Report: Credit and Debit Cards - UK

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 59: How consumers applied for credit cards, 2008
70% of internet users have opened a credit card online...
- Figure 60: 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 61: 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 62: Forms of credit held with outstanding balances, 2008 and 2009
Some have debt from multiple sources
- Figure 63: Cross-ownership of types of outstanding credit, April 2009
Middle-aged and more affluent most likely to have consumer debt
- Figure 64: 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 65: Credit card ownership and provider share, April 2009
Nearly one in eight hold a credit card with one of the big four banks
- Figure 66: Credit card providers, April 2009
Retailers a hit with the ladies while men prefer direct providers
- Figure 67: Provider share, by gender and age, April 2009
Wealthy spread their business among multiple providers
- Figure 68: Provider share, by socio-economic group and gross annual household income, April 2009
Internet users going direct
- Figure 69: Provider share, by technology users, internet usage frequency and web use, April 2009
Appendix -- The Consumer -- Types of Credit Held
- Figure 85: Most popular money currently owed, by demographics, April 2009
- Figure 86: Next most popular money currently owed, by demographics, April 2009 (continued)
Appendix -- The Consumer -- Brand Share
- Figure 87: Provider share, by demographics, April 2009

Credit and Debit Cards - UK - July 2009

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