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More than half of all payments in the UK were made on a card in 2016, according to the British Retail Consortium (BRC). This is the first time cards have overtaken cash, driven in part by an increase in customer willingness to use cards for lower value payments, said the BRC.
Retailers investing in card payment technology also fuelled the change, while the introduction of lower handling and transaction fees, introduced under the EU Interchange Fee Regulation (IFR), helped save retailers and customers an estimated £500 million ($645.35 million).
However, retailers still spent over £1 billion ($1.29 billion) last year to accept card payments, and credit card charges remain particularly high.
“A growing number of retailers have invested in payment technology to accept cards, contactless payments and new payment applications both online and in store,” said Andrew Cregan, a BRC policy advisor.
“Looking ahead, the government should act to retain the benefits of the IFR for retailers and their customers after the UK leaves the EU and introduce further regulatory action to address the alarming increase in other card fees and charges at a time when the retail industry is facing acute cost pressures elsewhere,” he said.
The survey, based on a data from half the entire retail industry, also found consumers are becoming less reliant on credit cards for day-to-day transactions; instead, many prefer to use debit cards, which now account for almost 43% of all retail transactions.
In contrast, the share of retail transactions made by cash has dropped more than 10% over the past two years.
The news follows the revelation that former Chancellor George Osborne planned to scrap 1p and 2p coins in 2015, because they cost more to produce than they are worth and are unpopular with shoppers. He also planned to end all cash transactions by 2020, to boost productivity via faster transactions, better record keeping, a reduction in financial crimes like taking cash-in-hand and not paying tax.
A third of all card transactions are now contactless, according to The UK Cards Association, the limit for which rose to £30 from £20 in late 2015.
There were 19 billion retail transactions overall in 2016, up from 18.2 billion in the previous year, and the average amount for any given sale was £18.42, down from £18.63.