK Cards Association