The United Kingdom is facing a rather turbulent economic landscape after a post-Brexit and post-pandemic scenario. Especially in terms of payment systems.

UK consumers in Great Britain, Northern Ireland, Scotland and Wales have been transitioning to electronic payment methods in recent years. As internet speed, server capacity and the creation of virtual wallets improve, the Fintech sector is growing.

From the point of view of the population, 87% make their purchases through electronic stores or applications. That is, going to the market for food, buying a T-shirt of their favorite soccer team or a house for their dog, is done from the comfort of their home.

The e-marketplace alone is valued at USD230 billion. That figure is growing. This includes applications, online stores, delivery services, etc.

The reason for all this is the massive use of smartphones to make payments. 55% of transactions are made through them. 

In this sense, the United Kingdom is a far cry from Europe, where in countries such as Germany, the electronic payments market is estimated at around 88 million dollars.

The use of smartphones is a key factor. Especially to understand that this is a phenomenon more recurrent in consumers between 20 and 35 years of age. They are the fuel that drives this sector.

As such, a large part of consumers use applications and websites to make their payments. In the not too distant future, these will become the preferred method for everyone to access through their SmartPhone.

According to studies by the Bank of England, 63% of the inhabitants of the United Kingdom say that they use electronic methods to make their purchases. This is an important fact to know if you want to open or create a company or business in the British territory. Especially if your desire is to break into the UK in a new way. 

However, there are other payment methods that are still in use. Here are the main payment systems in the UK. 

Payment System Cards

The use of credit and debit cards continues to maintain its trend. Recently the UK's White Paper reported that their use is ahead of cash. On the other hand, it is also almost on a par with electronic payments since, in most cases, at the time of making a payment, you must enter the number of the card you have.

One of the main companies offering services in this sector is PayZone. It is in charge of issuing cards and also of offering for rent or sale equipment to make payments in stores all over the country.

Recently they are also offering digitized credit cards, riding the wave of the transition to electronic ones.

The latter is also due to the fact that during the pandemic people preferred to make their purchases without having contact with second or third parties. Thus, the payment methods are adapted to the current circumstances.

Digital Wallets

As mentioned at the beginning of our article, digital payment systems are becoming the number one trend in the UK and are rapidly displacing conventional payment methods such as cash, checks or bank cards. 

One of the most widely used virtual wallets is Paypal. However, there are now local financial service providers also creating and introducing virtual wallets. Bridging the gap between them and the application of main use among people. 

The latter is a product of the open banking paradigm that prevails in the UK. Fintech is a key sector for the development of the economy and the government has allowed the issuance of EMI licenses for those wishing to enter the sector. Just in 2020, around 38 licenses were approved and there are currently 52 providers.

Cash

Despite the massive use of electronic methods to pay for the consumption of goods and services, cash still has a life within payment systems. However, only 7% of the population uses it. 

The uncertainty generated during and after the pandemic also reduced its use. With the fear of spreading the virus through the transfer of money from one person to another. They prefer to use applications or "plastic money".

Even a currency with great purchasing power such as the pound sterling will see the use of paper money as a thing of the past in a few years. 

Bank Transfers

Since 2008 in the United Kingdom there has been the Faster Payments network. In December 2019 alone, around 227 million bank transfers were made. Such a number is evidently on the rise as the processing time for peer-to-peer transfers is optimized and reduced. This will make life easier for many merchants and users.

Moreover, it is important to note that wire transfers account for 3% of person-to-person payments. Their use will increase as cash loses mobility or issuance. It will be interesting to see how banks can innovate in this service. 

The horizon for now allows us to see a great environment of change and mobility in payment systems in the UK. It is important to ride the trend and be aware of the major innovations happening in financial services. If you want to open a business or company in the UK you should adopt multi-payment systems in order to make life easier for your consumers and your business. 

At the moment the only indisputable truth is that electronic payment methods are here to stay.

Should you need an account in a UK payment system, we are here at MUNDO to help you. Moreover, we can also help you with the EMI licence in the UK to make it your business. 

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