Is the UK Falling Behind When It Comes to Digital Payments?

The way we pay for goods and services has completely changed. Only a few years ago, it was common to carry cash in your wallet, but now almost everything is paid by tapping a card, using your phone or sending money instantly.

Because the UK has always been quite innovative, you’d probably expect us to be leading the world in digital payments. But when you look a little bit closer at the statistics, this isn’t always the case. 

However, most of the UK is embracing the new, digital way of making payments. In this article, we’ll be looking at how the trends have changed, where potential challenges lie and how small businesses can make the most of digital payments within their own businesses.

Digital Payment Adoption in the UK

Paying with cash in any store feels old-fashioned in 2025. The statistics also back this up, showing a massive, fast change in how consumers spend their money.

In 2024, an important milestone was passed: for the first time, cash made up less than 10% of all payments in the UK, according to the latest figures from UK Finance. This shows a huge shift, considering it was almost half of all payments just ten years ago.

Contactless is now the normal way to pay. Data from Barclays in 2024 showed that nearly 95% of all eligible in-store card payments were made using contactless. It’s not just young people driving this change, either. The fastest-growing group using contactless for the fourth year in a row was people over 65. The average person now taps to pay over 230 times a year. Contactless is no longer a choice; it’s the default for daily shopping.

Another key development in digital payments has been the use of mobile phones, which are now becoming our wallets and banks. UK Finance reported that over half of UK adults (57%) used a mobile wallet in 2024, a big jump from the year before. Even more telling is that for the first time, mobile banking apps are now the most common way to access bank accounts, overtaking desktop computers. This shows that people are comfortable not just paying with their devices, but managing their money with them too.

Finally, one area where the UK truly led the world is Open Banking. This rule forced big banks to let third-party companies securely access your bank data and make payments, but only if you give permission. This technology is powering a new way to pay called ‘Pay by Bank’ or Account-to-Account (A2A) payments. This lets you pay a shop directly from your bank, cutting out the need for traditional card companies.

By 2025, there were over 15 million active users of Open Banking in the UK, according to Open Banking Limited (OBL). For businesses, this is huge because these bank-to-bank payments are often cheaper and settle faster than card payments, offering better cash flow.

Current Challenges Around Digital Payments

Although the UK consumer is becoming more digitally savvy, the payment system as a whole is not so forward-thinking. A government report on the Future of Payments noted that the UK is great at innovation, but it lacks a clear, single vision for the future. This lack of direction is where the UK might be losing ground.

The Problem For Small Businesses

While the consumer side is thriving, many Small and Medium-sized Enterprises (SMEs) are struggling to keep up and take full advantage of the digital shift. They face three main challenges:

1. High Fees: Accepting card payments, which is what customers demand, comes with various fees. For a small business with tight margins, these costs can really hurt, making it hard to invest in newer, cheaper systems like Open Banking payments.
2. Late Payments: This is arguably the biggest problem. A 2025 survey by Coface revealed that a staggering 90% of UK businesses are dealing with payment delays from their customers, which is much higher than in countries like France and Germany. Late payments damage cash flow, which means businesses struggle to pay suppliers and grow.
3. Complexity: Setting up new digital payment methods (like mobile wallets, BNPL, or A2A) often means dealing with complicated, old systems. Small businesses want simple, ‘plug-and-play’ solutions, but often end up juggling multiple pieces of technology and dashboards, creating headaches and wasting time.

For an SME, the promise of digital payments—lower costs and faster money—is often blocked by these deep, daily problems.

How UK Businesses Can Catch Up

To stop the UK falling behind with digital payments, we need to solve the business problem. Businesses need to quickly access funds to upgrade their technology, manage their cash flow better and adopt newer payment methods without the stress of high, fixed loan repayments.

This is exactly where flexible funding options come into play. 365 Finance’s revenue-based finance is a smart way to get the capital businesses need to push themselves forward without the rigid structure that comes with most traditional bank loans.

Here’s how revenue-based finance can help solve the digital payment challenge:

1. We offer cash advances of £10,000 to £500,000, with the repayment automatically linked to a small, agreed percentage of the business’s credit and debit card sales.
2. In an industry where 90% of businesses report late payments, revenue-based finance makes sense. Since repayments go up when sales are strong and automatically go down when sales are slow, it protects the business’s working capital. This removes the stress of fixed monthly payments when things are quiet.
3. Businesses can use the funds immediately to buy new payment terminals, integrate cheaper A2A payment technology, or get better software to make payment reconciliation less of a chore. This stops them from using outdated systems that hold them back.

Final Thoughts

Digital payments are becoming the norm globally, but there are signs that the UK is still falling behind when it comes to adoption. 

It’s clear to see that the public has made the digital shift by eliminating cash and making contactless the norm, which is supported by innovations like Open Banking. However, the lack of a clear national payment strategy and the practical, daily financial hurdles faced by small businesses mean the UK is not yet running at full speed like it should be.

The challenge now is to empower businesses to fully embrace and profit from digital payments. They need to move from simply accepting digital payments to optimising their entire operation around them.

Flexible financial products, like revenue-based financing solutions, could be an important part of this solution. By offering capital that moves with their revenue stream, they allow UK SMEs to invest in their future without having impossible loans causing unnecessary stress.

At 365 Finance, we provide revenue-based funding of £10,000 to £500,000 in capital so your customers can thrive all year round. We collaborate with thousands of UK brokerages, providing unsecured finance solutions to small businesses – and market-beating commissions for you as an introducer.

To find out more, please contact a member of our partnerships team or learn more on our website.