2022
9
UK Consumer Payment Preferences Market Report 2022
2022-02-23T03:20:22+00:00
OX1101311
2195
148200
[{"name":"Banking and Payments","url":"https:\/\/store.mintel.com\/industries\/finance\/financial-services\/banking-payments"}]
Report
en_GB
“Contactless card payments have accelerated due to the pandemic and the increase in transaction limits. Despite cash usage declining significantly, it will continue to play an important role for the…

UK Consumer Payment Preferences Market Report 2022

£ 2,195 (Excl.Tax)

Report Summary

The UK Consumer Payment Preferences report identifies attitudes towards consumers payment methods, different transactions, and payment innovations in the UK. This market report covers the market size, market forecast, market segmentation and industry trends for the Consumer Payment Preferences market in the UK.

Current Market Landscape

While cryptocurrency predominantly remains a niche investment product in the UK, payment products are set to bring bitcoin payments to a wider audience. However, it will take considerable time for cryptocurrency to become a viable payment method for many due to the unfamiliarity of the product and price volatility of the tokens.

  • 25% of consumers are interested in learning about paying in cryptocurrency, rising to 49% of 18-24 year olds.
  • 35% of consumers favour credit and charge cards for in-person transactions over £100.
  • 57% of 18-24 year olds and 52% of 25-34 year olds say the move towards contactless payments is positive.

The high levels of inflation and surging energy prices are likely to lead to many households cutting back on non-essential spending. For the payments market there will be an emphasis on tools to track spending and this could promote digital methods over cash. With uncertainty over rising bills, clear communication on new prices will be required from energy providers to avoid households switching away from direct debits and towards card payments, avoiding expected large sums being removed from their accounts.

Future Market Trends in Consumer Payment Preferences 

Cash continues to play an important role in the payments market and will do for some time to come. However, its decline is set to continue as the convenience, speed and expenditure-tracking benefits of digital payments continue to capture a larger part of the market. The increase to the contactless limit will see contactless card transactions continue to account for the majority of card purchasing moving forwards.

The shift towards digital payment methods provides strong opportunities for NFC-enabled devices that can offer mobile payments. The rising use of smartwatches will promote mobile wallets such as Apple Pay and Google Pay, with the latter set to become integrated into future Fitbit smartwatches. Smart jewellery such as payment rings will also offer convenient payment innovation, with devices such as RingPay not requiring charging.

Read on to discover more details or take a look at all of our UK Financial market research.

Quickly understand

  • The impact of COVID-19 on the payments market.
  • Frequency of use for consumer payment methods.
  • Preferred payment methods for different transactions.
  • Preferences in paying individuals.
  • Important factors when selecting payment options.
  • Consumer attitudes towards payment methods and payment innovations.

Covered in this report

Payment Types: Cash, debit card, credit card, charge card, Buy Now Pay Later (BNPL), digital wallets, bank transfers.

Brands: Klarna, Clearpay, PayPal, Apple Pay, Google Pay, BottlePay, Cash App, Revolut, HSBC, TreeCard, Santander, Amazon, Monzo, Keebo, Sainsbury’s, Block, MoonPay, Mastercard, Zumo,

Expert analysis from a specialist in the field

This report, written by Adrian Reynolds, a leading analyst in the Financial sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Contactless card payments have accelerated due to the pandemic and the increase in transaction limits. Despite cash usage declining significantly, it will continue to play an important role for the foreseeable future with consumers prioritising familiarity. For younger consumers, speed is the key consideration for payments and there is more appetite to learn about innovations including QR payments and cryptocurrency.

Adrian Reynolds
Senior Analyst – Financial Services

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • COVID-19: market context
    • Economic and other assumptions
    • Products covered in this Report
  2. Executive Summary

    • The market
    • Contactless transactions will continue to expand due to speed and convenience
      • Figure 1: Category outlook, 2022-26
    • Debit cards are the most common payment method as cash use declines
      • Figure 2: Payment volumes, by payment type, 2015-20
    • Inflation reaches highest level in 30 years and is set to grow further
      • Figure 3: CPIH and CPI, 12-Month Rates, 2018-21
    • Companies and brands
    • Visa credit cards will still be accepted on Amazon after talks with the retailer
    • BNPL operators look to expand offline with card payments
    • Monzo and Santander enter the BNPL space
    • The consumer
    • Debit cards are the most regular payment method
      • Figure 4: Weekly payment methods, 2021
    • BNPL set to become a more attractive option in-store
      • Figure 5: Preferred payment method by transaction type, 2021
    • Group bill innovations can help build credit history for sharers
      • Figure 6: Paying individuals, friends and family, 2021
    • The focus on familiarity means innovations will take time to gain traction
      • Figure 7: Important factors when choosing payment options, 2021
    • Offer consumers more autonomy over contactless limits
      • Figure 8: Attitudes towards contactless payments, 2021
    • Half of 18-24s are interested in learning about cryptocurrency payments
      • Figure 9: Attitudes towards payment innovations, 2021
  3. Issues and Insights

    • Offer consumers more autonomy over contactless card limits
    • The expansion of BNPL products must be designed to benefit consumers as living costs surge
    • Strong interest in cryptocurrency will not translate into a common payment method for the foreseeable future
  4. Market Background

    • The five-year outlook for consumer payment preferences
      • Figure 10: Category outlook, 2022-26
    • Debit cards are the most common payment method as cash use declines
    • Cash still plays an important role despite the decline in usage
    • There are 98 million debit cards in use in the UK
    • Open Banking can drive the use of faster payments
      • Figure 11: Payment volumes, by payment type, 2015-20
    • New £100 limit is boosting an already surging contactless market
      • Figure 12: Contactless payments, 2015-20
    • Bank branch closures bringing renewed focus on access to cash
    • FCA and PSR focused on limiting the impact of branch closures
    • Post Office agreement looks to boost cash access
      • Figure 13: Cash machine numbers, 2000-21
    • Open Banking usage is accelerating
  5. Market Drivers

    • Inflation reaches highest level in 30 years and is set to grow further
    • Bank of England increases interest rates as inflation soars
    • Pressure to focus on essential items could bring new measures of inflation
      • Figure 14: CPIH and CPI, 12-Month Rates, 2018-21
    • Overdraft borrowing expense could drive deferred payment options
      • Figure 15: Monthly interest rate of UK monetary financial institutions Sterling overdraft for households, 2018-21
    • COVID-19 continues to impact consumer cash usage
      • Figure 16: COVID-19 and cash usage, 2020-22
    • Fuel costs the leading concern as the energy price cap rise approaches
    • Bank of England warns of decline in living standards in 2022
    • Food and drink prices likely to become a bigger issue
      • Figure 17: Factors impacting financial situation, 2021-22
    • Credit card rose post-lockdown but will face competition from BNPL
      • Figure 18: Monthly changes of total sterling net credit card lending to individuals (in sterling), not seasonally adjusted, 2018-21
  6. Regulatory and Legislative Changes

    • National Insurance rate to rise 1.25 percentage points from April 2022
    • FCA and Treasury increase contactless limit to £100
    • PSR states it found no evidence to justify Mastercard and Visa fee rises
    • PSR fines five companies in the prepaid cards market over £33 million
    • Regulation of the BNPL sector expected in 2022 as consultation ends
    • FCA to introduce Consumer Duty
    • FCA delays SCA compliance for ecommerce until March 2022
    • CMA delays introduction of Variable Recurring Payments (VRPs)
    • Cryptocurrency exchanges coming under scrutiny of Advertising Standards Authority …
    • … while bitcoin tipping app BottlePay receives approval from the FCA
    • FCA intervenes at digital payments company Viola Money
    • House of Lords says no to Britcoin
  7. Competitive Strategies

    • Visa credit cards will still be accepted on Amazon after talks with the retailer
    • BNPL operators look to expand offline with card payments
    • Klarna launches BNPL credit card
      • Figure 19: Klarna Card
    • Laybuy and Clearpay release virtual cards to boost in-store usage
    • NatWest introduces paying in cheques on smartphones
    • More companies are expanding into cryptocurrency …
    • … while high-street banks block payments to exchanges to limit consumer risk
    • The increasing range of payment card designs must consider environmental impact
    • Metal cards focus more on design and status
      • Figure 20: Revolut Metal gold-plated card
    • The sustainable payment card space is set to expand
    • Limited edition cards could increase plastic waste
    • Tred and TreeCard look to find a market among eco-conscious cardholders
      • Figure 21: TreeCard wooden Mastercard
  8. Launch Activity and Innovation

    • Monzo enters the BNPL space with Monzo Flex
    • Santander is quick to follow with the launch of Zinia
      • Figure 22: Santander’s Zinia app
    • Amazon partners with Barclays to offer BNPL
    • BNPL provider Laybuy launches app-exclusive shopping
    • Keebo credit card targets “credit invisibles”
    • Checkout-free supermarkets could drive change for in-store payments
      • Figure 23: Sainsbury’s SmartShop Pick & Go
    • Payments companies targeting younger consumers and teenagers
    • Block’s Cash App expands to the 13-17-year-old market
    • Revolut Junior adds Apple Pay functionality
    • Block’s Cash App adopts Lightning Network for free bitcoin payments
    • Cryptocurrency wallet Zumo launches card payments
    • MoonPay and Mastercard expand card payment options for NFTs
    • Growth in smart jewellery could disrupt the payments market
  9. Payment Method Frequencies

    • Cash continues to play important role despite decline
      • Figure 24: Payment method frequency, 2021
    • Debit cards are the most regular payment method
      • Figure 25: Weekly payment methods, 2021
    • Credit and charge cards are used most regularly by older demographics
      • Figure 26: Frequency of using credit/charge cards, by age, 2021
    • Buy now, pay later growth has focused on younger Brits
      • Figure 27: Frequency of using Buy Now Pay Later services, by age, 2021
    • Strong potential to expand mobile wallets among older consumers
      • Figure 28: Frequency of using mobile wallet payments, by age, 2021
  10. Payment Preference by Transaction

    • Debit cards are the preferred option for in-person payments …
    • … except amongst 18-24 year olds
    • BNPL set to become a more attractive option in-store
      • Figure 29: Preferred payment method, by transaction type, 2021
    • Credit cards lead the way for larger online purchases …
    • … although 16-24 year olds prefer online wallets
    • Debit cards are preferred for small online purchases by all except the over-55s
      • Figure 30: Preferred payment method for online transactions under £20, by age, 2021
    • Bank transfers are leading most transactions to individuals
    • Bill splitting tools have become an important part of mobile banking …
    • … and must be expanded to recurring payments to cater for flatshares
    • Group bill innovations can help build credit history for sharers
      • Figure 31: Paying individuals, friends and family, 2021
  11. Important Factors When Choosing Payment Options

    • The focus on familiarity means innovations will take time to gain traction
      • Figure 32: Important factors when choosing payment options, 2021
    • Speed is the leading factor for 18-34 year olds
      • Figure 33: Important factors when choosing payment options, by age, 2021
    • Emphasise speed and purchase protection to satisfy consumers
      • Figure 34: TURF Analysis – Consumer Payment Preferences, November 2021
  12. Attitudes towards Payment Methods

    • Notes in circulation grow despite declining cash use
    • The pandemic has increased the holding of cash for emergencies
    • Stores should be prepared to take cash where possible
      • Figure 35: Attitudes towards cash payments, 2021
    • Offer consumers more autonomy over contactless limits
    • Face masks in-store have made mobile payments more of a hassle
    • The majority of Brits want to set their own contactless limits
      • Figure 36: Attitudes towards contactless payments, 2021
    • Four in five Brits are confident about alerting banks to fraud
    • Half of 18-44s say payment habits have changed permanently during the pandemic
    • Rising bills must be communicated effectively to avoid a shift away from direct debits
      • Figure 37: Attitudes towards payment behaviours, 2021
  13. Attitudes Towards Payment Innovations

    • New payment methods must differentiate to build interest
    • Cryptocurrency will take time to grow as a viable payment option
    • Half of 18-24s are interested in learning about cryptocurrency payments
    • New payment options are on the horizon but banks have avoided the sector
    • Visa highlights global growth of cryptocurrency payments
    • Cryptocurrencies must utilise clean energy to appeal to environmentally-conscious consumers
      • Figure 38: Attitudes towards payment innovations, 2021
    • Strong potential to expand QR code payments among younger Brits
    • QR code usage surged during the pandemic
    • Integrate QR code payments into apps to drive usage among younger Brits
    • Financial stability could drive interest in new payment methods
      • Figure 39: Consumer Payment Preferences – CHAID – Tree output, November 2021
  14. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Consumer research methodology
    • TURF analysis – Methodology
      • Figure 40: Table – TURF Analysis – Consumer Payment Preferences, November 2021
    • CHAID analysis – Methodology
      • Figure 41: Consumer Payment Preferences – CHAID – Table output, November 2021

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

Market

Mintel provides a range of market information, frequently through the category level, including market size and forecasting, complete with market drivers that illustrate the forces that shape a category or market.

Consumer

Mintel’s proprietary consumer research provides our analysts with the attitudinal and behavioral data used to provide valuable insight to topical issues.

Brand/Company

Mintel provides overviews of the top brands and manufacturers, and uses consumer research to explore attitudes and reactions to brands, as well as insight into what will resonate with consumers.

Data

Market reports provide appendices of data to support the research and insight produced. Our databooks* are easily manipulated and downloadable to support your research needs and covers factors from consumer attitudes to market forecasts.

*databooks not available with UK B2B Industry reports.

Below is a sample report, understand what you are buying.

Click to show report
2024 Sample Consumer Cover

Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted. Our reports are available to download in PDF and PPT formats.

Trusted by companies. Big and small.

Want to speak to us directly?

Contact us with your enquiry and our expert global team can help.

Get in touch