UK Finance said 34% of adults used mobile contactless payments at least once a month in 2023.
There was a marked increase in the number of people who were registered for mobile contactless payments such as Apple Pay or Google Pay last year, UK Finance said. They represented 42% of the adult population, up from 30% in 2022.
The report said: “UK Finance market research found that younger people are more likely than older people to use one of Apple Pay or Google Pay.
“We expect that, over the next decade, older age groups will start to catch up with younger cohorts in terms of adoption of mobile payments, a pattern that is regularly seen following the introduction of new payment and IT services.”
Some 18.3 billion contactless payments were made in the UK in 2023, a 7% increase compared with 17.0 billion in 2022.
In total, contactless payments represented nearly two-fifths (38%) of all payments made in the UK.
This figure includes both the use of physical cards and cards loaded onto mobile phones or other devices, such as watches, which are then used to initiate contactless payments.
UK Finance said there is scope for the use of mobile contactless payments to continue to increase.
Mobile contactless payments have security features such as biometric authorisation of individual payments and they are not limited by the £100 cap for individual contactless card payments.
UK Finance’s payment markets report, produced with Accenture, also found the volume of cash payments made in the UK during 2023 fell by 7% to 6.0 billion, down from around 6.4 billion in 2022.
The number of cash payments rose during 2022 for the first time in a decade but has since fallen back to 2021 levels, the report said.
Cash accounted for one in eight (12%) of all payments made in the UK during 2023, down from 14% in 2022.
Nearly two in five (39%) UK adults were living “largely cashless” lives last year, the report said.
The number of people mainly using cash in 2023 rose to 2.6% of the population, increasing from 1.7% in 2022.
The report said small upticks in cash payments, against a backdrop of a longer-term decline, “tend to be during periods of economic uncertainty or recession, and reflect the fact that some consumers find cash to be a useful payment method when they are trying to manage a limited budget”.
Increases in cash payments were seen following the financial crisis of 2008/2009 and in 2022 as the rising cost of living led some consumers to attempt to reduce their spending, the report said.
The report added: “As consumer confidence starts to recover, we tend to see cash payment volumes returning to their long‑run downward trend. This appears to be what we saw in 2023.”
While the average consumer experience appears to have been a move away from cash, the report noted: “It is important to note that this is not the experience of all consumers, and for some, the use of cash continues to be an important element of how they manage their finances.”
Remote banking (online, mobile, or telephone) remained popular in 2023, with 87% of adults using at least one form of remote banking last year, the report said.
Mobile banking usage increased last year while online banking using a computer fell, reflecting the fact that some people are now conducting all of their banking via their mobile device, UK Finance said.
It added that if current trends continue, mobile banking is likely to become the most-used remote banking service in the coming years.
Spending data over recent years also suggests there has been a shift towards consumers making more transactions of a lower value, without increasing their overall spend.
Anecdotal evidence suggests this trend is caused by an increased number of shopping trips, the transition to hybrid working, the use of multiple bank accounts and the increased use of buy now pay later (BNPL) services, the report said.
In 2023, the total number of payments made in the UK was 48.1 billion, up from 45.7 billion in 2022.
Over the next decade, debit card payment volumes are expected to continue to increase, driven by the continuing rise of contactless payments, the ongoing growth of online shopping and increasing levels of card acceptance amongst businesses of all sizes, the report said.
The number of cash payments is expected to continue on a declining trend, but the rate of decline is expected to slow as use becomes concentrated amongst people who have a strong preference for cash.
Adrian Buckle, head of research at UK Finance, said: “There is a huge amount of choice available to consumers in terms of how they make payments, but we can definitely see the continued popularity of debit cards and contactless.
“This has been driven both by consumer demand as well as new technologies which help to increase acceptance levels, particularly among small and mobile businesses.
“Mobile contactless payments are growing fast and one-third of adults are now making these at least once a month, with scope for usage to increase further.
“This doesn’t mean we are on our way to becoming a cashless society. Cash is still the second most frequently used method of payment in the UK, although on the whole we are using it less and more people are leading largely cashless lives.”
Sulabh Agarwal, global payments lead at Accenture, said: “Just as credit and debit cards once offered consumers a more seamless option than cash or cheques, contactless and mobile payment methods like digital wallets are quickly gaining market share.
“To preserve and grow their traditional payments revenue streams, UK banks must learn from the successful customer offerings and business models in Latin America and south-east Asia, where these methods are more widely used.”
John Howells, chief executive of ATM and cash access network Link said: “People continue to choose new ways to pay, and cash continues to be used less.
“But it remains vital for millions of people – even if the data forecasts that cash will represent only 6% of payments in a decade’s time – it’s critical if other systems go down as we saw with the outage last week.
“Despite people moving away from cash, £1.6 billion a week is still being issued by our network.”
Rich Wagner, chief executive of Zempler Bank said: “It’s clear that the adoption of and preference for digital payments is happening faster than we’ve seen in the past where these changes have typically taken generations to bed in.”
