Faster payments and remote banking to dominate UK payments by 2031

By Puja Sharma

UK Finance released its Payment Markets Report report revealing the top payment trends of 2021 and predictions for 2031 including:

Faster Payments and other remote banking totalled just over 3.6 billion in 2021. Faster Payments overtook Bacs Direct Credit as the payment method most frequently used by businesses to make payments. Around 43 million adults used cash machines in 2021 but the frequency of use fell, with 64% of them using cash machines at least once a month.

Debit cards were the most used payment method with 19.5 billion payments, accounting for 48% of all payments in the UK. Contactless debit and credit card payment volumes totalled 13.1 billion. While Cash payments decreased by 2% to 6.0 billion, accounting for 15% of payments. Cash remained the second most frequently used payment method in the United Kingdom.

• Cheque volumes continued to fall in 2021 and accounted for less than half a percent of payments made in the country. Over 86% of adults used remote banking. About 65% of adults used online banking and 57% used mobile banking. Bacs Direct Credit volumes fell by 1% to 1.9 billion payments, and Direct Debit volumes rose 2% to 4.6 billion payments.
• About 12% of people used Buy Now Pay Later services. The value of CHAPS payments was £86.3 trillion. Cheques continue to decline to account for just 0.2% of payments, and over 93% of adults will use remote banking. Bacs Direct Credit is expected to decline slightly to 1.8 billion payments. Direct Debit is forecast to grow to 5.7 billion payments.

Despite these findings, Siamac Rezaiezadeh, Director of Product Marketing at GoCardless, believes this report only looks at part of the picture when it comes to the transformative power of Faster Payments.

Siamac Rezaiezadeh, Director of Product Marketing at GoCardless, highlighted the shift away from cards, open banking as a driver for growth, and how VRPs will transform the customer experience.  said: “We think the Report is too conservative in its growth estimates for Faster Payments. Several important considerations haven’t been taken into account.”

“First, there is a strong preference for bank payments in this country, with Direct Debit a long-standing and popular way to pay. Gen Z is also shifting away from credit card usage as new payment methods come on the scene, such as Buy Now Pay Later (BNPL). And this is even before considering the impact of Strong Customer Authentication (SCA), which has created disjointed checkout flows that are likely to put even more payers off cards.” he said.

Second, open banking will be a driver. Momentum is building, with open banking payments currently growing at around 10% month-on-month according to the OBIE. As Variable Recurring Payments (VRPs) come online, we expect the Faster Payments adoption curve to become even steeper as a result of net new payments and payers moving from Direct Debit to VRPs for recurring payments.

“We’ve already spoken to several innovative companies that are excited about the way VRPs will transform their customer experience. One example is Nude, the app for first-time buyers, which has already seen its users embrace one-off Faster Payments to instantly boost their home deposit. They expect substantial uptake of VRPs once they’re available.

Rezaiezadeh further added, “And finally, promoting innovative payment methods which offer an alternative to incumbent forms, such as cards, is a clear part of the PSR’s strategy to create a competitive market. When regulators make something a priority, it carries weight.”

Key highlights

• Faster Payments volumes increased by 23% to 3.6 billion – and outnumbered the number of credit card payments in 2021 (3.4 billion)
• Faster Payments overtook Bacs Direct Credit as the method most frequently used by businesses to make payments in 2021
• Open Banking is predicted to be another ‘potential driver’ of growth for Faster Payments
• Remote banking payments processed via the Faster Payments Service or cleared in-house are forecast to rise to 5.7 billion by 2031 (+58% from 2021 volumes)
• Cash use to decline to the point where 6% of payments are made using cash
• Faster Payments and other remote banking to grow to 5.7 billion payments