A transformation in the UK retail industry has meant that cash spending is falling while popularity of new payment methods such as PayPal continue to gain ground, according to a study from the British Retail Consortium (BRC).
The Cost of Payment Collection Survey report, which covers almost 10 billion retail payments made during 2012, showed that cash spending by customers dropped almost 10 percent compared to the previous year, as transactions made on debit cards and through relatively new means such as PayPal became more popular.
Although over half of all transactions are still made in cash, 54.4 percent, both the number of physical transactions and the amount spent fell, at 6.7 percent and 9.7 percent respectively. BRC noted that this is the first time in the survey's 13 year history that both measures have simultaneously decreased over one year.
Credit card payments also fell, by 3.4 percent, while debit card spending grew slightly at 3.2 percent.
In contrast there was significant growth in the use of 'alternative' methods of payment however, which have doubled compared to 2011. According to the BRC survey these methods include cheques, which now account for just £63 million worth of transactions, manufacturers money-off coupons, and the "rapid growth" of methods such as PayPal as online sales boom.
In total, these non-cash, non-card payments account for £3.3 billion of sales (compared to £1.5 billion in 2011) through 499 million transactions, around 5 percent of all payments made during the year.
While this remains a relatively small figure compared to the use of cash, the growing popularity of mobile wallets and other innovative mobile payment systems will lead to further growth for non-traditional payment methods, the report concluded.
Helen Dickinson, Director General of the British Retail Consortium, commented: "New ways to pay and new ways to shop are shaping the retail landscape like never before.
"Cash is still the most popular way to pay, but our survey shows how rapidly alternative and emerging methods are gaining ground, with growth more than doubling on the previous year, albeit from a low base."
She added: "These methods will be the 'ones to watch' in the future, and retailers are investing heavily to make sure their customers have choice and convenience in ways to pay, whether in-store, at home or on the move."
Sign up for MIS Asia eNewsletters.