How are UK consumers paying for purchases?

Cash or credit or debit or contactless or mobile payment?

Only 50 years ago, consumers used mainly cash to pay for purchases at the point of sale, although some paid with cheques. Credit cards were first introduced into the UK market in the 1960s--a major change that still reverberates today.

How consumers pay for UK purchases has changed over the years. Cash is no longer the overwhelming favourite for payments, a trend that is unlikely to reverse in the future. In 2010, fewer cheques were being written than in years past; less cash was being dispensed at ATMs; and more cards (debit mainly but also credit) were being used at the point of sale.

Just two months ago, the Payments Council released a report saying that cash still accounted for 52% of all UK payments in 2013. So coins and bills are not going away anytime soon.

Although credit cards are in widespread use--an estimated 64% of the UK adult population carries a credit card--there has been tremendous growth in the use of debit cards during the 21st century.

Another trend is the rise of contactless payments--via plastic or a key fob or another device held near the till--increasingly accepted for transportation and other purchases. In fact, competing mobile wallets (also known as digital wallets) are on offer, allowing consumers to use the mobile itself or a mobile phone number to pay. Tesco wants you to use its mobile wallet, as does PayPal, among others.

Individual marketers are also providing apps to facilitate speedy, convenient mobile payment. Starbucks has payment apps for iPhones and Android mobiles.

Watch for more changes in consumer behaviour as the usage of mobile shopping and mobile payments increase in the coming years.

2013 Top UK brands

Superbrands UK recently released its 2013 list of top brands, consumer and business. Here are the top 5 in each list.

Consumer brands:

1. Rolex
2. Apple
3. Microsoft
4. British Airways
5. Coca-Cola

Business brands:

1. Apple
2. British Airways
3. Google
4. Visa
5. Virgin

I was surprised to see Rolex at the very top of the consumer list, above Apple. Yet Rolex is an extremely strong brand, known around the world for quality, styling and status. The company is an active sponsor of many artistic, cultural and athletic activities. It's also received more than 1 million YouTube views, more than 1 million Youku views (China) and additional Douban views (China).

Visa, the no. 4 business brand, is expanding its use of 'contactless payments' (by card), mobile payment options and safe payment alternatives for online shopping. As an example, Visa recently arranged with RBS and NatWest to issue 2m contactless cards for consumers to use in everyday transactions such as buying clothing or groceries. Visa has also partnered with Samsung to have mobile payments functionality preloaded on future Samsung mobiles. For businesses and retailers, it emphasises that 'whether you're making or receiving payments, Visa can help your business make money flow'.

UK consumers choose debit cards over cash

The Payments Council reports that now UK shoppers are using debit cards more often than they use cash. A Council official says:

“Once credit cards were the only convenient way to pay as alternatives to physical cash and cheques, but now people have far more options. Conscious of the need to repay credit borrowed, consumers are increasingly choosing their debit card over credit card.  Contrary to expectation, the possibility of greater financial stress during the recession and beyond has not driven people to rely more heavily on their credit cards.”

In other words, the recession and changing attitudes toward credit have reshaped consumers' payment behaviour.

At the same time, UK consumers are writing fewer cheques each year, possibly as a result of their increased reliance on debit cards.

Now that many consumers are diving into the social media economy with purchases via Facebook credits and other e-payment alternatives, and mobile-based payments are starting to become popular, it's clear that credit/debit/cheque usage will change even more dramatically by 2015.