Cash will account for just 6% of all payments within the next ten years, the banking body UK Finance predicted today.
The forecast came as the latest data showed contactless made up a third of all payments in 2021, while cash continued its slow decline.
Payments in cash fell 1.7% to account for just 15% of all transactions, according to the Payment Markets Report.
And UK Finance expects cash to fall further out of favour in the next decade, as more people switch to contactless and remote banking.
“We expect cash usage to continue to fall and by 2031 cash will account for six per cent of all payments made in the UK,” UK Finance said in the report.
“Rather than the UK becoming a cash-free society over the next decade, the UK will transition to an economy where cash is less important than it once was but remains valued and preferred by many.”
Debit and credit cards were the most popular form of payment in 2021, comprising 22.9 billion of the 40.4 billion transactions that took place in the UK.
Contactless payments grew by 36% compared to 2020, accounting for 58% of consumer card payments and nearly a third of all transactions.
12% of people had used Buy Now Pay Later services last year, which were especially popular with younger consumers.
The most commonly used payment method among businesses was Faster Payments, which overtook Bacs Direct Credit.
This was as the total number of transactions recovered to pre-pandemic levels after a sharp decline in 2020 during Covid-19 lockdowns.