Credit and Debit Cards - UK

Published by: Mintel International Group Ltd.

Published: Jul. 1, 2009 - 109 Pages

Table of Contents

Issues in the Market

Key issues

Abbreviations

Market in Brief

Debit card growth negates fall in the number of credit cards in issue

Figure 1: Number of payment cards in issue, by type, 2003-08

Credit cards mainly a source of revolving credit

Figure 2: Gross and net credit card lending, 2004-09 (not seasonally adjusted)

Visa dominates debit cards while MasterCard controls credit cards

Plastic card transaction values rising ahead of volumes

Credit and debit card spending behaviour

Spending will be depressed as consumers focus on debt repayment

APRs rise along with lending criteria and fraudulent activity

Market share - Lloyds Banking Group takes control

Adspend on plastic cards declines

Branch network still important in distribution but future online

Key consumer research findings

Type of credit held

Debit card usage

Credit card usage

Consumers and type of issuer

Internal Market Environment

Key points

APRs continue to rise along with lending criteria

Figure 3: Official end-of-month bank rate and monthly bank and building society overdraft and credit card interest rates, January 2002-June 2009

Shrunken target market increases competition for new business

Faster Payments Service introduced in May 2008

Value of plastic card fraud hits £596 million in 2008

Figure 4: Value of fraudulent transactions, by card type, 2002-08

Identity theft continues to be a problem

Figure 5: Number of reported cases of identity theft, 2000-08

32% rise in credit card complaints to the Ombudsman

Changing regulatory landscape

OFT to conduct an investigation into consumer credit

FSA to tighten control of retail banking activities

New FSA rules replacing the Banking Code

Government White paper aims to curb irresponsible lending

The Payment Service Directive

Consumer Credit Directive

E-Money Directive

Interchange investigations

Broader Market Environment

Key points

Economic conditions likely to hinder spending

Consumer confidence rising from the depths but still low

Figure 6: Monthly consumer confidence index, June 1988-June 2009

Expected financial activity focuses mostly on debt repayment

Figure 7: Savings, investment, borrowing and debt repayment - consumers’ expected activity, quarterly indices, 2002-09 (Q2)

Unemployment - 7.2% and rising?

Figure 8: Working age unemployment rate, seasonally adjusted, year to March 2004-09

Fall in inflation and interest rates has eased pressure on budgets…

Figure 9: Monthly changes in the rate of annual inflation* and Bank of England base rate - UK, June 2002-June 2009

Increasing internet penetration good for the plastic card industry

Figure 10: British internet penetration at home/work/place of study or elsewhere, April 2002-January 2009

Competitive Context

Key points

Decline of the cheque

Figure 11: Volume of cheque* and plastic card** and automated payment^ transactions, millions, 2002-18

Store card market shrinking as retailers issue own-brand credit cards

Total borrowing on overdrafts hits £10 billion in 2008

Figure 12: Total borrowing on overdrafts, 2003-08

A sharp decline in unsecured personal loans

Figure 13: Gross and net consumer credit (excluding credit card lending), June 2004-April 2009 (not seasonally adjusted)

SWOT Analysis

Figure 14: Credit and debit card SWOT analysis, July 2009

Market Size and Forecast

Key points

Credit card debt falls from its mid-2000s peak

Figure 15: Outstanding credit card balances, not seasonally adjusted, 2004-09

Credit cards mainly used as revolving credit

Figure 16: Gross and net credit card lending, 2004-09 (not seasonally adjusted)

Most pay off their balances in full each month

Figure 17: Trends in how balance settled for credit card, 2004-08

Debit card growth negates fall in the number of credit cards in issue

Figure 18: Number of payment cards in issue, by type, 2002-08

Multiple credit card ownership on the decline

Figure 19: Trends in number of credit cards held, 2004-08

Debit cards responsible for 73% of transaction volumes

Figure 20: Volume of UK purchases, by card type, 2002-08

Value of purchases on debit and charge cards continues to rise

Figure 21: Value of UK purchases, by card type, 2002-08

Average purchase values highest for charge cards

Figure 22: Average purchase value in the UK, by card type, 2002-08

Debit cards most frequently used type of card

Figure 23: Card usage frequency for purchases in the UK, by card type, 2002-08

Forecast

Credit Cards - will be used less frequently but for higher value purchases

Figure 24: Forecast of credit cards: Total value and volume of purchases, 2004-14

Debit Cards - average purchase value likely to fall over time

Figure 25: Forecast of debit cards: Total value and volume of purchases, 2004-14

Factors used in the forecast

Segment Performance

Key points

Debit cards

Visa dominates UK debit card market

Figure 26: Debit cards in issue, by scheme, 2002-08

Visa debit card represents over half of all transaction volumes

Figure 27: Debit card transaction volumes, by scheme, 2002-08

Transaction values rising slightly ahead of volume

Figure 28: Debit card transaction value, by scheme, 2002-08

Average transaction values around £50

Figure 29: Debit card average transaction values, by scheme, 2002-08

Cash acquisition on the rise

Figure 30: Debit card cash acquisition, by scheme, 2002-08

Credit and charge cards

MasterCard taking over where Visa took off

Figure 31: Credit and charge cards in issue, by scheme, 2002-08

Overall transaction volumes relatively flat

Figure 32: Credit and charge card transaction volumes, by scheme, 2002-08

Purchase volumes also stagnate

Figure 33: Credit and charge card purchase volumes, by scheme, 2002-08

Value of credit and charge card purchases continues to rise

Figure 34: Credit and charge card purchase values, by scheme, 2002-08

Average purchase values considerably higher for ‘other’ issuers

Figure 35: Average credit and charge card purchase values, by scheme, 2002-08

Cash acquisition on credit and charge cards decreasing

Figure 36: Credit and charge card cash acquisition volumes, by scheme, 2002-08

Figure 37: Credit and charge card cash acquisition value, by scheme, 2002-08

Spending Behaviour

Key points

Highest purchase volumes on food and drink

Figure 38: Credit and debit card purchase* volumes millions, by sector, 2008

Consumers spend twice as much on debit cards

Figure 39: Credit and debit card purchase* values £ millions, by sector, 2008

Average value of purchases falling in most categories

Figure 40: Average value of purchases*, by sector, 2003-08

Overseas - credit cards are still favoured

Figure 41: Summary of credit and debit card transactions outside the UK, annual transaction value and volume, 2008

Market Share

Key points

Debit cards

Lloyds Banking Group leads the current account market

Figure 42: Main or primary current account providers, by main banking groups, March 2009

Credit cards

Lloyds Banking Group grabs top spot from Barclays with HBOS takeover

Figure 43: Credit card provider market share, by brand, April 2009

Companies and Products

Major players

American Express

Barclays/Barclaycard

Capital One

HSBC

Lloyds Banking Group

Marks & Spencer Money

MBNA

Royal Bank of Scotland

Other recent company news

O2 to launch 02 Money

Nationwide introduces new overseas use charges

Egg launches mass-market credit card with a monthly fee

Tesco plans further activity in financial services

Brand Communication and Promotion

Key points

Plastic card adspend down by a fifth in 2008

Figure 44: Plastic card adspend, by category, 2006-08

69% of advertising done via direct mail

Figure 45: Plastic card adspend, by media type, 2006-08

Most major plastic card providers have cut adspend

Figure 46: Top ten plastic card adspend companies, 2006-08

Average monthly adspend peaks at the start and end of the year

Figure 47: Adspend seasonality based on average monthly adspend, 2006-08

CHANNELS TO MARKET

Key points

Over a quarter of consumers apply for credit cards in a branch

Figure 48: How consumers applied for credit cards, 2008

70% of internet users have opened a credit card online…

Figure 49: Method used to switch/open new account, by product type, April 2008

…but debit cards are more likely to be obtained via the branch network

The future of distribution is online

Figure 50: Online purchasing behaviour for current accounts and credit cards, September 2008

THE CONSUMER - TYPE OF CREDIT HELD

Key points

Two in five borrowing using unsecured debt

Figure 51: Forms of credit held with outstanding balances, 2008 and 2009

Some have debt from multiple sources

Figure 52: Cross-ownership of types of outstanding credit, April 2009

Middle-aged and more affluent most likely to have consumer debt

Figure 53: Outstanding credit held, by gender, age and socio-economic group, April 2009

Young and less affluent lack access to most forms of consumer credit

THE CONSUMER - CREDIT CARD BRAND SHARE

Key points

Barclaycard and Lloyds TSB vie for top spot

Figure 54: Credit card ownership and provider share, April 2009

Nearly one in eight hold a credit card with one of the big four banks

Figure 55: Credit card providers, April 2009

Retailers a hit with the ladies while men prefer direct providers

Figure 56: Provider share, by gender and age, April 2009

Wealthy spread their business among multiple providers

Figure 57: Provider share, by socio-economic group and gross annual household income, April 2009

Internet users going direct

Figure 58: Provider share, by technology users, internet usage frequency and web use, April 2009

APPENDIX - THE CONSUMER - TYPES OF CREDIT HELD

Figure 59: Most popular money currently owed, by demographics, April 2009

Figure 60: Next most popular money currently owed, by demographics, April 2009 (continued)

APPENDIX - THE CONSUMER - BRAND SHARE

Figure 61: Provider share, by demographics, April 2009

APPENDIX: RESEARCH METHODOLOGY

Abstract

Although consumers are increasingly turning to plastic cards instead of cash, the credit and debit card markets are heading in two different directions. A more mature market, credit card business has been relatively stagnant for the past several years - the number of credit cards in issue has actually been in decline since 2005. The debit card market, on the other hand, continues to show strong growth - now accounting for nearly three quarters of all plastic card transaction volumes.

The credit crunch has impacted the market for plastic cards in a number of ways, from a tightening in lending criteria, to a shake up among the top banks, to a significant decline consumer confidence, to an increasingly stringent regulatory environment. Consumers have become more cautious with their personal finances, with the primary focus being on paying off debt. As a result the current economic environment greatly favours the continued growth in the use of debit cards.

In addition to the difficulties in the economy the credit and debit card markets also face changes in regard to a rise in fraudulent activity and a steady level of identity theft. While much has been done to improve security, fraudsters have continued to find new ways to get around them. On a brighter note, the plastic card market can also be characterised as a market with a number of exciting innovations that could totally change the way consumer use and view credit and debit cards.

This report explores the key developments taking place in the credit and debit cards markets, ranging from wider demographic and economic trends to industry specific developments. The Market Size section highlights changes and potential for growth in each segment of the market, while the key players and their performance within the marketplace are also included. Finally, consumer research examines trends in plastic card ownership and debt as well as attitudes and behaviour towards credit and debit cards.

Key issues

• The consolidation brought on as a result of the credit crunch has dramatically shaken up market share in retail banking industry.
• A tightening in lending criteria has increased competition for quality customers among providers.
• Advertising on plastic cards has shrunk, along with the potential target market.
• Security continues to be an issue for credit and debit card providers as fraudulent activity and identity theft continues to grow.
• Increased focus on paying off debt has reduced demand for credit.
• The financial crisis has also brought increased scrutiny and regulation on credit and debit card providers.
• Average credit and debt card transaction values are relatively high indicating there is plenty of room to encourage the use of cards for smaller value transaction instead of cash.

About MarketResearch.com
MarketResearch.com is an online aggregator selling over 250,000 market research reports, company profiles and country profiles from over 650 research firms. Our reports will provide you with the critical business and competitive intelligence you need for strategic planning and marketing research. Coverage includes the US, UK, Europe, Asia and global markets.