PayPal has claimed that 2016 will mark the “real start of money’s digital switchover in the UK” due to the growing popularity of mobile payments.

In a new report, Money: The Digital Tipping Point,  the eBay-owned online payments firm said that “2016 will be the year when UK shoppers will be able to use their mobile phones to pay for things on the high street with digital money rather than cash, cheques or cards.”

Its findings are based on a commissioned survey conducted by Forrester Consulting on PayPal’s behalf consisting of interviews with ten senior executives from major UK retailers and other businesses, representing a combined 2010 turnover of £85 billion.

PayPal said it has over 14 million active accounts in the UK with over a million of these users sending payments via their mobile. The firm expects to process more than US$3.5 billion in mobile payment volume in 2011 – five times the volume it processed in 2010.

"We’ll see a huge change over the next few years in the way we shop and pay for things,” said Carl Scheible, MD of PayPal UK. “By 2016, you’ll be able to leave your wallet at home and use your mobile as the 21st century digital wallet. Our vision of money is to enable you to pay for something from wherever you are, whatever device you’re on – a PC, mobile phone, tablet, games console and a whole lot more."

The PayPal report follows June’s launch of PizzaExpress’s iPhone app that for the first time allows diners in the UK to pay their bill at their table via PayPal using their smartphone.