The UK cards and payments market is projected to grow from USD 489 billion in 2024 to USD 838.95 billion by 2029, with a compound annual growth rate (CAGR) of 11.4% over the forecast period.
UK people have an entrepreneurial mind, and their economy is among the most diverse in Europe. Currently, the shoppers in the country are more inclined towards purchasing on mobile and online. Also, the “buy now, pay later” option has become increasingly common. Moreover, the digital wallet landscape is expanding with Google Pay and Apple Pay virtually present everywhere across the UK. Overall, global cards dominate this industry, followed by wallets and online banking.
Visa and Mastercard have completely overtaken the market, resulting in undesirable prices and non-price outcomes for customers, merchants, and acquirers. Together, both account for 99 percent of UK credit and debit card payments by value. However, the interim report released by the Payment Systems Regulator (PSR) in 2024 has raised concerns over the poor performance of card schemes and recommended regulatory intervention as a suitable solution.
This can be linked to the fact that more than 80 percent of customers make online purchases. So, this large number of digital buyers is elevating the market share. People have bought more clothes online in the last few years than any other item. Six of ten customers have followed this trend with at least one apparel product in the past 12 months. And, footwear ranked second in this list.
The market is also growing due to higher usage of debit cards against other payment methods. Most UK citizens have two or three debit cards and a staggering 97 per cent hold no less than one of these cards for application in daily spending. Moreover, the market continues to have a strong grip over the payments industry with close to 57 per cent of the country’s transactions being done through cards including debit and credit.
About 35 per cent of small and medium enterprises (SMEs) consider high transaction fees and lengthy times associated with card payments as their main restraint and 25 per cent of SMEs voted for reconciliation-related problems. All these are decreasing the country’s market growth rate.
Weekly SMEs are engaged for about 3.6 hours for manually reconciling payments coupled with the greater expense on transactions have amplified these pain points for the UK industry. Further, the cost and time required for managing cards are also substantial.
Additionally, Visa and Mastercard have no alternative providers. As a result, the total fees charged by these companies to acquirers have surged by over 30 percent in the last 5 years with little or no change in service quality.
These are expected to provide potential opportunities for the UK cards and payments market. The HM Treasury reviewed the new payment architecture and other developments and said it will take at least 5 years at a cost ranging between 10 and 20 billion pounds.
The need for faster, affordable, and more secure payment services, like UPI in India, holds huge prospects for the industry players. Moreover, the market will get further benefits from the entry of big technology organisations into the financial payment wallet services. Apple Pay, Paypal and Google Pay are already present in the industry but are yet to come close to the real and quick digital wallet. Thus, it is believed that the collaboration between tech companies and banks will provide more progress than serving full-fledged banking services themselves.
The e-commerce customers top priority is delivery. And, a large section does not proceed with payment just because of the non-availability of preferred delivery provider, hindering the industry’s progress. This accounts for a significant 41 percent of digital shopping carts. Besides this, they also have reserved choices regarding their product delivery with most favouring postal service instead of robot or drone delivery. Hence, this indirectly affects the expansion of the UK cards and payments market.
The poor performance of the UK’s economy is also affecting the UK cards and payments market. Their economy just came out of recession but is still struggling to advance further. This is reflected in the decline of average card spending by 8.6 per cent on a month-on-month basis which is equal to 775 pounds.
The debit cards segment accounts for the maximum share of the UK cards and payments market. Its extensive use and the expanding e-commerce sector are increasing the segment’s market size. Also, the dependence on Mastercard and Visa, with no legal change or amendment in the present payment structure, fuelled the debit card industry. Furthermore, the growth of contactless payment across different use cases has also influenced the expansion of debit cards. The market saw 75 percent of overall debit card transactions were contactless payments higher than those of credit cards, i.e., 63 percent. When compared to February 2023, the industry witnessed an 8.1 percent surge in the number of this type of contactless transactions in February 2024. Apart from this, there were around 102 million debit cards active in the system in the country with 94 million being contactless.
The POS segment is projected to grow at a faster rate during the forecast period for the UK cards and payments market. This can be attributed to the rising adoption of mobile POS and contactless payment systems. The key market players in this segment are Apple Pay, Google Pay, and Fitbit Pay. According to a study, the UK held more than 2.3 million POS terminals in 2022. Moreover, it is anticipated that the volume of customers will reach 20.46 million by 2028. In addition, it is quickly advancing towards a cashless economy, which is believed to elevate the application of budget-friendly Mpos and payment wallet terminals. Besides this, the adoption of POS software is likely to increase among small and medium enterprises because tablet and mobile-based POS terminals are less costly. However, with the proliferation of contactless payments and other digital methods will decrease the growth rate of the ATM segment.
The direct debit segment is estimated to drive forward at a higher pace during the projection period for the UK cards and payments market. Better access, ease of use, macro-economic trends, open banking and PSD2, increased online shopping, improved customer experience and government support for digital payments are all pushing the segment’s market share.
In addition, third-party providers have commenced the facility of direct debit for SMEs, which were previously constrained by the bond and revenue requirements set by banks, Companies like GoCardless offer an automated method for payment collection via an app for business billing or CRM software or by creating their incorporation with inhouse REST API are moving the market forward.
The UK cards and payments market is believed to steadily propel further in the coming years. This is due to the dominance of debit and credit cards. The buyers utilised debit cards more frequently than any other payment method, boosting the industry’s market size. In February 2024, approximately 2.06 billion debit card transactions were recorded a 6.7 per cent growth than February 2023 and overall expenditure stood at 60.9 billion pounds i.e. 0.5 per cent greater. However, remedies are required to solve the lack of competitive constraints. This includes the need for more detailed financial reporting from Visa and Mastercard.
Frequently Asked Questions
The major types of payment cards used in the UK include debit cards, credit cards, prepaid cards, and charge cards. Debit cards are the most commonly used, followed by credit cards.
The Financial Conduct Authority (FCA) is the primary regulatory body overseeing the cards and payments industry in the UK, ensuring compliance with financial laws and consumer protection standards.
Businesses in the UK are increasingly adopting digital payment solutions, investing in secure online payment gateways, and offering various payment options like Apple Pay and Google Pay to meet consumer demand for convenience.
Future trends in the UK cards and payments market include the continued growth of contactless and mobile payments, increased use of cryptocurrencies, advancements in payment security technologies, and a shift towards more personalized and seamless payment experiences.
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