Table of Contents
Executive Summary
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- The market
- Rise in credit card borrowing…
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- Figure 1: Forecast of gross credit card lending, at current prices – Fan chart, 2010-20
- …and spending
- Balance transfer market hots up
- Low base rate and fall in bad debts improve profitability
- Reduced income from interchange fees could increase cost of borrowing
- Key players
- Barclays and LBG have the largest credit card customer bases
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- Figure 2: Estimated group (volume) share of UK credit and charge card market, May 2015
- The consumer
- 63% of adult internet users own a credit card
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- Figure 3: Ownership of credit and other payment cards, by type and number owned, May 2015
- 76% of credit and charge card holders manage their account online
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- Figure 4: Channels used for account management, May 2015
- 27% have a credit or charge card because of the cashback or rewards offered…
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- Figure 5: Reasons for having a credit or charge card, May 2015
- …and 75% of these would use their card less or not at all if the perks were withdrawn
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- Figure 6: Likely response if card issuer withdrew cashback or other rewards, May 2015
- 47% still had a balance owing after making last monthly payment
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- Figure 7: Amount still owing on credit card after last monthly payment, May 2015
- 18% with credit card debts predict it will take over two years to clear their balance, while 3% can’t envisage paying it off
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- Figure 8: Length of time expected to take to clear credit card balance, May 2015
- Within the past year, 13% of cardholders either reached or extended their credit limit
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- Figure 9: Credit and charge card applications, extensions, transfers and missed payments within the past 12 months, May 2015
Issues and Insights
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- Learn the lessons of the past
- The facts
- The implications
- Meeting the needs of the mobile consumer, with a personalised service
- The facts
- The implications
- Beware of cutting back on rewards
- The facts
- The implications
The Market – What You Need to Know
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- Greater appetite for credit card borrowing and balance transfers
- Stable credit card penetration
- Debit cards dominate non-cash payments
- Increase in online and mobile payments
- Strong growth prospects
- A stronger economy drives growth in market
- Cap on interchange fees prompts some card issuers to scale back the rewards they offer to customers
- Most credit cards are now applied for and managed online
Market Size and Forecast – Credit Card Lending
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- Net credit card lending rises further
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- Figure 10: Gross and net credit card lending (non-seasonally adjusted), 2010-15
- Strong growth forecast
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- Figure 11: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2010-20
Size of the Payment Card Market
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- Credit and debit cards in issue
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- Figure 12: Number of debit, credit and charge cards in issue, 2001-14
- Size of the cardholder customer base
- Shift from cash to cards continues
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- Figure 13: Share of consumer payment volumes, 2014
Card Spending Patterns
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- Growth in credit card spending
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- Figure 14: Volume and value of credit and debit card purchase transactions, 2010-14
- Medium-term outlook for UK card purchases
- A slow drift away from cards as a source of credit
- Overseas transactions
- Shift online gathers pace
- Surge in contactless payments
- Cash advances on credit cards grew 6% in 2014
- Balance transfer activity strengthens as card issuers increase terms
Market Drivers
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- Improved economic backdrop drives credit card spending and borrowing
- Credit cards accounted for 73% of gross unsecured lending in 2014
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- Figure 15: Gross consumer credit lending, by sector (non-seasonally adjusted), 2000-14
- Consumer credit net lending has risen over the past two years
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- Figure 16: Net consumer credit lending (non-seasonally adjusted), 2000-14
- People are generally feeling better off
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- Figure 17: Personal financial situation, May 2012-May 2015
- Total credit card debt outstanding increased 7% in 2014
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- Figure 18: Amount of credit card and other unsecured lending outstanding (non-seasonally adjusted), 2000-14 (at year end)
- Credit card write-offs continue to fall
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- Figure 19: Annual write-offs of lending to individuals, by sector, 2005-14
- Card issuers enjoy a period of improved interest margins
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- Figure 20: Official bank base rate, three-month LIBOR and effective overdraft, personal loan and credit card interest rates (monthly average), January 2008-May 2015
- Impact of EU ruling on interchange fees
- FCA investigates credit card complexity, fairness and transparency
- New payments regulator
- Growing cost of card fraud, driven by fraudsters targeting customers and rising incidents of cybercrime
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- Figure 21: Annual plastic fraud losses on UK-issued cards, 2008-14
Channels to Market
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- Current account providers have a significant cross-sell advantage
- 49% of cardholders applied for their credit card online
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- Figure 22: Channels used for card application, May 2015
- 76% manage their card account via online or mobile banking
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- Figure 23: Channels used for account management, May 2015
Key Players – What You Need to Know
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- A crowded marketplace
- Barclaycard remains on top
- Tesco Bank bolsters its position with current account entry
- Capital One adopts a risky strategy
- More products launched to cater for the non-prime segment
- Credit card issuers spend £95 million annually on above-the-line advertising
Market Share
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- Barclaycard tops credit card rankings by a clear margin…
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- Figure 24: Largest credit and charge card providers in the UK, by share of customers, May 2015
- …but on a group basis, it shares the top spot with LBG
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- Figure 25: Estimated group (volume) share of UK credit and charge card market, May 2015
- Two card schemes dominate
Competitive Strategies
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- Barclaycard: still the number one credit card brand and leading contactless technology innovator…
- …by launching new wearable devices…
- …streamlining the customer experience…
- …and via strategic acquisition
- LBG sees 15% increase in balance transfer volumes during 2014
- Retailers make further inroads
- Capital One at risk of losing market share?
- Nationwide launches “Fairness Campaign”
- Credit builders muscle in
- American Express: strong on loyalty
Brand Communication and Promotion
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- Credit card adspend stabilises
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- Figure 26: Recorded above-the-line, direct mail and online display total advertising expenditure on credit, charge, store and affinity cards, 2011-15
- Rise of social media
- Direct mail remains the offline channel of choice for card issuers
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- Figure 27: Recorded above-the-line advertising expenditure on credit and charge cards, by media type, 2013-15
- Barclaycard continues to invest the most in above-the-line advertising
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- Figure 28: Top 17 above-the line, direct mail and online display advertisers of credit and charge cards, 2013-15
- Data coverage and methodology
Brand Research
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- What you need to know
- Brand map
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- Figure 29: Attitudes towards and usage of selected brands, May 2015
- Key brand metrics
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- Figure 30: Key metrics for selected finance brands, May 2015
- Brand attitudes: Sainsbury’s Bank is good at rewarding loyalty
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- Figure 31: Attitudes, by brand, May 2015
- Brand personality: MBNA, Capital One, HSBC, Lloyds Bank and NatWest have some work to do to shake off negative brand connotations
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- Figure 32: Brand personality – Macro image, May 2015
- American Express is closely aligned with prestige
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- Figure 33: Brand personality – Micro image, May 2015
- Brand analysis
- American Express and Barclaycard
- MBNA and Capital One
- Virgin Money, First Direct and Sainsbury’s Bank
- Santander, NatWest and Lloyds Bank
- HSBC
The Consumer – What You Need to Know
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- Decline in proportion of people owning two or more credit cards
- The over-65s are most likely to have a credit card, but least likely to owe money
- Around half of all cardholders have an outstanding balance…
- …and just half of these expect to pay off their debt within a year
- 14% have a credit card in order to make use of a 0% balance transfer deal
- Card issuers will lose customers if they stop offering cashback and other rewards
- Missed payments affect a small proportion of cardholders
Payment Card Ownership
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- Debit cards are the most popular payment cards
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- Figure 34: Ownership of credit and other payment cards, May 2015
- Most people own more than one type of payment card
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- Figure 35: Payment card ownership – Cross-analysis, May 2015
- 39% of credit card holders own two or more credit cards
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- Figure 36: Number of credit cards owned by credit card-holding customer base, May 2015
- Multiple credit card ownership has declined over the past four years
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- Figure 37: Trend in credit card ownership, 2012-15
- There’s also been a slight reduction in people owning two or more store cards
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- Figure 38: Trend in store card ownership, 2012-15
- Charge card ownership has remained broadly stable over the past three years
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- Figure 39: Trend in charge card ownership, 2012-15
Reasons for Credit Card Ownership
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- 27% have a credit card because it offers cashback or other rewards…
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- Figure 40: Reasons for having a credit or charge card, May 2015
- …and 40% of these would stop using their card if the rewards were removed
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- Figure 41: Likely response if card issuer withdrew cashback or other rewards, May 2015
Level of Credit Card Debt
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- 47% of cardholders paid off their balance in full when making their last monthly payment
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- Figure 42: Amount still owing on credit card after last monthly payment, by number of credit cards owned, May 2015
- Age often dictates behaviour
- A third of credit card borrowers think it will take them over a year to pay off their debt
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- Figure 43: Length of time expected to take to clear credit card balance, May 2015
- 7% with three of more cards expect to never clear their credit card debt
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- Figure 44: Length of time expected to take to clear credit card balance, by number of credit cards owned, May 2015
- 40% of cardholders who owe at least £5,000 expect to take more than three years to repay their debt, if at all
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- Figure 45: Length of time expected to take to clear credit card balance, by amount of credit card debt outstanding, May 2015
Recent Credit-related Activity
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- Within the past year, 12% of cardholders transferred their balance to a new card…
- …and 13% reached or extended their credit limit
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- Figure 46: Credit and charge card applications, extensions, transfers and missed payments within the past 12 months, May 2015
- Payment defaults affect one in six cardholders owing £2,000+
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- Figure 47: Credit and charge card applications, extensions, transfers and missed payments within the past 12 months, by level of credit card debt, May 2015
Appendix – Definitions and Abbreviations
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- Product definitions
- Abbreviations
Appendix – Market Size and Forecast
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- Forecast of gross credit card lending
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- Figure 48: Forecast of gross credit card lending (non-seasonally adjusted), at constant and current prices, 2015-20
- Best- and worst-case scenarios
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- Figure 49: Forecast of gross credit card lending – best- and worst-case scenarios, at current prices, 2015-20
- Forecast methodology
- Fan chart explanation
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