Cash payments fall as coins and notes give way to cards

Coins and notes will be used in less than half of all transactions within five years after payments made by cash slumped from 73 per cent to 59 per cent over the past decade, according to research yesterday.

The Payments Council said cash was "king no more" after a study of payment trends between 1999 and 2009 found debit card spending was now the most popular - quadrupling to 264bn last year.

Debit card payments are even dwarfing credit card usage, while the cheque continued its decline and at a faster pace than expected.

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The council said it predicted in 1999 that just over one billion cheques would be used by individuals in 2009, but the figure in fact fell to 577 million.

Cheques are proposed to be phased out completely by October 2018, although the council said even if no action was taken, the volumes would more than halve to just 248 million in that time, making up just 0.8 per cent of all personal payments made.

The future instead looks set to be contactless cards, which allow people to pay for goods worth up to 15 without having to use a PIN number.

There are eight million cards in the UK that allow contactless payment, but the council estimates this will grow to 30 million by 2012.

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Mobile phones are likely to be used eventually for payments, with an iPhone application already making this possible.

"By 2050, contactless could well be the norm, but it is unlikely to be on a plastic card and could very well be on a mobile phone," said the report.

While used less, cash remains the most important method of payment for one-off and small transactions.

Yesterday's study showed around 21 billion consumer payments were in cash, but the vast majority, 80 per cent, were below 10.

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Almost a third of money spent on goods and services was made by cash, but only 11 per cent of financial spending used notes and coins.

For regular commitments, such as bills, cash has plummeted from nearly a fifth of all payments by value in 1999 to less than a tenth last year, or from 19 per cent to 9 per cent.

"Paying for things is more secure and more convenient now we don't have to keep replenishing the stock of paper and metal we drag around," said the council.

It added: "By 2050, using cash could well be a minority activity, much more the preserve of informal transactions."

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While cash and cheques are less popular, debit cards have dominated the way Britons pay with more than six billion purchases in 2009.

Since the launch of debit cards in the late 1980s, the council said their use has soared and there were just under 80 million cards in issue last year, up from 46 million in 1999.

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