contactless payment banking

Card purchases account for half of retail transactions as calls for a cashless society grow

Calls to move to a cashless society in order to prevent tax evasion through “cash-in-hand” employment have been shot down by the UK government despite increases in the number of electronic payments.

The newly published Taylor Report into modern working practices calls on Chancellor Philip Hammond to use this autumn’s Budget to unveil measures to clamp down on the “hidden economy”, amid estimates that cash payments cost the Treasury £6.2bn in uncollected tax each year.

The report’s author Matthew Taylor said the government should accredit certain electronic payment platforms to encourage the move to a cashless economy.

He suggested that use of approved methods could be made a condition of migrant workers’ visas, to prevent them from taking cash payments for jobs.

Labour leader Jeremy Corbyn agreed it was “obviously” wrong for cash payments to be used as a means of avoiding tax, and said he would like to see the practice phased out.

But a Downing Street spokeswoman said she was not aware of any work within Government to make Britain a cashless economy.

She added: “We need to make sure that we are at the forefront of all the technology and innovation around making it easier to pay for things.

“But at the same time many people prefer to pay cash-in-hand and that is a legitimate way of paying for goods and services.

“There needs to be a balance so that people who prefer to pay cash-in-hand can continue to do that legitimately, and for people who prefer not to do that we have the technology and innovation to help them to do it.”

The news comes as the British Retail Consortium (BRC) announced that card purchases now account for more than half of retail purchases made in the UK for the first time.

The body said card usage has grown, with debit cards overtaking cash for the first time, as more retailers have invested in payments technology to accept cards and ‘tap and go’ contactless payments.

Many retailers also now accept new payment methods that allow people to use their mobile phone like a wallet, such as Apple Pay, Android Pay and Samsung Pay.

There were 10.3 billion retail transaction made on a debit, credit or charge card in 2016, accounting for 54 per cent of all retail payments.

This five percentage point increase in the share of cards compared with 2015 means that cards now account for more than half of retail transactions for the first time, the BRC said.

The ongoing decrease in the average value of card purchases - from £30.53 in 2013 to £25.40 in 2016 - shows cards are increasingly used for lower-value transactions, partly driven by the wider use of contactless payments, the report said.

In autumn 2015, the transaction limit for a single contactless payment was increased from £20 to £30.

The results from the BRC Payment Survey conducted for 2016 were based on retailers accounting for nearly half of UK retail annual sales turnover, which in 2016 was £351bn.

The report said: “It is the first time that cash has ceased to be the largest payment category, with the share of debit card transactions growing by 4.5 per cent to almost 43 per cent of all retail transactions, overtaking cash transactions which saw a 5 per cent shrinkage in its share of retail purchases to account for 42 per cent.”

Meanwhile, there were signs that people have become less reliant on their credit cards when making retail purchases, the BRC’s survey found.

It said that consumers are borrowing less for day-to-day purchases, in contrast to a broader trend of increasing consumer borrowing in the UK.

Credit card payments for retail purchases shrank by value from £73bn in 2015 to £72bn in 2016.

In May last year annual figures for contactless payment use showed that over three billion contactless transactions were made across Europe in 12 months prior, representing a triple-fold increase over the previous 12-month period. 

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