There were 6.4bn payments made using notes and coins, up from 6bn in 2021, and while overall it is still in decline, it remains the second-most popular method of payment in the UK, according to the report from UK Finance.

Half of all payments last year were made using debit cards and the total number of payments, of all methods, rose to 45.7bn, up from 40.4bn in 2021.

A return to cash

The number of payments using cash rose 7% last year but as the overall number of payments by all methods also increased, the share of those made using cash fell to 14% , a 1% fall from 2021 and a fall from 54% 10 years ago.

UK Finance said “growing fears about inflation and the rising cost of living” had meant some people were using cash more as a way of budgeting.

In 2022 21.6m people used cash once a month or not at all, down from 23.1m the previous year. While 0.9m said they mainly used cash, down from 1.1m in 2021 and 2.2m in 2017.

It comes as the Government has recently committed to a new set of rules which mean banks and building societies must ensure people have free access to cash. If this doesn’t happen, such as if a local bank branch is shut without an alternative option put in its place, the Financial Conduct Authority (FCA) now has the authority to issue fines.

Debit cards were the most popular way of paying for things last year, and the volume of payments rose by 18% to just over 23bn payments, from 19.5bn in 2021. Payments made by credit card rose 19% to 3.4bn, from 4.1bn in 2021.

Contactless payments rose, by 30% to 17bn in 2022, and 87% if people used contactless payments at least once a month or more.

Almost a third of adults are now registered for at least one mobile payment service and 86% use a form of remote banking.

The number of Buy Now Pay Later (BNPL) payments remained the same in 2021, at 12% of all payments. Adults aged 25 to 34 used this payment method most, at almost one in five, while 8% of those aged 65 and over used it, a rise from 4% in 2021.

More turn to cash to help with budgeting

Adrian Buckle, head of research at UK Finance, said: “During 2022 we saw increased use of contactless, online banking and mobile payments, although cost-of-living challenges meant that some people preferred to use cash to help with their budgeting.

“Changes to shopping and travel habits, particularly related to the rise of hybrid working, led to a big jump in the volume of transactions made. Debit cards remain the most popular way of paying, with them now accounting for half of all payments made in the UK.”

Graham Mott, director of Strategy at LINK, said: “Over the past ten years, we’ve seen a significant shift with people moving away from cash to card and digital payments.

“Recently, as people manage higher inflation and bills, there has been evidence some people may be using cash to help them budget. While the report shows cash in long-term decline, it also shows that people have chosen to use it more overall in the current tough economic climate.”