By Rosie Bajjali, PGDip Strategy & Innovation

The COVID-19 pandemic had a profound effect on consumer payment habits, affecting the payments sector through expediting transitions from cash to digital or electronic payment sources. Let that be through a sharp shift in purchasing towards online platforms, or credit cards being preferred as a method of payment over cash at physical stores; the change is imminent, and principally in the UK.

During the peak of the pandemic and pertaining restrictions throughout the last couple of years, the payments sector reeled from a huge decline in transactions as governments ordered their populations into lockdown. Unable to leave the house, many consumers shifted their purchasing patterns towards the online. Concurrently, cash transactions sharply tailed off, which brought to the fore the importance of digital payment capabilities, with implications that drastically shifted businesses’ payment strategies overnight. To date, this conversion is considered one of the leading factors behind the shift in purchasing trends from the physical cash to the digital payment alternatives, and all in a timely manner.

Due to the pandemic, customers’ and merchants’ with fears of virus transmission sped up the adoption and demand for contactless card payments. This accelerated digital payments pertaining innovations, including payment methods, platforms and even gateways. The adoption of digital payments spread across all business fronts including C2C, B2C, B2B, and even P2P spaces5.

Not only did prominent businesses adopt the trend, but even their cash payment counterparts raced to catch up. Although this collateral change was a cohesive, unanimous act of solidarity, these actions started off on an individual voluntary base, as each store independently invested in new payment infrastructures and refrained from accepting cash.

Although one could argue that at present we are witnessing the end of the COVID era, payment trends acquired during the pandemic seem to be here to stay. In fact, McKinsey described the switch as “a half decade of change in a few months” 1.

A few credible reasons enforcing the adoption of digital payments beyond the realms of the pandemic include changes in consumer preferences, as both customers and merchants got accustomed to the post pandemic norm, and found it more convenient considering the implications related to using cash, including having enough cash, or the regular ATM visits. From a financial perspective, it is easier to track a payment executed through digital payments, than it is by using cash, since transactions are recorded, and can be easily accessed for reference at any time.

What is undoubtedly interesting is that despite the changing trends, the Central Bank of England2, the bank that produces and issues bank notes, released a study in 2020, stating that although there is a gradual decline in cash usage in the economy, the total value of cash in circulation escalated. It seems that although people choose to use alternatives to cash, they appear to hold more cash in hand. The reasons for this may vary, yet it seems that while digital payments are gaining ground, cash holds an indispensable position in many situations.

However, the decreasing reliance on cash makes it unclear how long will this act hold in the long run. Entertaining UK specific statistics, the numbers reveal that a decade earlier, 60%2 of all payment transactions were made using cash, in comparison to only 23%2 in 2019, with a further 8%3 decline in 2020, and a steeper fall following the pandemic.

Despite the fact that life in the UK, as we know it, has relatively gone back to its pre-pandemic course this year, payment habits acquired during that period do not seem to go back to their previous ways. It remains unknown if they haven’t because people are comfortable with the newly acquired trends, or since holding cash on daily basis is no longer a necessity. Nonetheless, further studies are required to determine if the reasons behind the shift are solid enough to influence long term habit adoption in customer payments behavior and their relationship to cash.

After all, what is known to us at this point is that preference regarding cash and cashless payments at present changed as a result of COVID-19. The belief that handling cash presented a serious risk of transmitting the virus was the main reason for the adoption of new payment habits, and moving away from cash. These choices are shaping future payment intentions well after the pandemic is over, more so as government regulations, advancements in technology and customer expectations push towards an updated payment system, especially as fears of a possible future wave of disruption coming again lingers in the air somewhere.


  1. Accelerating winds of change in global payments | McKinsey. [online]
  2. Bank of England (2020). Cash in the time of Covid. [online]
  3. Global Banking Practice The 2021 McKinsey Global Payments Report. (2021). [online]
  4. Wisniewski, T.P., Polasik, M., Kotkowski, R. and Moro, A. (2021). Switching from Cash to Cashless Payments during the COVID-19 Pandemic and Beyond. SSRN Electronic Journal. doi:10.2139/ssrn.3794790.
  5. Three ways COVID-19 is changing the payments industry. [online]