More than 23 million people in the UK used virtually no cash last year, while notes and coins will account for just 6% of payments in a decade, according to a report.
The findings, from banking body UK Finance, are likely to raise concerns that millions of people could be left behind as the shift to a cashless society accelerates.
However, other data has indicated that cash is making a comeback as a result of the cost of living crisis, with many hard-pressed households turning to notes and coins to help them budget.
UK Finance said debit cards were the most used method in 2021, accounting for 48% of all payments and reflecting the continued growth in popularity of contactless cards.
The number of cash transactions fell by 1.7% last year, although it remained the second most used method, accounting for 15% of payments.
However, the number of people who turned their backs on cash increased in 2021. This could be because some businesses only used cards during the pandemic or stopped accepting cash for a while. There are also indications that some consumers avoided using notes and coins for fear of transmitting Covid.
During 2021, 23.1 million consumers did not use notes or coins, or only used them once a month. This was a big increase compared to the previous year’s 13.7 million consumers who did not use cash. This number has grown rapidly: in 2018 there were 5.4 million people; in 2016 it was 2.9 million. At the same time, 1.1 million consumers primarily used cash for day-to-day purchases, according to 2021 data.
UK Finance said it expected the use of cash to continue to fall. It predicted that by 2031, notes and coins would account for just 6% of all payments made in the UK.
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“Instead of becoming a cashless society over the next decade, the UK will move to an economy where cash is less important than before, but is still valued and preferred by many,” a spokesman said.
The organization acknowledged that some people found physical cash useful for budgeting, adding: “Given the rising cost of living, this may affect the use of cash by the people over the next few months.”
This month the Post Office said its branches handled a record £801 million in personal cash withdrawals in July, an increase of almost 8% on June and 20% on the figure of July 2021.
UK Finance said almost a third of all payments in the UK were made via contactless methods in 2021, up 36% from 2020.
The report also provided insight into the growing popularity of buy now, pay later. Research by UK Finance found that 12% of people used this to buy goods last year. Younger people were more likely to use the controversial form of credit than older people, although the group that used it the most were those between 35 and 44 years old.
Earlier this year it was announced that the Financial Conduct Authority would be given powers to ensure communities across the UK have access to cash and fine banks that fail to do so.
Responding to the findings, Natalie Ceeney, chair of the independent Access to Cash Review, said there was evidence that the use of cash had increased for the first time in several years as the cost of living crisis was getting worse and people were returning to the safety of notes and coins. to help them budget.
He added: “It is now widely recognized that those who rely on cash tend to be older, poorer or more vulnerable, many of whom simply cannot ‘go digital’.”