Two thirds of people planning to travel abroad in the next two years say they would prefer to pay for goods and services abroad with cash, well ahead of preferences for credit and debit card payments. This is despite falling use of cash at home and a particular shift away from physical currency during the COVID-19 pandemic.

COVID-19 prompted an estimated 78% drop in the value of overseas spending in 2020 and will continue to dampen demand in the short and medium term. The pandemic has meant most bureaux de change have closed at least temporarily at times over the last year, resulting in an increased reliance on online channels.

As international travel returns, consumers will favour tried-and-tested methods, which is likely to boost demand for physical foreign currency and physical locations. Innovators will find it particularly hard to cut through, and will need to offer a compelling reason for consumers to try something new.

However, there is an opportunity for providers of debit cards that offer fee-free overseas spending to grow their share of overseas expenditure by appealing to consumer demand for fair interest rates and convenience. This will likely come at the expense of traveller’s cheques – which have long been in decline – and pre-paid cards.

Key issues covered in this Report

  • The impact of COVID-19 on travel money and the value of overseas expenditure and forecast for the next five years.

  • Major market drivers and the competitive strategies of travel money providers during a period of unprecedented market upheaval.

  • Consumers’ preferred payment methods abroad and channels for arranging travel money for future overseas travel.

  • Consumers’ preferred timing of arranging travel money and key factors affecting their choice of payment methods abroad.

  • Consumers’ experiences of travel money problems abroad.

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It wasn't until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions. Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March and with a hoped end to all restrictions by 21 June. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

Notably, the roadmap does not include firm dates for the return of non-essential international travel. This is dependent on the findings of a report by the government’s Global Travel Taskforce, which is due by 12 April. However, the roadmap does state that international travel will not return until 17 May at the earliest.

The UK’s vaccination programme started on 8 December 2020, and with the Pfizer-BioNTech, Moderna and Oxford-AstraZeneca vaccines licensed for use in the UK, the government aims to offer a first dose of the vaccine to 32 million people by mid-April.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook Report. After the fall of 9.9% over the course of 2020, the scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022.

GDP isn’t expected to return to pre-COVID levels until the second quarter of 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster-than-expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in the fourth quarter of 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors. Note, the market forecast included in this Report was prepared before the publication of the OBR’s March 2021 Economic and Fiscal Outlook report and is therefore based on the projections for private consumption presented by the OBR’s November 2020 Economic and Fiscal Outlook central scenario.

Products covered in this Report

This Report looks at the travel money market in the UK. This includes:

  • Foreign currency, exchanged either in the UK or abroad

  • Pre-paid travel or currency cards

  • Traveller’s cheques

  • Use of domestic debit cards abroad for travel money purposes

  • Use of domestic credit cards abroad for travel money purposes.

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