Are new technologies affecting UK’s most popular payment method?

By Puja Sharma

Payment specialist allpay Limited has revealed the results of its latest consumer survey, providing insight into payment behaviours across UK household bills.

To facilitate the research, allpay continued its relationship with external company TLF Research, which surveyed its online Panel Database. Findings outlined that there is reduced consumer confidence in paying household bills, an increase in Direct Debit uptake and a decline in cash usage across the Social Renters market.

With previous research conducted earlier in 2022, allpay’s results offer insight into post-pandemic payment and pre-cost-of-living crisis behaviours. In September 2022, allpay surveyed 1,001 people from all areas of the UK, with varying household statuses. The results found that although the number of social renters who are fully confident in managing money and paying their household bills has reduced slightly, it has remained high at 74.9%. allpay also found that the number of social renters without a bank account has increased from 1.4% to 2%, highlighting the importance of access to cash. In trend with previous years, cash dependency has decreased however is still prevalent, with an average of 3.6% for each bill payment.

With many businesses rapidly moving towards a cashless society, the persistent rate at which the method remains emphasises its value to many in the social renter’s space. September’s results demonstrated that 1.1% of social rent payments were made utilising cash, with 63.6% of these made at PayPoint, Post Office or Payzone stations. A significant percentage of water bill payments were also made using cash (6.9%), again highlighting the importance of cash payment points such as the Post Office and PayPoint.

The most popular payment type across all household bills remains Direct Debit, with an average take-up of 45.8% across all bills, a substantial 10.9% increase from the early 2022 survey. With as many as 68% of people choosing to pay their internet/phone bills via Direct Debit, and 62.7% using it to pay their electricity bills, it’s clear that Direct Debit usage is on the rise. Debit Card payments remain the second most popular payment method, with an average of 16.2% choosing it as their preferred payment method.

Having seen a rather significant decline of 11.3% since February’s survey and 16.3% since the 2020s, indicating that people are planning out their expenditures more thoroughly now and creating Direct Debits. Continuing the trend from previous surveys, monthly payments continue to be the most popular frequency in all household bills, but there is still a significant number of payees that utilise weekly, fortnightly, and quarterly payments.

Quarterly instalments across the whole household bill set remained favourable for people paying their water bill (14.3%), however in general, the average number of people making bill payments quarterly has decreased to 6.1%. When asked whether the recent increase in the cost of living has changed the way participants make payments, an overwhelming 84.9% of respondents answered ‘no’ and 15.1% answered ‘yes’. Of the 15.1% of people that responded ‘yes’, 37.1% of people claim they are now using payment methods to track their spending accurately, as a way of budgeting.

When asked about how paying household bills could be made easier, 48.1% of respondents outlined how payment reminders (via text or email) would be a significant aid, followed by Budgeting Tools, Self-Service Automated Payments, and Instalment Plans.

The pandemic and cost-of-living crisis have affected the payment behaviours of all consumers across the UK, and a quarter of social renters stated the pandemic changed the way they make regular payments. Consumers also cited making fewer in-person payments and the adoption of new technology as the main causes. The findings point to the rise in Direct Debit usage, despite the increase in social renters without bank accounts. Cash usage has declined but remains significant, and debit card payments remain the second most popular, despite usage declining.

To ensure those who feel less confident in paying their bills, flexibility on methods and frequencies is essential to ensure all payees can make their payments with ease and on time. Enhanced and tailored support to consumers following the cost-of-living increase is a crucial feature which organisations need to focus on in their service delivery over the coming months.