61% of consumers used cash less, or stopped using it entirely, as a result of the COVID-19 pandemic, while just a third expect to increase the amount they use cash once pandemic restrictions are lifted.

COVID-19 has transformed the way we pay. The enormity of the event had a habit-busting effect on consumers who abandoned cash and adopted contactless alternatives. The raising of the contactless limit to £45 led to a surge in use, while the rapid growth in ecommerce accelerated interest in the BNPL space and other online payment options.

As pandemic restrictions ease some consumers will return to pre-pandemic spending behaviours. Cash is likely to see a small uptick in use along with wider transactions – 27% of 18-24s say it is their preferred way to pay in bars and restaurants. However, the pandemic has changed the future direction of payments. Having embraced alternative payment methods, many have found these alternatives provide a much better solution to their needs and have little interest in going back.

Debit cards dominate the payments landscape, having overtaken cash payments in 2017. However, debit card use declined in absolute terms during 2020. By contrast, the number of payments going through the Faster Payments service surged 21%. As the availability of Open Banking payments increases, Faster Payments will take a greater share of payments. Indeed, Faster Payments have the potential to erode the current dominance of debit cards by offering a simpler, cheaper and faster way to send money directly between bank accounts.

• The impact of COVID-19 on the payments market.

• A look at the key innovations and competitive strategies relating to payments.

• Consumer attitudes towards the use of cash.

• Consumers use of, and reasons for using, buy now, pay later to make purchases.

• An analysis of consumer preferences for different payment methods and how this varies by the type of purchase being made.

• Consumer attitudes towards the use of cryptocurrency as a method of payment.

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It wasn't until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions further in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March, and with a hoped end to all restrictions by 21 June, although the growth of the Delta variant means this final lifting of restrictions was delayed. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

Even before the full re-opening of the economy, retail sales and Mintel’s own household finances tracker provided encouraging signs of a rapid return to consumer confidence, and a willingness to spend at least some of the savings that many households were able to build up over lockdown period.

The UK’s vaccination programme started on 8 December 2020. As of 12 July, 87% of the UK’s adult population had received their first dose of the vaccine and 66% had received their second dose.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook Report, but also take into account predictions made by other economic forecasts, including the Bank of England.

After the fall of 9.9% over the course of 2020, the OBR’s scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022. GDP isn’t expected to return to pre-COVID-19 levels until the second quarter of 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster than expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in the fourth quarter of 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

The rapid vaccine rollout and the continued efficacy of the vaccine, however, means that more recent economic forecasts have been significantly more optimistic than the OBR’s March forecast, even given the rise of the Delta variant. We have factored this rise in optimism into our market analysis and scenario forecasts.

This Report explores the way in which consumers pay for goods and services and how this is changing. It examines why consumers choose to pay the way they do and how they feel about the ever-increasing range of ways to pay.

This Report covers consumers’ use and attitudes towards the following:

• Cash

• Debit card

• Credit card

• Buy now, Pay Later

• Digital wallets

• Cryptocurrencies

Money transfers between individuals, remittances or bill payments are not specifically covered within the scope of this Report.

For more detail on specific markets, see the following related Reports:

• Credit cards – UK, 2020

• Car Finance – UK, 2021

• Unsecured Loans – UK, 2021

For more on how consumers feel about money and their finances see:

• Consumer Attitudes towards Debt – UK, 2020

• Managing Household Income – UK, 2020