Sizing and Forecasting the UK Plastic Card market

Published by: Datamonitor

Published: Oct. 26, 2009 - 65 Pages

Table of Contents

Overview

Catalyst

Summary

UK Plastic Card Market in Review and Future Outlook

Cards grew by a CAGR of 10.0% from 2004 to 2008, but growth will be weaker to 2013

Economic indicators give mixed indications for the future of the UK cards market

Inflation is no longer a worry for the cards market

Inflation may be easing, but unemployment continues to rise

Write-offs continue to be a problem for cards, a problem made worse by unemployment

Due to the recession consumer behavior with cards is turning negative for issuers

Both balances outstanding and transaction values are showing a decline

While dropping balances outstanding, remain surprisingly robust despite the downturn

Consumers are also using alternative forms of credit to help make ends meet

Changes in overdraft balances tend to follow similar patterns to changes in credit card outstandings

In line with long term trends, balance transfers are decreasing

Market Statistics and Key Trends

UK cards are growing as a share of the total payments market

The value of all card transactions is rising

The total number of cards in issue remains flat, with only debit showing growth

The decline in private label cards may be stabilizing

The number of credit card holders is falling

The variety of cards by type is polarizing into more premium and standard cards

Despite static card numbers, transactions are growing with over 10.1 billion in 2008

Transaction values are growing as a result of the growth of debit

Charge cards hold the highest average transaction value and shows signs of continuing growth

Purchases account for 66.3% of all UK card transactions

Debit cards showed the highest rate of growth in transaction value by type between 2004 and 2008

Credit transactions are dominated by purchases

Charge cards are seeing growth in transaction values, driven primarily by business use

Card scheme market shares have been volatile over the past five years

MasterCard now leads the credit card market

The charge card market has seen American Express' historic lead solidified into a dominant position

The increase in POS terminals have helped drive the growth in transaction volumes

The Independent sector continues to drive growth in ATM's

The number of fraudulent transactions continues to rise

The successful implementation of chip and pin has led to an increase in card-not-present fraud

The value of CNP and counterfeit card fraud continues to rise, driving up overall fraud

Forecasting the UK Payment Card Market

Despite the recession the UK cards market will continue to grow through to 2013

Datamonitor forecasts annual growth in the value of payment card transactions of 2.4% to 2013

Datamonitor's forecasting model assesses the relationship of macroeconomic factors with respect to consumer credit products

Datamonitor bases its neutral view on forecasts provided by the Treasury

The credit card market is likely to remain flat through to 2013

Datamonitor forecasts annual growth in the credit card market of 1.1% to 2013

Under an optimistic scenario Datamonitor forecasts an annual growth of 3.1%

Under a pessimistic view of future economic performance, Datamonitor forecasts an annul growth of -1.2%

Debit cards will see the most positive levels of growth over the next five years

Datamonitor forecasts annual growth in the debit card market of 2.9% to 2013

The charge card market will remain flat through to 2013

Datamonitor forecasts that the charge card market will see marginal annual growth of 1.1% to 2013

Private label cards will decline through to 2013, but at a slower rate than in the past

Datamonitor forecasts that the private label card market will see an annual decline of -5.7% to 2013

APPENDIX

Definitions

AAGR

APACS

Average transaction value

Balances outstanding

Bank of England base rate

CAGR

Charge card

Credit card

Debit card

EMV

Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions

Interchange

Non-standard

OFT

Methodology

Primary research

Secondary research

Forecast Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Forecast UK plastic cards market 2009-13

Table 2: Datamonitor's forecast of transaction values for the UK plastic card market, 2009-13

Table 3: Datamonitor's neutral scenario forecast of the total UK card market 2009-13

Table 4: Forecast performance of the UK consumer credit market drivers under the neutral scenario, 2009-13

Table 5: Datamonitor's five year forecast of the credit card market under a neutral scenario, 2009-13

Table 6: Market drivers for the UK credit card market under Datamonitor's forecast scenario, 2004-13

Table 7: Datamonitor's five year forecast of the credit card market under an Optimistic scenario, 2009-13

Table 8: Market drivers for the UK credit card market under an optimistic scenario, 2004-13

Table 9: Forecast performance of the UK consumer credit market drivers under an optimistic scenario 2009-13

Table 10: Datamonitor's five year forecast of the credit card market under a pessimistic scenario, 2009-13

Table 11: Market drivers for the UK credit card market under a pessimistic scenario, 2004-13

Table 12: Forecast performance of the UK consumer credit market drivers under a pessimistic scenario 2009-13

Table 13: Datamonitor's five year forecast of the debit card market, 2009-13

Table 14: Market drivers for the UK debit card market under a neutral scenario, 2004-13

Table 15: Datamonitor's five year forecast of the UK charge card market, 2009-13

Table 16: Market drivers for the UK charge card market under Datamonitor's forecasting scenario 2004-13

Table 17: Datamonitor's five year forecast of the UK private label market, 2009-13

Table 18: Market drivers for the UK private label card market under Datamonitor's forecasting scenario 2004-13

Table 19: Current relevant publications, 2008-09

Table 20: Future relevant publications, 2009

List of Figures

Figure 1: Following a CAGR of 10.0% from 2004-08, growth will slow to a CAGR of 2.5% from 2009 to 2013

Figure 2: While a concern last year, inflation has dropped, while deflation is now a potential risk

Figure 3: Despite predictions card write-offs have not risen as sharply as unemployment

Figure 4: The index of write-offs, insolvency, and unemployment suggests probable growth in write-offs

Figure 5: Although momentarily stabilizing, the value of card write-offs has grown over the past 10 years

Figure 6: Both balances and transaction values are declining compared to their position the previous year

Figure 7: 2009 transaction value, continue to fall below the previous year following the collapse of Lehman

Figure 8: Transaction values have seen a sustained decline since December 2009

Figure 9: Despite some seasonal fluctuations, quarterly outstanding balances have remained broadly stable

Figure 10: Hard pressed consumers are turning to other forms of credit such as overdrafts

Figure 11: Quarter on quarter growth in overdrafts and credit card outstandings show a strong correlation

Figure 12: Monthly balance transfers are showing long term decline

Figure 13: The value of balance transfers have dropped by 52% between Q1 2006 and Q2 2009

Figure 14: Plastic cards have grown to a 6.5% share of the total UK payments market

Figure 15: The value of card transaction grew by a CAGR of 9.9% between 2004 to 2008

Figure 16: The total number of cards in the market has grown due to the growth of debit

Figure 17: The private label card market has declined 33% since 2004, but the rate of decline is slowing

Figure 18: The gap between debit and credit card holdings has grown since 2005

Figure 19: The share of platinum and co-branded cards has grown while affinity and gold cards has declined

Figure 20: There were over 10.1 billion card transactions in 2008, compared to 8.0 billion in 2004

Figure 21: The bulk of transaction growth per card is from debit cards which had an AAGR of 4.4% from 2004-08

Figure 22: The total value of all transaction had a CAGR of 9.9% between 2004 and 2008

Figure 23: Charge cards hold the highest average transaction value at £117.86 in 2008

Figure 24: Charge cards also hold by far the highest turnover per card at £7,505 in 2008

Figure 25: Debit card turnover per adult in the population is strongly led by debit at £8,661 in 2008

Figure 26: UK purchases continue to constitute the bulk of all UK card transactions

Figure 27: Debit card transaction values had a CAGR of 13.1% between 2004 and 2008

Figure 28: The credit market remains flat, and has had a CAGR of only 1.0% from 2004-08

Figure 29: Charge cards have seen the highest growth by transaction values with a CAGR of 13.9%

Figure 30: Visa has successfully grown its debit card market share to nearly two thirds of the sector

Figure 31: MasterCard has successfully grown its credit card positioning to 58.1% of the market

Figure 32: The charge card market remains dominated by American Express with a 50.9% share

Figure 33: The number of POS terminals continues to rise, growing by nearly a fifth since 2004

Figure 34: ATM numbers are also rising, yet 2008 saw a slight drop in the number of independent machines

Figure 35: Despite the introduction of EMV in 2006, instances of card fraud continue to grow

Figure 36: Card not present fraud and counterfeit cards are the only forms of fraud seeing growth

Figure 37: Following from a 15.4% decline, the value of card fraud has grown 42.8% between 2006 and 2008

Figure 38: The total UK card market will see growth in transaction values through to 2013

Abstract

• Includes UK market sizing from 2004-2008, with metrics on card numbers, the number and value of transactions, POS, ATMs, fraud and outstandings
• Full range of five year forecasts covering the credit, debit, private label and charge card markets under a range of potential economic scenarios
• The number of cards, number of transactions and value of transactions are forecast to 2013. These are also presented by card type.
• This brief also contains macroeconomic data on the major issues affecting the card market and what they indicate for the future.

• Understand how the UK plastic card market has developed over the last five years, and learn what shape the market will take in the future
• Gain a deeper understanding of what impact the recession is having on the cards market today, and what impact it will have in the future
• Plan for the future effectively with Datamonitor's range of forecasts under neutral, optimistic, and pessimistic scenarios

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