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Consumer Payment Preferences - UK - October 2015

“The payments market defies all typical negative stereotypes of the financial services sector. It is dynamic, fast paced and innovative with multiple players competing to solve the payments challenges of both today and tomorrow. This is creating an environment that is both exciting and potentially hugely beneficial to both providers and consumers, and challenging as regulation and security measures try to keep up with the rapid pace of change.”
– Jessica Morley, Financial Services Analyst

This report discusses the following key topics:

  • Incumbents and new entrants need to collaborate to innovate 
  • For consumers, choice is what matters 
  • The need to overcome the security barrier

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Table of contents

  1. Overview

      • Abbreviations
      • Executive Summary

          • The market
            • Cashless payments are on the rise
              • Developments are concentrated on mobile…
                • …but it is not just out with the old and in with the new….
                  • …and we are long way from becoming a completely digital economy
                    • The consumer
                      • Awareness and usage of alternative payment methods is mixed
                        • Figure 1: Awareness and usage of alternative payment methods, July 2015
                      • For consumers, choice is the best option
                        • Figure 2: Consumer use of payment methods within the last six months, July 2015
                      • Security concerns are less of a barrier than in the past
                        • Figure 3: Consumer security rankings of different payment methods, July 2015
                      • Incumbents and new entrants need to collaborate
                        • Figure 4: Consumer payment app expectations, July 2015
                      • Mobile payments are the next frontier
                        • Figure 5: Attitudes towards payment methods, July 2015
                      • What we think
                      • Issues and Insights

                        • Incumbents and new entrants need to collaborate to innovate
                          • The facts
                            • The implications
                              • For consumers, choice is what matters
                                • The facts
                                  • The implications
                                    • The need to overcome the security barrier
                                      • The facts
                                        • The implications
                                        • The Market – What You Need to Know

                                          • Cashless payments are on the rise
                                            • Developments are concentrated on mobile…
                                              • …but it is not just out with the old and in with the new
                                                • A fully digital economy remains a long way off
                                                • Recent Developments in Payments

                                                  • Cashless payments on the rise
                                                    • Mobile phones are the next payments frontier
                                                      • Phone as contactless
                                                        • Payment apps
                                                          • Incumbents fight to stay relevant
                                                            • Barclays leads the way…
                                                              • …but others are not far behind
                                                                • Payments get social
                                                                  • Rethinking the traditional
                                                                    • Cheques get a digital makeover
                                                                      • Monese helps the traditionally unbanked participate in payments
                                                                        • Fidor lands in the UK
                                                                          • Payments get superpowers
                                                                            • The disruptive potential of blockchain
                                                                              • Going beyond payments
                                                                                • Squirrel
                                                                                  • xWare42
                                                                                    • Ravelin
                                                                                    • Regulatory Development in Payments

                                                                                      • The role of regulation in innovation
                                                                                        • Recent regulatory developments
                                                                                          • EU caps card fees
                                                                                            • Credit card market under review
                                                                                              • Creating a European payments market
                                                                                              • The Consumer – What You Need to Know

                                                                                                • Awareness and usage of alternative payment methods is mixed
                                                                                                  • Progress provides choice
                                                                                                    • Security concerns remain rife
                                                                                                      • Mobile payments are the next frontier
                                                                                                        • Incumbents and new entrants need to collaborate
                                                                                                        • Awareness and Use of Alternative Payment Methods

                                                                                                          • The power of brand aids awareness
                                                                                                            • Figure 6: Consumer awareness of alternative payment methods, July 2015
                                                                                                          • Awareness is split by gender
                                                                                                            • Generation X are most engaged
                                                                                                              • Figure 7: Awareness of alternative payment methods, by generation, July 2015
                                                                                                            • Adoption rate is slow
                                                                                                              • Figure 8: Use of alternative payment methods, July 2015
                                                                                                          • Use of Payment Methods

                                                                                                            • Over a third have used a contactless card within the last six months
                                                                                                              • Figure 9: Consumer use of payment methods within the last six months, July 2015
                                                                                                            • New technologies needed to relaunch cheques
                                                                                                              • Figure 10: Consumer use of payment methods, July 2015
                                                                                                            • For consumers, choice is the best option
                                                                                                              • Figure 11: Number of payment methods used within the last six months, July 2015
                                                                                                            • Mobile wallets could help navigate the payments minefield
                                                                                                            • Security Concerns

                                                                                                              • Consumers reassured by chip and PIN
                                                                                                                  • Figure 12: Consumer security rankings of different payment methods, July 2015
                                                                                                                • Experience of contactless cards does little to allay concerns
                                                                                                                    • Figure 13: Most highly rated payment method in terms of security, by those who have used a contactless card in the last six months, July 2015
                                                                                                                  • Time and biometrics could tip the balance
                                                                                                                  • Mobile Payment Apps

                                                                                                                    • Banks are expected to produce ‘best’ mobile payment apps
                                                                                                                        • Figure 14: Consumer payment app expectations, July 2015
                                                                                                                      • Younger consumers put their faith in tech companies
                                                                                                                          • Figure 15: Consumer expectations of a payment app produced by a tech company, by age, July 2015
                                                                                                                      • Attitudes towards Cash

                                                                                                                        • Consumers rely on cash for security and budgeting purposes
                                                                                                                            • Figure 16: Consumer attitudes towards cash, July 2015
                                                                                                                          • Age and income divide opinion
                                                                                                                          • Barriers to Uptake of Payments Innovation

                                                                                                                            • Majority of consumers see no need to change the way we pay
                                                                                                                                • Figure 17: Consumer attitudes towards factors affecting uptake of new payment methods, July 2015
                                                                                                                              • Concerns over security and acceptance remain major barriers
                                                                                                                                • These concerns slow the rate of adoption, but don’t prevent progress
                                                                                                                                  • Figure 18: Payment methods used within the last six months, by agreement with statements about payment methods, July 2015
                                                                                                                              • Factors Influencing Choice of Payment Method

                                                                                                                                • Convenience is most important factor for consumers
                                                                                                                                    • Figure 19: Consumer attitudes towards factors influencing their choice of payment method, July 2015
                                                                                                                                  • Contactless debit cards could become payment method of choice
                                                                                                                                      • Figure 20: Payment methods used within the last six months, by agreement with the statement “When making a purchase I use whichever payment method is the most convenient at the time”, July 2015
                                                                                                                                    • Reward-driven consumers
                                                                                                                                      • Figure 21: Consumer payment preferences – CHAID – Tree output, July 2015
                                                                                                                                  • Consumer Interest in Smartphone Payments

                                                                                                                                    • Majority uninterested in using smartphone to pay…
                                                                                                                                        • Figure 22: Attitudes towards smartphone payments, July 2015
                                                                                                                                      • …but this could change over time
                                                                                                                                          • Figure 23: Agreement with the statement “I’d like to be able to use a smartphone to pay for purchases in shops, restaurants and other high street stores”, by age, July 2015
                                                                                                                                      • Appendix

                                                                                                                                        • CHAID Analysis Methodology

                                                                                                                                        Companies Covered

                                                                                                                                        To learn more about the companies covered in this report please contact us.

                                                                                                                                        Consumer Payment Preferences - UK - October 2015

                                                                                                                                        £2,195.00 (Excl.Tax)