UK Plastic Cards: Outlook to 2010

Table of Contents

OVERVIEW

• Catalyst
• Summary

THE UK CREDIT CARD MARKET: A TICKING TIME BOMB?

• The cards market is faced with challenges to revenues and costs
  • Unemployment is growing and will result in further growth in card write-offs
  • Consumers continue to accumulate debt, potentially building up further pain for issuers
  • Recessionary consumer behavior also represents a major challenge to issuers
  • In addition to the immediate threats, the long term challenge from debit shows no signs of letting up
• Datamonitor forecasts a 6.4% fall in the credit card market in 2009
  • 2009 will see a 6.4% drop in the credit card market and there will be a further drop of 1.5% in 2010
• Issuers must manage risk more carefully yet increase card usage if they are to navigate through the downturn
  • Managing defaults through identification and opening dialogue can help relieve pressure on the market
  • Innovations in repayments will help both short term and long term growth
  • Portfolio optimisation must continue to help limit issuer exposure to risk
  • Issuers need to find out why consumers are not using cards
  • Repayment rates can be improved by incentivising consumers
  • Issuers must improve consumer reluctance to use credit cards for small scale transactions
  • Rewards and loyalty programs remain a key way to help driver card usage

APPENDIX

• Supplementary data
  • Datamonitor' s forecast for the credit card market under a neutral scenario
  • Datamonitor' s forecast for the credit card market under an optimistic scenario
  • Datamonitor' s forecast for the credit card market under a pessimistic scenario/
  • Datamonitor' s forecast for the debit card market under a neutral scenario
• Definitions
  • (Untitled sub-section)
• Methodology
  • (Untitled sub-section)
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Historic and forecast view of the credit card market under a neutral scenario
• Table: Across all scenarios the credit card market will see a drop in 2009 - 2010
• Table: Historic and forecast view of the credit card market under a neutral scenario
• Table: Neutral scenario of the historic and forecast credit card market 2006-2010
• Table: Neutral forecast of the consumer credit market, 2006 - 2010
• Table: Optimistic scenario of the historic and forecast credit card market 2006 - 2010
• Table: Optimistic forecast of the consumer credit market 2006 - 2010
• Table: Pessimistic scenario of the historic and forecast credit card market 2006 - 2010
• Table: Pessimistic forecast of the UK consumer credit market, 2006 - 2010
• Table: Neutral scenario of the historic and forecast debit card market 2006 - 2010
• Table: Current relevant publications, 2008-2009
• Table: Future relevant publications, 2009

FIGURES

• Figure: Growth in unemployment points to a sharp increase in write-offs in 2009
• Figure: Bankruptcy orders and IVAs have increased every quarter since Q4 2007, a trend that is likely to continue
• Figure: Despite falling transaction values balances outstanding continue to rise, creating potential problems for the future
• Figure: Repayment rates have not risen above 100% since Q2 07
• Figure: Following a period of decline, overdraft amounts outstanding are increasing
• Figure: Card volumes increased in Q1 09, despite a drop in account numbers
• Figure: Monthly transaction values saw a decline from September 2008 onwards
• Figure: The average value and number of transactions decreased from September 2008 onwards
• Figure: ATM withdrawals follow seasonal patterns and saw an increase in Q4 of 2008
• Figure: The drop in ATM withdrawal values in Q4 08 demonstrates that consumers are moving into recessionary behavior
• Figure: The Consumer Confidence Index declined in 2008, which explains the drop off in spending and card activity
• Figure: House prices have declined sine 2007 and will not stabilize until 2010
• Figure: Debit was growing while credit shrank in Q4 08 and Q1 09
• Figure: The combined fall of POS and ATM transactions will strongly impact the credit card market
• Figure: Credit card transactions will decline in both volume and value at the POS in 2009 and 2010
• Figure: ATM credit card withdrawals will shrink through to 2010
• Figure: Under all scenarios the credit card market will contract in 2009
• Figure: Despite the downturn debit will continue to grow through to 2010 and beyond