Opinion

The Changing Face of Payments

Contactless Payment

The Office of National Statistics has released its figures on retail sales for April and has reported that there was a 9.2% increase in overall sales, and a staggering 70% increase in clothing sales month on month from March. This far exceeded the expected rise of 4.5% predicted by many economists. Often with such statistics, the massive increases are statistical anomalies resulting from such a low starting point due to the Pandemic and lockdown restrictions. However, the ONS reveals that sales were in fact 10% higher than pre-pandemic levels, despite a small dip in online sales. There has clearly been pent-up consumer demand for clothing specifically, and as non-essential shops opened once again on April 12th it appears customers returned in droves.

It is almost a certainty that the figures for May will reveal similar strong sales improvements as theatres, cinemas, and of course, restaurants and pubs re-open fully. Rishi Sunak has estimated that the average family has saved £7,100 over the 12 months of lockdown, fuelling the continual month on month growth. However, the recovery is still fragile, as over 500,000 people remain on furlough, and footfall overall remains down 40% from pre-pandemic levels. The continued uncertainty regarding the Indian variant could pour cold water on any economic recovery, but barring that or any further unseen reversals, the economic outlook is cautiously positive.

April 2021 SpendingThe data released by the ONS mirrors the exclusive data that UTP has gathered from the industry. While it is the case that customers are flocking back to the shops, this economic recovery is not equal across all regions of the UK, and the way in which consumers are paying for products has fundamentally changed. It is no secret that cash usage has been declining as online payments and contactless card transactions become the preferred method of payment, but there has been a tectonic shift owing to the pandemic.

Regional SpendingOther distinct trends in consumer behaviour can be identified. Wales and the North East have seen the biggest increase in both overall spending, and in contactless card payment adoption. In the Welsh case, this could perhaps be explained by the length and severity of their lockdown measures creating even more pent-up demand then elsewhere in the UK. Conversely, Scotland has seen a very minimal increase in sales, but this is perhaps unsurprising considering they have been later in easing lockdown restrictions.

While London has posted a 23% increase in spending, this is perhaps lower than some may have expected. Undoubtedly, the lack of international tourists, students, and the move towards working from home as opposed to commuting to the office have subdued what could have been a massive bounceback in London. Wales and the South West as well as other popular staycation destinations may in fact see even further increases in spending as the small green list of countries published by the government is likely to keep consumers spending in UK holiday hotspots.

The changing nature of consumer payments has also been borne out in the figures collated by UTP. UTP CEO Michael Ault has discussed this in his latest piece published in Global Banking & Finance Review, stating that “When looking at UTP’s data for retail sectors with lower average transaction values, contactless transactions currently account for 80%-90% of all face-to-face transactions. This suggests that cardholders are very comfortable using contactless transactions where possible. Drilling deeper into these figures, contactless was used for 90% of transactions at off-licences and tobacconists in 2021, an increase of 36% from 2018. In supermarkets and grocery stores, contactless comprised 89% of transactions, up a massive 47% from 2018. The biggest jump in contactless usage was at clothing and footwear stores, where contactless was used for 62% of transactions, up 72% from 2018.”

Contactless Card Payments

It is not simply that people are preferring to pay via contactless methods in preference to chip and pin, either. Consumers, especially younger demographics, are increasingly make use of alternative payment methods such as Apple Pay and Google Wallet to make purchases via their phone. Businesses have also demonstrated an appetite for wanting more control over when they receive their funds, which has led to an uptake of interest in our Faster Processing service, allowing businesses to receive their funds the same day, and to set their own end of day. As hospitality venues re-open, and open later, this has proved popular with customers across a range of businesses, including event hosting companies and pubs.

Taken together, it is clear that the payments landscape is shifting dramatically by region, by payment type, and by speed of economic recovery. It is difficult to predict firmly how the industry will look in the future, but there are clear developing trends that seem likely to remain well beyond the Covid crisis. UTP will continue to remain at the forefront of these developments, making use of our exclusive industry data. Check back for further articles.