Table of Contents
Introduction and Abbreviations
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- The bigger picture
- Consumer insight
- Key sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
Executive Summary
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- Number of cards escalate
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- Figure 1: Growth in the number of credit and debit cards, 1995-2003
- The market’s value continues to expand
- Trends in transaction types
- Being in debt is now a fact of life for many people
- Putting it all into context
- Four debit card schemes operating in the UK
- Issuers have experienced some contraction in the market
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- Figure 2: Estimated market shares of the main debit card issuers, 2004
- Credit card scheme providers
- Competition between credit card companies is rife
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- Figure 3: Estimated volume share of the credit card market by the main card issuer groups, May 2004
- Credit cards mostly sold via direct routes to market
- Debit card distribution linked to current accounts
- New media is making inroads
- Credit cards represent the biggest area of finance sector adspend
- Direct mail used extensively
- Limited debit card adspend
- Product penetration
- Huge choice available
- Multiple card ownership
- Switching fever
- Payment patterns…
- …vary considerably with age
- The market outlook for plastic cards
- Nearing saturation?
Market Context
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- Debit cards may not be ‘sexy’, but they are popular
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- Figure 4: The role of credit and debit cards in British society, 2004
- A flexible short-term borrowing vehicle…
- …and a symbol of status
- Credit card lending continues at a pace…
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- Figure 5: Consumer credit gross new lending (non-seasonally adjusted), 1999-2003
- …and yet net unsecured lending as a proportion of PDI falls back in 2003
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- Figure 6: Net lending as a proportion of personal disposable income (non-seasonally adjusted), at current prices, 1999-2003
- Over-indebtedness: a cause for concern or a case of over-exaggeration?
- Repayment defaults are rare
- Lifestyle change is the prime facilitator of credit card debt
- Changing attitudes towards purchasing on plastic
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- Figure 7: Treatment of money versus financial literacy matrix, 2004
- Scenario planning
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- Figure 8: Scenario – how debt could potentially impact on future savings/retirement planning
Market Drivers
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- The business environment has been favourable for credit card issuers…
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- Figure 9: The key factors driving growth in the credit card market, June 2004
- …but what if harsher times are on the horizon?
- Is the gradualist approach to interest rates working?
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- Figure 10: Bank base rate, June 1992-June 2004
- Consumer confidence remains subdued
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- Figure 11: Headline confidence, expectations regarding future personal finances and spending measure, July 2002-May 2004
- Savings ratio edging up
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- Figure 12: PDI, consumer expenditure, savings and the savings ratio, at constant 1999 prices, 1999-2005
- Online retailing is flourishing…
- …with credit cards dominating online payments
- Card fraud losses fell in 2003
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- Figure 13: Summary of plastic card fraud losses, 1999-2003
- Counterfeit card fraud saw the largest reduction
- Fraud-prevention initiatives proliferate
- Chip and PIN
- Regulation update
- Credit industry awaits new Bill
- Clearing up confusion
- European Directive: fierce lobbying continues
- Section 75 under threat?
Market Size and Trends
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- Growth in new credit cards remains strong…
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- Figure 14: Number of payment cards in issue, by type, 1999-2003
- …as existing cardholders accumulate multiple cards
- Penetration nearing saturation, but still scope for growth in debit card usage
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- Figure 15: Debit cards – number in issue, total annual transaction volumes and value, 1999-2003
- Rapid rise in number of cards making it difficult to accurately assess trends in usage
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- Figure 16: Credit cards – number in issue, total annual transaction volumes and value, 1999-2003
- Business cards: a specialist sector experiencing steady growth
- Turnover from UK debit card purchases doubles in five years
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- Figure 17: Summary of debit and credit card purchases in the UK, 2003
- More than a quarter of debit card spending concentrated in food and drink sector
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- Figure 18: Breakdown of debit and credit card spending by sector, 2003
- Three in four cash withdrawals made by debit cards
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- Figure 19: Summary of debit and credit card cash acquisitions in the UK, 2003
- Credit cards favoured over debit cards when abroad
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- Figure 20: Summary of debit and credit card transactions outside the UK, 2003
- Amounts outstanding on credit cards continue to rise…
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- Figure 21: Amounts outstanding on credit cards, by value and as proportion of total, year end 1999-2003
- …but is this the full story?
- Other revenue sources
- Growing demand for ATMs
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- Figure 22: Number of ATMs and annual volume and value of transactions, 1999-2003
Key Players and the Competitive Environment
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- Debit cards
- The leading payment brands
- Visa and Switch have roughly equal market share
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- Figure 23: Number of debit cards in issue, by scheme, 1999-2003
- Switch cardholders use their cards most frequently
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- Figure 24: Debit card schemes – number of cards in issue, annual transaction volumes and values, 2003
- Share of debit card market closely mirrors that of current accounts
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- Figure 25: Estimated market shares of the main debit card issuers, by volume of customers, 2004
- Credit cards
- Two card schemes dominate
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- Figure 26: Number of credit cards in issue, by scheme, 1999-2003
- Visa outstrips MasterCard
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- Figure 27: Credit card schemes – number of cards in issue, transaction volumes and values, 2003
- Credit card providers facing tough competition
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- Figure 28: Estimated volume share of the top 20 credit card brands in the UK, May 2004
- New arrivals entering all the time
- RBS Group has inched ahead of Barclays
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- Figure 29: Estimated market share of the main credit card issuer groups, by volume of customers, May 2004
- Growing competition encourages creative offerings
Distribution and the Internet
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- Direct channels dominate sales
- Cross-selling abounds
- Distribution of debit cards inextricably linked to the delivery of current accounts
- The Internet: a cost-effective and increasingly important delivery channel
Advertising and Promotion
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- Credit cards represent the biggest area of finance sector adspend
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- Figure 30: Total advertising expenditure on plastic cards, by type, 1999/2000-2003/04
- Direct mail is the prime promotional tool
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- Figure 31: Total advertising expenditure on credit cards, by main media, 1999/2000-2003/04
- Online campaign push
- US firms top the table of credit card advertisers
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- Figure 32: Top 15 advertisers of credit cards, 2002/03-2003/04
- The popular appeal of sponsorship
- Credit card providers to heed new advertising rules
Consumer Financial Activity
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- Assessing demand for the main financial services providers
- Borrowing, saving and debt repayment activity
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- Figure 33: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2002-March 2004
- ABs, 23-29s and those earning over £35,000 are likely to be the most financially active
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- Figure 34: Expected financial activity, by socio-demographic and income groups, March 2004 and average for the last eight quarters
- Consumers looking to service debt
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- Figure 35: Leading financial activities planned in the next six months, September 2002-March 2004
- HSBC and NatWest were strong in the latest quarter
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- Figure 36: Leading main financial services providers: Market shares, March 2003-March 2004
- HSBC can expect active customers in plastic card usage
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- Figure 37: Saving, investment and lending, market sizes by expected customer demand and brand leaders, March 2004
- Royal Bank of Scotland and Bank of Scotland customers will be the most active
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- Figure 38: Activity levels of main financial providers’ customer bases, March 2004
The Consumer and Product Ownership
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- Survey coverage
- Debit cards more popular than credit cards…
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- Figure 39: Penetration of credit, debit and charge cards, 2000, 2002 and 2004
- …while a growing number of people have both
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- Figure 40: Credit and debit card mix, 2000, 2002 and 2004
- Common for ABC1s to have both a debit and credit card
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- Figure 41: Plastic card ownership, by gender, age and socio-economic group, May 2004
- Third agers and full-time workers show great enthusiasm for plastic cards
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- Figure 42: Plastic card ownership, by lifestage and working status, May 2004
- Mortgage holders represent a good cross-selling opportunity
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- Figure 43: Plastic card ownership, by tenure and gross annual household income, May 2004
- Penetration of credit and debit cards is highest in the South
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- Figure 44: Plastic card ownership, by region, May 2004
- Affluence is a key determining factor
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- Figure 45: Plastic card ownership, by ACORN category, May 2004
- Internet users, broadsheet readers and light TV viewers are key target groups
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- Figure 46: Plastic card ownership, by main media groups, May 2004
- Supermarkets can cost-effectively market credit cards to their extensive customer bases
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- Figure 47: Plastic card ownership, by supermarket preference, May 2004
- Expansive choice…
- …but the longest established retains largest share of customer
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- Figure 48: Share of credit card customer base, by main and other selected providers, May 2004
- Top five banks dominate
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- Figure 49: Share of credit card customer base, by main provider category and by gender, age, socio-economic group, lifestage and marital status, May 2004
- Competing more for wallet share than simply customer share
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- Figure 50: Share of credit card customer base, by main provider category and by working status, tenure, gross annual household income and TV region, May 2004
- Supermarkets offering own-brand credit cards are seeing some success
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- Figure 51: Share of credit card customer base, by main provider category and by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, May 2004
- Multiple card ownership is common
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- Figure 52: Number of credit cards held, by gender, age, socio-economic group and lifestage, May 2004
- Propensity increases among higher income brackets
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- Figure 53: Number of credit cards held, by working status, gross annual household income and TV region, May 2004
- A third of cardholders have changed provider in just three years
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- Figure 54: Number of times switched credit card provider, by gender and socio-economic group, May 2004
- 35-44-year-olds are most prone to switching allegiance
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- Figure 55: Number of times switched credit card provider, by age group, May 2004
- NatWest customers appear to be the most loyal
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- Figure 56: Number of times switched credit card provider, by all credit card holders and by customers of the top seven providers, May 2004
- Half of all cardholders had less than £250 still owing after paying their last bill
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- Figure 57: Amount owing on credit card(s) after last monthly payment(s), by gender and socio-economic group, May 2004
- The best repayers are over age 45
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- Figure 58: Amount owing on credit card(s) after last monthly payment(s), by age group, May 2004
- Further analysis
Consumer Attitudes and Targeting Opportunities
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- Which providers attract the most profitable customers?
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- Figure 59: Amount owing on credit card(s) after last monthly payment(s), all credit card holders and segmented by customers of the top seven providers, May 2004
- There are multiple reasons for the wide variance
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- Figure 60: Average outstanding credit card balance after last payment, by cardholders of top seven providers, in order of highest first, May 2004
- The greater the number of the cards, the greater the debt
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- Figure 61: Average outstanding credit card balance after last payment, by number of cards held, May 2004
- Almost three in five cardholders with balances of £500 plus have at least two cards
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- Figure 62: Number of credit cards held by amounts outstanding after last monthly payment(s), May 2004
- Link between switching activity and average balance
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- Figure 63: Average outstanding credit card balance after last payment, by number of times changed provider, May 2004
- Men owe nearly twice as much as women on their credit cards
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- Figure 64: Average outstanding credit card balance after last payment, by gender, age, socio-economic group, lifestage and marital status, May 2004
- House price inflation has given confidence to homeowners
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- Figure 65: Average outstanding credit card balance after last payment, by working status, tenure, annual gross household income and TV region, May 2004
- Consumers are smarter than given credit for
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- Figure 66: Average outstanding credit card balance after last payment, by number of financial products held, May 2004
- Why doesn’t everyone have a credit card?
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- Figure 67: Reasons for not having a credit card and potential targets, May 2004
- Identifying the size of the prospective target market
- Convenience, immediate access to credit and protection provide the primary impetus for carrying a credit card
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- Figure 68: Attitudes towards using credit cards, by cardholders, May 2004
- One in twenty cardholders occasionally experience difficulty with repaying their credit card debt
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- Figure 69: Attitudes towards using credit cards, by cardholders, May 2004
- Prudent card users outnumber chancers six to one
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- Figure 70: Average outstanding credit card balance after last payment, by typology groups, May 2004
- One in four 18-34-year-olds are chancing their luck
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- Figure 71: Segmentation of credit card holder customer base, by gender, age, socio-economic group, lifestage and marital status, May 2004
- A prudent approach is not necessarily dictated by income
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- Figure 72: Segmentation of credit card holder customer base, by working status, tenure, gross annual household income, TV region and ACORN category, May 2004
- Current account provider often gets first refusal
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- Figure 73: Most influential factors affecting choice of credit card, May 2004
- Cardholders with larger balances are most responsive to advertising
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- Figure 74: Most influential factors affecting choice of credit card, by amount outstanding after last payment, May 2004
- Mix and match benefits to appeal to different age groups
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- Figure 75: Most influential factors affecting choice of credit card, by gender, age and socio-economic group, May 2004
Trade Views
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- Over-regulated?
- Consumer debt: a myth or a potential problem?
- Customer churn versus loyalty
- Getting the best out of direct mail
The Future
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- What if there is a slowdown in spending?
- Market size to stabilise
- Consumers more prudent than given credit for
- No rap for cash on tap
- Battle gloves on
- Innovate and prosper
- Aggressive short-term versus steady long-term commitment
- Let’s not forget that at the end of the day it’s a good product
- Debit card transactions will continue to grow strongly
Forecast
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- The number of cards in issue will continue to climb
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- Figure 76: Forecast of the number of payment cards in issue, by type, 2003-09
- A period of consolidation
- Consumers will use their debit cards more frequently
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- Figure 77: Forecast of the debit card market – number of cards in issue, total annual transaction volumes and value, 2003-09
- Credit cards will experience slower growth going forward
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- Figure 78: Forecast of the credit card market – number of cards in issue, total annual transaction volumes and value, 2003-09
- Factors Incorporated
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