Card spending in the UK – Same stats; different message

The latest reports from the UK CA and the BRC are a masterclass in how to spin figures to reflect your agenda. Billy Bambrough examines the reports to see how much the UK is actually spending on cards

Card spending in the UK - Same stats; different message

The latest reports from the UK CA and the BRC are a masterclass in how to spin figures to reflect your agenda. Billy Bambrough examines the reports to see how much the UK is actually spending on cards

However you look at 2013 retail spending figures from either the British Retail Consortium (BRC) or the UK Cards Association (UK CA) cash has declined. The full extent of that decline can be seen in two ways however: the amount of cash transactions and the value of cash transactions.

These interpretations, while both equally valid and necessary to properly understand the way an economy is spending, can tell you very different things.

The headline statistic from BRA is that cash still retains an important though slowly declining role as it now accounts for 52.57% of transactions, down 3.3% year on year. Over half of transactions are in cash? So much for the death of cash then!
Though conversely, the UK CA leads with: “Debit and credit cards used for three in every four pounds spent in shops – up from two in every four just a decade ago,” in its press release. So 75% of money spent on the high street is by card? That certainly sounds like cash is on its way out!

Is cash really King?

On the one hand the BRC feels that credit and debit card handling fees are too high. It argues that because of these high charges the cashless revolution has stalled with only a 3% fall in cash usage over the last year to 53% of transactions.

The BRC claims that the cost for a retailer to process a debit and credit card payment is still excessively high and out of line with the costs that retailers incur for cash transactions. The cost comparison analysis for the main payment methods:

  • Cash accounts for 52.57% of transactions – yet only account for 8.7% of costs;
  • Debit cards account 32.37% of transactions – and account for 36.63% of costs, and
  • Credit and Charge cards account for only 9.28% of transactions – but account for a staggering 48.66% of costs.

Measured as a percentage of sales turnover and sales transactions against the 2012 figures are:
table1

Source: BRC Retail Payments Survey 2013

The BRC’s Payments Survey 2013 covers 60% or £191 billion in retail sales in 2013 and the figures are broadly in line with recently released data from Halifax Bank, which shows that debit cards are now used in 56% of all transactions and the use of notes and coins on the wane.

For retailers, the switch to plastic is not entirely welcome, with the BRC accusing banks of levying “unjustifiably high” charges for handing card payments. The average cost to a retailer to process a credit or charge card payment is now 40.9 pence, up 18.3% in the last five years. Credit and charge cards account for only nine per cent of transactions but almost half (48.7%) of costs, says the retailer lobby group.

The UK CA believes the charges are just and that neither merchants nor customers mind paying the cost. UK CA double down, saying in its press release headline that consumers have “switched from cash.”

The UKCA has interpreted the data to show that just one in four pounds spent in the UK is now cash, based on the value of all transactions, with annual card spending passing £0.5trn. This takes into account huge, one off payments that people are far more likely to put on a card, such as buying a car, where they once might have written a cheque.

The quote from the chair of the UK CA Melanie Johnson shows a clear agenda, suggesting that consumers are no longer carrying cash, despite over 50% of transactions being carried out in cash and more cash being withdrawn from ATMs in the UK than ever before: “Rather than carrying cash, consumers are increasingly opting for their cards instead, not least because of the extra protections available.

The UK CA does not try and hide the data that doesn’t conform to its agenda, ironically flagging up the statistic that the average cash machine withdrawal on a debit card was £69.

The cards group claim that the average debit card was used to make 94 purchases in 2013, with the total amount spent per card amounting to just over £4,000.

This equates to around two card purchases a week. Even if a person has a few debit cards they regularly use for daily spending, the vast majority of people make purchases well into double figures, mostly it seems with all the cash they are continuing to carry and use.

The cashless society has far from arrived, although it is edging closer. One of the biggest barriers seems to be not awareness, or upfront cost of card machines, but the regular cut that card companies continue to take.

It is unfair and unrealistic to expect business big or small in encourage card usage at the expense of their bottom line and the middle men involved in the process need to recognise that widespread usage is worth more than a small percentage of high value transactions.