By 2021, debit cards and contactless payments will eclipse cash, says Payments UK.
Since the start of 2016, contactless use has gathered pace, particularly on the London Underground network.
On the high street, one in six card purchases are now contactless, with Tesco leading the way.
The Payments Council, the predecessor to Payments UK, provoked a storm of protest in 2009 when it proposed a complete withdrawal of cheques by 2018.
Its annual report charts the changing nature of how British households choose to spend their money.
Figures from the UK Cards Association show that in the first six months of 2015 there was £516,500 of fraudulent transactions on contactless cards – the equivalent of 2p for every £100 spent using the technology.