New research by Lloyds TSB has looked at the key developments in the UK banking and payments market over the past 60 years as we celebrate the Queen’s Diamond Jubilee.
In 1952, there were just two methods of payment: cash and cheques. When Queen Elizabeth II came to the throne there were no credit or debit cards. Cash machines were yet to be invented and there was no telephone, internet or mobile phone banking.
1952-1990: The Rise of the Cheque
The cheque's popularity increased strongly over the first 40 years of the Queen's reign as the holding of a bank account became widespread and the vast majority of the population had their salary paid directly into it. These trends led to a reduced reliance on cash. As a result, there was a 12-fold increase in the volume of cheques used between 1952 and 1990 from 335 million to 4 billion.
Cheque volumes, however, peaked in 1990. Since then the cheque's use as a payment method of choice has been in decline as consumers and businesses have looked to use more modern, more convenient and quicker methods of payment. As a result, the cheque has been overtaken as our love for plastic and our use of technology has risen manifold.
1990-2012: Plastic Cards Increasingly Take Over
In summary, plastic cards have revolutionised the way that we pay for goods and services. Now, most consumers have a non-cash way to pay for purchases with around 85% of UK adults holding a debit card and approximately 95% with some type of plastic payments card.
Cash Remains King
Despite the transformation in payment methods over the past 60 years, cash is still the most common payment method in volume terms. In 2009 there were still around 21.2 billion payments made in cash, accounting for two-thirds of all payments by volume.
Cash, however, accounts for a much smaller proportion of all payments made by consumers in value terms (23%) and has taken on a niche position in the market. Most cash is used for retail purposes, and secondly for travel and entertainment. Around 75% of cash transactions are for values below £10. The average (mean) value of a cash transaction, at £9.30, is much lower than for other payment mechanisms. (The average value of a personal cheque, for example, is around £400.) Moreover, the proportion of payments made by cash is in slow decline.
Jatin Patel, director of current accounts for Lloyds TSB, said:
"The way in which we pay for goods and services has changed dramatically over the past 60 years. Cheque usage grew rapidly between 1952 and 1990 but has since been in decline as we have increasingly turned to plastic cards. We have also seen great technological change since Queen Elizabeth II came to the throne with the introduction of cash machines and telephone banking. The inventions of both the internet and mobile phones are also transforming banking.
"No doubt we will continue to see substantial changes in the way we make payments over the coming years, as we have seen over the past 60 years."
OTHER KEY FACTS
Cash machines supply 70% of all cash to individuals. The total value of all withdrawals from cash machines reached £186 billion in 2010.
There were more than 63,000 cash machines by the end of 2010.
The first cheque guarantee card was introduced in October 1965, guaranteeing payment of sterling cheques up to a value of £30. This helped to improve the take-up of cheques as a means of payment, which itself led to many more bank accounts being opened. This limit was raised in 1977 to £50 and two additional limits of £100 and £250 were introduced in 1989.
In 1990 cheque volumes hit their peak with 11 million cheques issued each day.
Cheque usage has been in sharp decline since 1990 falling to less than 2.75 million cheques issued each day in 2009, and now comparable to volumes in the mid 1970s.
The decision by many businesses to stop accepting personal cheques, particularly in the retail sector, has been a major factor driving the decline in the use of cheques. Consumers are also using cheques less for regular bill payment, preferring instead to pay by Direct Debit, internet and telephone banking.
KEY EVENTS IN THE PAST 60 YEARS
1966: UK’s first credit card issued
1967: First cash machine in the world installed in Enfield in Greater London
1987: Debit cards introduced
1989: First telephone-only bank introduced
1990: Cashback emerges as a means of acquiring cash
1997: First internet banking service introduced
2004: Chip and PIN rolled out nationally
KEY MILESTONES IN THE PAST 60 YEARS
1993: Half of UK adults are regular users of cash machines
1994: Half of UK adults hold a debit card
1995: UK debit card volumes exceed credit card volumes for the first time
1998: UK debit card payments exceed personal cheques, and account for more than half of all non-cash spending in supermarkets
1999: Half of all UK adults hold a credit card. The average value of a credit card purchase exceeds £50 for the first time
2001: More than half of UK retail spending is on plastic. More than 100 million card payments are made online
2001: The number of cash machine withdrawals exceeds one billion during the year
2001: Debit card expenditure exceeds credit card expenditure for the first time
2002: More than half of all cash acquired by UK adults is acquired through cash machines
2004: UK card expenditure exceeds cash expenditure for the first time