Digital payments on the up but cash is still king

Spending on mobile devices in UK shops will reach £54bn a year within the next decade, but the rise of digital payments does not signal the end of cash, experts argue.

Consumers are increasingly using mobile phones and tablets to make purchases, as more retailers install digital payment services such as Paym and Zapp, with spending reaching £9.7bn last year, according to research by Barclays.

Money transfers via mobile are expected to rise from £1.7bn a week to £3.4bn by 2020, while online banking transactions will grow from £6.4bn a week to £9.4bn, the Centre for Economics and Business Research said.

The rise of digital payments comes as some banks report a huge decline in cash withdrawals and cheque transactions.

Halifax, for example, said cash withdrawals accounted for only £18.33 of every £100 spent, marking a decline of £1.82 since 2013.

But concerns that cash will soon be displaced by digital devices as a form of payment are exaggerated, analysts say.

Liz Oakes, a payments expert at KPMG, said: "Digital is increasingly helping us to live that mobile life, but cash is still instantaneous and provides anonymity. For some transactions, it is more convenient. It's difficult to imagine a world without any cash at all."

And a recent report by the Payments Council said cash was still "the single most commonly used payment method", accounting for more than half of the total volume of consumer payments.

There were 19.7bn consumer cash payments made in 2013, representing 57 per cent of the total volume.

Although cash volumes have fallen over the past decade as people turn to debit cards and online services, the report said usage had stabilised over the past couple of years.

People have been using cash to help them budget as household finances were squeezed after the financial crisis. Growth in discount retailers has been another contributing factor supporting its use.

Although cash has a smaller share of the total value of consumer payments than of volume, this reflects the fact that most cash transactions are for less than £5.

In contrast, cheques represent a higher proportion of the value of consumer payments than they do volume, as they tend to be used for more expensive goods and services.

The Payment Council's report said examples of popular cheque transactions include second-hand car purchases and payments to tradesmen for work done in the home.

Nonetheless, the total amount paid by consumers using cheques fell below £100bn for the first time in 2013.

The steady usage of ATMs is another sign that cash is still one of the most popular forms of payment.

A report by Nationwide Building Society said "cash remains king" in parts of the UK, with east London claiming the top three spots for ATM use.

The top ten areas for utilising cash machines, which account for about 1.8m transactions per year, include East Ham, Dagenham, Bow, Manchester and Swindon.

Phil Smith, head of current accounts at Nationwide, said cash was particularly strong in places with a "strong market history".

"Cash remains as popular as ever, with industry figures showing ATM use has not been significantly affected by the digital revolution," he said.

And, in many cases, retailers are not yet ready to facilitate a huge move to digital payments.

The report by Barclays said less than 3 per cent of retailers believed their business was at the cutting edge of being "mobile ready", while a further 70 per cent said they did not have a mobile site or app for consumers.

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