Cash use falling as more than half of all UK payments now contactless

Cash use falling as more than half of all UK payments now contactless

Data from UK Finance shows more than 2.1 million people still use cash every day

Stephen Little
Thu, 06/04/2020 – 11:44

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Britain is getting closer to becoming a cashless society, with more people than ever before using contactless payments last year.

More than half of all payments were made by card, according to new figures from banking trade body UK Finance.

Card payments accounted for 51% of all payments for the first time in 2019, while the number of contactless payments across debit and credit cards increased by 16% to 8.6 billion.

The number of people who were not using cash or using it just once a month has more than doubled in two years, from 3.4 million in 2017 to 7.4 million in 2019.

UK Finance says the move by consumers towards these payment methods may have helped prepare them for the changes they now face due to the coronavirus pandemic.

However, even though contactless payments are increasing, 2.1 million people are still using cash for their day-to-day shopping, and risk being left behind.

While cash payments fell by 15% to 9.3 billion payments, cash was still the second most frequently-used method, representing a quarter of all payments in 2019.

Impact of coronavirus

This trend will likely continue over the next year due to warnings over the transmission of Covid-19 through the use of physical money.

The contactless limit for card payments was increased by £15 to £45 in April to improve safety by reducing the need for cash to be used in shops.

Caroline Abrahams, charity director of Age UK, says the pandemic should not be used as an excuse to force people onto card payments.

She says: “The number of businesses not accepting cash during the pandemic has skyrocketed, and this must not become a permanent state of affairs. It is essential that proper consideration is given for the many vulnerable people that will be left behind if cash disappears.

“Many older people rely on cash. It helps them budget effectively and is an essential back up if other ways to pay do not work for them. These are the people who need continuing access to a convenient and affordable payment method that they can trust.”

Stephen Jones, chief executive of UK Finance, says: “With consumers already using contactless payments and remote banking more than in previous years, these technological advances have allowed many people to shop and make payments safely from home or in store.

“However, we are fully aware that not all customers are digitally-enabled which is why we are working flat out to ensure people have access to cash and everyday banking services remain available to help the country through these difficult times.”

Concerns

The figures will fuel concerns that the elderly and the vulnerable are being left behind as we move towards a cashless society.

According to the Access to Cash Review, Britain could have zero cash use within the next 15 years.

The report warns that the pace of this change could lead to millions of people being excluded from being able to pay for things in the way they want or have to.

It says the elderly and disabled could lose their independence, rural communities could be threatened and debt could also increase.

The move towards a cashless society also means there is less need for ATMs, making things even worse for those that rely on notes and coins.

Martyn James, of consumer complaints service Resolver, says: “While many of the older people I speak to like aspects of the new technology, I am hearing countless complaints about the pace of change. People are not stupid and they don not respond well when businesses try to tell them that the cashless society is what people want.

“The feeling is very much that card payments are being pushed on the masses because they are more cost-effective for the banks and it means they can cut vital services like branches.”

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DARIUS MCDERMOTT: Covid-19 could be a catalyst for these 4 investment trends

DARIUS MCDERMOTT: Covid-19 could be a catalyst for these 4 investment trends

There is a train of thought that political, economic and social disasters can accelerate existing trends — trends that may otherwise have taken years to take off

Darius McDermott
Wed, 06/03/2020 – 16:15

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Having spoken to fund managers, economists and scientists over the past few months, I believe Covid-19 could be such a catalyst. Here, I look at areas I believe will see permanent change, and the funds investing in them:

1 Healthcare

Healthcare systems worldwide have been under pressure due to an ageing population. I think this area will now see huge investment. There is likely to be more government spending on hospitals and facilities, while social distancing has forced us to think about virtual visits to the doctor, the use of robotics in procedures and surgeries, and smartphones to collect real-time data on our health – all nascent trends that have previously faced barriers to their take-up.

Funds investing in healthcare

Polar Capital Global Healthcare trust is an investment trust I like that talks very nicely to all of these themes. It invests for both growth and innovation across the healthcare sector.

Comgest Growth Europe ex UK and Baillie Gifford Global Discovery are more generalist funds, with very significant exposure to healthcare companies (32% and 42% of their portfolios respectively*).

2 Working from home (WFH)

 As WFH has become the new norm for so many of us, firms that facilitate it – such as Zoom, Microsoft and Alphabet (Google’s owner) – have found their services in extraordinary demand. I suspect usage will persist well beyond the end of lockdown. Not only do these services help people work from home, they could also greatly reduce costs for companies. It is  inefficient to fly employees around the world, for example, when we can conduct productive meetings from the comfort of our homes.

Funds investing in WFH technologies

AXA Framlington Global Technology is again an obvious choice as it invests in many of these areas, as well as others that are too numerous to mention.

Brown Advisory Global Leaders is a more generalist fund that has had Microsoft as its largest holding for many months. And Scottish Mortgage Investment Trust has a great track record of backing exciting growth companies at an early stage – including the likes of Zoom.

3 e-commerce

Social distancing has also accelerated the move to e-commerce. When it comes to food shopping in particular, there has been a dramatic change, with supermarkets seeing online demand increase dramatically.

Many became overwhelmed and it took weeks for them to offer the regular services that existing clients had been used to. I suspect that many customers will continue to do their food shopping online in the future.

The gravitation away from shopping malls, supermarkets and cash payments will likely lead to the world becoming cashless faster. Companies such as Visa, Mastercard and PayPal, and the ecosystem around payment networks, transactions and terminals, should benefit.

4 Funds investing in ecommerce

Smith & Williamson Artificial Intelligence fund invests in companies that have benefited from the need to stay at home, including Ocado, which it believes will be the supplier of choice for those global grocers that do not have an online solution of their own. Rathbone Global Opportunities, on the other hand, is invested in most of the payment networks and solutions mentioned**.

Investing for the next decade

Will short-term reactions to Covid-19 lead to long-lasting changes? The answer will play a big part in determining investment strategies for the next decade. Certainly, those companies whose products and services gained traction during the pandemic will most likely emerge stronger, more profitable, and more embedded in our everyday lives.  

* Source: Fund fact sheets as at 31/3/20 

** Source: Fund fact sheet as at 29/2/20 

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’s views and those of the investment professionals quoted are their own and do not constitute financial advice.

Darius McDermott is managing director at Chelsea Financial Services and FundCalibre.

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UK house prices see largest price fall in 11 years

UK house prices see largest price fall in 11 years

The coronavirus pandemic has caused property prices to tumble

Stephen Little
Wed, 06/03/2020 – 15:10

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UK house prices have fallen the most in 11 years due to the coronavirus outbreak hitting the property market.

Annual house price growth slowed to 1.8% in May – down from 3.7% in April, according to the latest Nationwide House Price Index.

On a monthly basis, house price growth fell by 1.7% after a gain of 0.9% in April, taking the average UK house price to £218,902. This makes it the largest monthly fall since February 2009.

The ban on viewing properties and moving home because of the coronavirus pandemic brought the housing market to a grinding halt in March.

Estate agents, buyers and surveyors were banned from visiting properties, and around £82 billion in house sales were put on hold.

However, the Government has now eased these rules, allowing the housing market to start up again.

Nationwide says the medium-term outlook for the housing market remains highly uncertain, with much depending on the performance of the wider economy.

Robert Gardner, Nationwide’s chief economist, says: “We have already seen a sharp economic contraction as a result of the necessary measures adopted to suppress the spread of the virus.

“However, the raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.

Data from HM Revenue and Customs shows that house purchases were down 53% in April compared with the same month last year.

Early indicators of housing demand have picked up since in-person property viewings were permitted again.

The daily volume of Google searches for the three main property portals, Rightmove, Zoopla and OnTheMarket, has picked up to just 13% below its pre-lockdown level, having been down 50% in April.

Mortgage holiday extension

The Financial Conduct Authority has confirmed the deadline for mortgage holidays has been extended until October 31 for homeowners either coming to the end of a payment holiday or who are yet to request one.

The financial watchdog is also reminding customers they should resume payments if they can.

Other options may include making a proportion of their monthly payment, or temporarily switching to an interest-only mortgage.

Homeowners can also extend the term of their homeloan in order to bring their monthly repayments down.

Economists believe the impact of the lockdown on incomes will continue to weigh on the market for the rest of the year.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, expects property prices to fall 5% by the end of the third quarter.

He says: “The huge size of the blow from Covid-19 to households’ incomes and the deterioration in consumers’ confidence suggests that house prices must drop.

“Relatively few people likely will be forced to sell their homes, given that mortgage payment holidays are easily available and home ownership has declined.”

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‘Slow and steady’ NS&I now outguns rivals with top savings rates

‘Slow and steady’ NS&I now outguns rivals with top savings rates

Treasury-backed savings firm holds its rates while rivals make cuts

Brean Horne
Wed, 06/03/2020 – 12:35

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National Savings & Investments (NS&I) is a much-loved institution but rarely pays savers top rates, though in a surprise turn of events now offers some of the best deals available.

State-backed NS&I typically sets interest on its savings deals to be competitive but not the best available, to avoid putting banks out of business.

But these banks have been cutting interest on their savings rates, while NS&I has not, meaning the much-loved institution now has some of the top deals available.

NS&I Income Bonds are currently the best easy access savings product, paying paying 1.16%.

The company’s Premium Bonds also pay an unbeatable one-year savings rate – at least on paper.

These deals pay an average of 1.4% a year, while even the best one-year bond would only pay 1.3%, from Atom Bank.

However, as Premium Bonds are a form of lottery, savers may get nothing.

Why has this happened?

NS&I delayed plans to cut interest rates at the start of May. It wanted to trim the rate on its Direct Saver account from 1% to 0.7%. 

Rates on its Income Bonds were to be reduced from 1.16% to 0.7% and its Investment Account deals from 0.8% to 0.6%. Premium Bonds rates also faced a cut from 1.4% to 1.3%.

But NS&I decided to hold back on the reductions to help support customers during the coronavirus pandemic. 

In a statement NS&I says: “Planned interest rate reductions on NS&I variable rate products due to be effective on 1 May 2020 will not now be implemented.

“The variable interest rate changes announced on 17 February 2020 will be cancelled and rates will remain unchanged to ensure savers are supported during the coronavirus pandemic.”

Most providers with market-leading rates slashed interest on their accounts following the Bank of England’s decision to reduce the base rate twice this year to 0.1%, its lowest level in history.

The base rate is factored into the interest levels banks pay savers, and cuts to this are almost always passed on in full.

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Can we open a savings account for our grandkids if they live abroad?

Can we open a savings account for our grandkids if they live abroad?

Is it possible to open savings accounts for our two grandsons? They are aged five and two and live in Zimbabwe.

They both have British passports and they are the sons of our British-born daughter.

Anna Bowes
Tue, 06/02/2020 – 17:19

From
PF/Peterborough

It is very hard to open a UK savings account if you live abroad as savings providers want to see proof of a UK address to satisfy their anti-money laundering Know Your Client rules.

If the children have any UK accounts that were opened when/if they ever lived in the UK, you could contribute into these for them. Equally, if their parents set up a Junior Isa (Jisa) before they moved abroad you are allowed to contribute up to the Jisa allowance each year. The annual allowance has just increased, so you could pay in up to £9,000 this tax year.

The other option may be to buy NS&I Premium Bonds on behalf of your grandchildren, as this is allowed, even if they live abroad. That said, you would need to check whether the laws of Zimbabwe allow them to hold Premium Bonds, because some countries forbid it.

You will need to nominate one of the child’s parents or guardians to look after the bonds until the child turns 16 and they may need to send proof of the children’s identity and address.

Finally, you could open an account in your own name and earmark the accounts for your grandchildren in your will. Bear in mind that there may be tax implications by taking this route.

Best current accounts

Switching perks

HSBC Advance

Open a linked 2.75% regular savings account

You must pay in £1,750 a month

Interest

Virgin

2.02% interest on accounts

Rate available on balances up to £1,000

Overdraft

First Direct

Interest-free £250 overdraft

 

Cashback

Santander 123

3% cashback on phone and broadband bills; 2% on gas and electricity bills

£1 monthly fees and must pay in £500
a month

Source: Moneywise June 2020

Anna Bowes is the founder and director of Savings Champion.

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