Britons have been falling out of love with cash over the last few years in favour of digital wallets and contactless payments.

Almost four in 10 UK adults were living largely cashless lives during 2023, a new report from UK Finance suggests.  

The number of cash payments last year fell to six billion, with cash representing just 12 per cent of all 48.1billion payments recorded last year. 

But while many UK adults are now living a largely cashless life, the number of people mainly using cash in 2023 actually rose to 2.6 per cent of the population or 1.5million adults - the first rise since 2019. 

UK Finance attributed this to the cost of living crisis, with some claiming that using physical money helps them to stick to a budget. 

Debit cards are the most popular payment method, accounting for 51 per cent of all payments made in 2023, and almost four in ten payments made in the UK during 2023 were contactless. 

There has also been a mass adoption of digital wallets by Britons, separate data from card issuing platform Marqeta reveals. 

In the last seven days alone, 80 per cent of UK consumers surveyed reported using contactless payments.

And 68 per cent of adults now say they would be comfortable leaving their wallets at home altogether. 

The 6billion cash payments made in 2023 reversed 2022's increase to 6.4billion cash payments. In 2022, cash accounted for 14 per cent of all payments, marking the first rise in cash payments in a decade.

Overall cash remains the second most frequently used payment method in the country, varying slightly by age. 

Around three million people are reliant on cash, according to research from the Financial Conduct Authority.

The FCA found that being in a low-income household - those with an annual household income of less than £15,000 a year - and having low digital capability or access has the strongest association with reliance on cash.

Being digitally excluded, which is measured through an individual having low digital capability or poor digital access, makes an individual more than four times more likely to rely on cash than an individual who is not digitally excluded.

A person in a low-income household is almost three times as likely to rely on cash, while being unemployed makes an individual almost twice as likely to rely on cash.

Adrian Buckle, head of research at UK Finance, said: 'There is a huge amount of choice available to consumers in terms of how they make payments, but we can definitely see the continued popularity of debit cards and contactless. 

'Mobile contactless payments are growing fast and one third of adults are now making these at least once a month, with scope for usage to increase further.

'This doesn't mean we are on our way to becoming a cashless society. Cash is still the second most frequently used method of payment in the UK, although on the whole we are using it less and more people are leading largely cashless lives.

'Over the next decade we forecast that the long run trend of a decline in cash use and growth of certain other payment methods such as cards and Faster Payments, will continue.'

Cash remains vital if systems go down 

A growing reliance on cashless payments could leave customers vulnerable in the future, say experts. 

Last week, a software update from CrowdStrike caused a global IT outage.  

On top of planes being grounded and surgeries being cancelled, banking and payments systems were also taken out. Some customers found they were unable to make card payments in shops or access mobile banking. 

In instances like this, cash could remain an essential lifeline for many if digital payments fail.

John Howells, CEO of cash machine operator Link, said: 'People continue to choose new ways to pay, and cash continues to be used less. But it remains vital for millions of people - even if the data forecasts that cash will represent only six per cent of payments in a decade's time - it's critical if other systems go down as we saw with the outage last week.

'Despite people moving away from cash, £1.6billion a week is still being issued by our network. We remain absolutely committed to making sure people can access cash free of charge, conveniently, on the high street.'

But the digital payments industry is confident that the outage won't impact the uptake of virtual wallets.  

Marcin Glogowski of Marqeta said: 'What we are seeing, is UK consumers increasingly choosing instant, digital financial options that work for them. 

'Rather than consumer confidence being shaken by the recent IT outage, I think we will continue to see higher consumer uptake of new, innovative financial options such as digital banks, embedded finance and earlier access to wage programs.'