Some 53 per cent of transactions were made using cash last year, falling from 54 per cent in 2012, the report from the British Retail Consortium (BRC) found.
Over the last five years the average transaction value for cash has seen a 17 per cent slide, from £11.43 in 2009 to £9.47 in 2013.
The value of cash taken by retailers as a proportional share to all other payment methods taken has fallen by 14 per cent, from 32.15 per cent to 27.64 per cent, over the five-year period.
Helen Dickinson, director general of the BRC, said: "Customers are taking advantage of new ways to shop and pay.
"The availability of contactless cards, handy express stores and self-service tills as well as online sales has increased the use of debit cards for smaller payments in place of cash.
"This is very much in line with the attention customers have paid to price and value during the recent economic uncertainty as they have sought to minimise payments from their budgets for everyday items."