Cards account for more than four in every five pounds spent
In 2020, 81 per cent of spending was made by payment cards, up from 78 per cent in 2019, according to the British Retail Consortium (BRC).
Cash accounted for just 15 per cent of total spending in retail last year, down from 20 per cent in 2019.
The findings suggest the Covid pandemic has changed the way consumers shop as well as how they pay.
Brits now make fewer shopping trips, but spend more each time, the BRC said.
The number of transactions fell by 13 per cent between 2019 and 2020 from 19.1bn to 16.7bn, but shoppers spent on average 20 per cent more per transaction.
The average transaction value increased from £20.16 in 2019 to £24.15 in 2020.
The overwhelming trend towards card payments in recent years has meant retailers incurred costs of more than £1bn just to accept these payments from customers in 2020.
Debit cards, which accounted for over half of all transactions (54 per cent) for the first time, have seen transaction fees rise by 22 per cent.
The BRC said these card fees plus mounting costs from Covid, Brexit, global supply chain disruption and rising commodity prices, are putting increased cost pressures on retailers, which could translate to higher prices for consumers.
The group is calling on Parliament to intervene to protect British businesses and consumers from spiralling costs.
Last year, the UK Supreme Court ruled that card firm interchange fees were unlawful, yet the UK’s Payment Systems Regulator five-year strategy delivers nothing to resolve this issue, the BRC said.
Andrew Cregan, payments policy advisor at British Retail Consortium, said: “Despite the general movement to card payments, retailers are being punished through the soaring cost of accepting such payments.
“Parliament needs to urgently intervene in this anti-competitive behaviour by regulating card scheme fees and abolishing interchange fees, both of which ultimately hurt consumers.
“Card firms are abusing their dominant market position, and this must come to an end.”