Abstract
This report examines recent downturns in U.K. credit card issuing in terms of
receivables and payment volume, which are unprecedented in this traditionally
fast-growing card market. Credit card growth rates in the U.K. have
historically exceeded those of the U.S., and the decline in growth represents
a sudden departure from these trends. This report highlights comparisons
between the U.S. and U.K. in order to look for clues in the growth and
maturation of the two markets.
Four major U.K. trends are seen as drivers:
- Consumers' choices to avoid use of card-based credit, due to underlying
economic concerns and availability of better-priced loan alternatives.
- Heightened publicity about allegedly deceptive lending terms employed by
issuers.
- Strong growth of debit as a payment alternative
- Disruptions caused by implementation and issuance of EMV (chip and PIN).
The confluence of conditions in the U.K. may or may not be unique, but could
hold lessons for the U.S. issuers. The report discusses strategic and product
development trends being employed by U.K. issuers in this challenging
environment. While U.K. credit card issuing conditions are challenging
conditions. They are not totally different from those that could arise in the
U.S.
Given the strong historical parallels in the U.K. and U.S. card issuing
markets, the U.K. experience offers an interesting case study. Ken Paterson,
Director of the Credit Advisory Service at Mercator Advisory Group and the
author of this report comments that; "While U.S. cardholders have coped
well with parallel market conditions, with no precipitous behavior changes to
date, the U.K. experience raises legitimate questions as to whether U.S.
consumers could follow suit."
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