Payments Landscape in the UK: Opportunities and Risks to 2021

Payments Landscape in the UK: Opportunities and Risks to 2021


United Kingdom payments market is highly mature - arguably even over-served by its financial institutions. There were more debit cards in issue than individuals in the UK in 2017 by a considerable margin. Access to formal financial services in the UK is easy and mostly free, leading to a population that is highly comfortable with credit and debit cards both in-store and online. Contactless card numbers and usage have also seen strong growth in the past few years, with the vast majority of contactless users in the UK seeing these cards as helpful. The e-commerce market is well developed and mature; with UK consumers ranking the highest in terms of e-commerce spend per capita in comparison to regional peers.

Contactless has now become a mainstream form of payment in the UK. According to UK Finance, there were 110.8 Million contactless cards in circulation in the country as of June 2017 - nearly doubling from 58.7 Million in December 2014. These include 74.2 Million debit and 36.6 Million credit cards. UK consumers made about 2.5 billion transaction worth £23.2bn ($28.6bn) through contactless cards during the first half of 2017. The rise of the contactless spending limit from £20 ($24.70) to £30 ($37) in 2015 has contributed to the high adoption of contactless.

Rising pressure on profitability and growing consumer preference for online banking are driving the concept of digital-only banks in the UK. Atom Bank was the first such bank, offering mobile-only transactions. This business model is used by several other digital-only banks including Starling Bank, Monzo Bank, and Fidor Bank. In November 2017, Italy-based Fineco Bank - a subsidiary of UniCredit - entered the UK market. N26, a Germany-based mobile-only bank, plans to enter the UK during 2018. The proliferation of digital-only banks is likely to accelerate the growth of electronic payments.

The UK e-commerce market is highly mature, with e-commerce spend per capita amounting to $2,800.20, the highest in comparison to its peers: the US ($2,271.70), Canada ($1,252.80), France ($1,266.40), Germany ($965.80), Spain ($495.60), and Italy ($406.10). The UK e-commerce market is heavily dominated by payment cards. Debit and credit card together account for nearly 46% of all online spending. PayPal, which is the third most popular online tool, is also mainly funded by payment cards.

The report Payments Landscape in the UK: Opportunities and Risks to 2021, provide top-level market analysis, information and insights into the British cards and payments industry, including -

  • Current and forecast values for each market in the British cards and payments industry, including debit, credit, and charge cards.
  • Detailed insights into payment instruments including credit transfers, cheques, direct debit, cash, and payment cards. It also, includes an overview of the country's key alternative payment instruments.
  • E-commerce market analysis and payment methods.
  • Analysis of various market drivers and regulations governing the British cards and payments industry.
  • Detailed analysis of strategies adopted by banks and other institutions to market debit, credit, and charge cards.
Companies mentioned in this report: Lloyds Banking Group, Barclays, Royal Bank of Scotland, HSBC, Santander, Tesco Bank, Visa, Mastercard, American Express, and Diners Club

  • To enhance competition and innovation in the payment and banking spectrum, the Open Banking service was launched by the Open Banking Implementation Entity (OBIE). Due to be launched on January 13, 2018, the service allows banks’ customers to give other companies permission to securely access their accounts. Customers can also access a range of services from different types of companies regulated by the Financial Conduct Authority (FCA) or any another European regulator. Initially, the service will cover only personal and small business accounts; other banking products and services such as credit cards and e-wallets will be added throughout the course of 2018 and 2019. OBIE is an entity created by the UK’s nine largest personal and small business current account providers, collectively called CMA9. These are Barclays, Lloyds Banking Group, Santander, Danske, HSBC, RBS, Bank of Ireland, Nationwide, and AIBG. In July 2017, the Bank of England opened up the UK’s RTGS payment system to non-banking payment service providers (PSPs). As a result, non-bank PSPs can apply for a settlement account in the RTGS system. The move will allow non-bank PSPs to offer a wider array of payment services and will lower their dependency on banks for access to payment systems. Non-bank PSPs are expected to start joining the RTGS service from 2018.
  • In order to streamline various operations within the UK financial services industry, a new governing body called UK Finance was set up in July 2017. The body was formed after the merger of the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK, and the UK Cards Association. The new organization represents around 300 firms in the UK offering credit, banking, markets, and payment-related services. The merger is anticipated to lower operational costs and result in a more co-ordinated approach towards issues such as payment fraud, and access to newer technologies.
  • To further enhance the use of payment cards, in July 2017 the UK government announced the removal of surcharges on card payments, effective from January 13, 2018. Currently surcharge fees are commonly levied by merchants in the UK to compensate for merchant service fees. Generally, a surcharge of 2-3% is added on transactions made through payment cards. The removal of surcharges will drive consumers to shop more with payment cards, thus driving payment card transaction volume and value.
Reasons to buy
  • Make strategic business decisions, using top-level historic and forecast market data, related to the British cards and payments industry and each market within it.
  • Understand the key market trends and growth opportunities in the British cards and payments industry.
  • Assess the competitive dynamics in the British cards and payments industry.
  • Gain insights into marketing strategies used for various card types in the UK.
  • Gain insights into key regulations governing the British cards and payments industry.

Market Overview
Executive Summary
Card-based Payments
E-commerce Payments
Alternative Payments
Payments Infrastructure & Regulation

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