Credit and Debit Cards - UK - July 2009

Abstract

About this report

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.