How spending habits are impacting on the UK retail sector

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The spring sunshine came as a pleasant surprise to British consumers last week, who were out in force and driving double-digit growth for pubs and restaurants nationwide.

This contributed to a 2.5% hike in consumer confidence in the year ending April 2019, despite a slight contraction in high street spending and the procurement of clothes and electronic items. This continues a trend first established last year, when UK household spending reached its highest level since the pre-crisis peak in 2005

This contributed to a 2.5% hike in consumer confidence in the year ending April 2019, despite a slight contraction in high street spending and the procurement of clothes and electronic items. This continues a trend first established last year, when UK household spending reached its highest level since the pre-crisis peak in 2005

This was despite the depreciation of the pound against the backdrop of Brexit, and in this Retail Times Opinion Time article, we’ll explore how the use of credit and contactless payments is impacting the total spend in the UK.

Heralding the rise of credit and debit card payments

Surely, it’s no coincidence that the increase in consumer spending has coincided with advancements in payment technology (and the higher levels of borrowing in the UK)?

Contactless payments have made it easier than ever for people to complete cashless payments in-store, for example, whilst consumer borrowing soared to a record high of £15,400 per household during the third quarter of 2018.

At the same time, notes and coins contributed to just 40% of sales in 2016, whilst this is set to fall to a paltry 21% in seven years’ time. 

So, whilst we’ve already moved beyond “peak cash” and the notion that notes are coins are the pre-eminent payment methods in the UK, debit and credit payments are likely to become even more dominant in the years ahead.

Debit cards are undoubtedly leading this charge, whilst the number of withdrawals made from the country’s cash machines fell to a six-year low as recently as 2016. Now, whilst the introduction of PayPoint ATMs may help to reverse this trend and enable retailers to remove banking charges, it’s fair to assume that the use of cash in the retail sector and on the British high street will eventually become a thing of the past.

Is this increasing consumer spending?

Whilst the use of a debit card and contactless payments may have triggered the biggest change in terms of how people spend their money, it’s arguably credit card usage that has underpinned increased consumer activity levels.

Sites such as Compare the Market have certainly made it easier for people to leverage the most viable credit card offers, whilst even individuals with a poor credit history can now access products that have been tailormade to suit them.

Whilst people remain more likely to own a debit than a credit card, the latter is becoming increasingly accessible and encourages individuals to spend more on each transaction, especially as interest rates often fluctuate at competitive rates.  

More specifically, the average purchase made via credit card is £54.97, and this is a whopping 67% higher than the average debit card payment of £33. Contactless purchases are also higher on a credit card, with an average value of £9.86 as opposed to £9.08.

This trend may be reversed online, but it’s clear that credit card use is driving the offline retail sector and high street purchases nationwide. Similarly, debit and credit card use is rendering cash payments a thing of the past, changing the nature of the UK retail sector beyond all recognition.

(A Retail Times’ collaborative article)