As economic pressures on households and businesses mount, people are thinking harder about the ways they pay for things they buy and retailers are investing more in preventing losses to card and cash fraud.
But banks continue to levy high charges on retailers and customers for processing payments.
New figures from the British Retail Consortium (BRC), published on the 27th June, suggest cautious customers, increasingly reluctant to spend money they have not got, are turning from credit cards to cash and debit cards to better manage their finances.
The findings show the proportion of transactions using credit cards fell by 12.9 per cent in a year while the proportion involving debit cards rose by 15.8 per cent. Cash was involved in a smaller proportion of transactions than a year earlier but used for a greater proportion of overall retail spending as the average amount spent in each cash transaction increased by 13 per cent to £12.93.
Cash is also the quickest way to pay taking an average 27.2 seconds compared with an average 39.4 seconds for a card payment.
The BRC's annual Cost of Payment Collection Survey includes results from nearly eight billion transactions in store and online. They add up to 60 per cent of total UK retail sales, the largest proportion of UK retailing this survey has covered since it began in 1999.
This year's results compare 2010 with 2009. They examine the methods of payment customers are using, costs imposed on retailers by banks for processing those payments and losses to card and cash fraud.
Retailers are investing to cut the costs they can influence. Fraud losses fell by a huge 37 per cent compared with 2009 as they invested in technology such as the latest secure card readers, new levels of internet security and note checkers at tills.
But the costs retailers cannot control – the charges they have to pay to banks, according to the BRC 'remain illogical and unjustifiably high'. In 2010 retailers taking part in the survey paid out a total of £659 million in fees for payment processing and cash collection.
On average in 2010, each retailer paid 1.7 pence per cash transaction to have the money transported and banked. Despite the efficiency of electronic systems, the average charge for processing a credit card payment was 37.1 pence compared with a debit card average of 9.2 pence.
- Cash is used in 55 per cent of transactions but makes up 11.5 per cent of retailers payment costs.
- Credit cards are used in only 10 per cent of transactions but account for a staggering 44.5 per cent of retailers' costs.
- Debit cards are used in 34 per cent of transactions and make up 37.5 per cent of retailers' costs.
British Retail Consortium Director General Stephen Robertson said: "Hard-pressed customers are switching to cash and debit cards for the reassurance that they can't spend what they haven't got. At the same time, use of credit cards has dropped sharply. Cash remains king – used for more than half of all retail payments.
"In the face of big pressures on household budgets, people are managing their money carefully while retailers are minimising the costs they can influence by investing in anti-fraud technology.
"But unjustifiably-high payment charges are still being taken from retailers. The question is should this money be going into increasing banks' profits or to keeping shop prices down for customers? Reducing the charges banks impose so they genuinely reflect the actual costs involved in processing these transactions is the right answer."
A full copy of the report is available to the media - visit the BRC website for more details on this and other content.