Cash usage plummeted 35 per cent last year as the pandemic drove “some marked changes in payments behaviour”.
Physical cash was used to make 6.1 billion payments in the UK last year, representing just 17 per cent of all transactions, according to new data from UK Finance.
In contrast, contactless card payments accounted for more than a quarter (27 per cent) of all transactions accounting for 9.6 billion transactions last year.
Around 135 million contactless cards are now in circulation, according to the data, covering around 88 per cent of debit and 81 per cent of credit cards in the UK.
The sharp drop in cash payments was in partly due to the UK seeing its first fall in overall payments in six years as the majority of stores remained closed for large portions of the year.
Overall transactions dropped 11 per cent year-on-year to 35.6 billion, with supermarkets accounting for a whopping 41 per cent of all payments throughout 2020.
While 13.7 million people said they used cash once a month or not at all, doubling from the 7.4 million cashless shoppers in 2019, 1.2 million consumers said they still mainly used cash for their day-to-day spending.
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Last year also saw a significant rise in mobile payments, with the number of UK adults registered to make mobile payments rising from 7.4 million in 2019 to 17.4 million, though this was heavily weighted towards 16 to 34-year-olds.
“The increase in the contactless limit to £45 coupled with retailers encouraging its use meant that more than a quarter of all payments in 2020 were made via contactless,” UK Finance chief executive David Postings said.
“The use of cash fell, reflecting the fact that large parts of the economy were closed during the year, although it still remained the second most popular payment method behind debit cards.
“There remains real diversity in the way in which people choose to conduct their day-to-day spending and the banking and finance industry is committed to helping customers make payments in a variety of different ways.”
Loomis UK’s commercial director Simon Wood added: “Demonstrating the continued preference for notes and coins among some consumers, this week our data has shown that cash use is now back to 73 per cent of pre-lockdown levels and as a business, we have had the highest cash collection volumes since the first lockdown.
“With this in mind, we will continue working to ensure that those consumers who still prefer to use cash can still have this choice as our economy continues to open.”