Author: Mintel Group Ltd.
Last saved by: HTTP server

Credit and Debit Cards - UK - August 2008

ISSUES IN THE MARKET
Main issues
Abbreviations
INSIGHTS AND OPPORTUNITIES
Younger consumers still represent an untapped opportunity
Older consumers
Dormant cards
Popularity of debit cards and death of the cheque
MARKET IN BRIEF
Debit and charge cards are the success stories of 2007…
Figure 1: Volume of payment cards in issue (m), by type of card, 2002-07
The move to a cashless society continues
…and signs of a slowdown in credit card switching?
Economic environment affecting consumers…
Contactless cards – the latest innovation
Traditional players retain their dominant position
Debit cards starting to replace cash
Driving frequency of use…
…and minimising switching
FAST FORWARD TRENDS
 TREND 1: COOL VENDING
Building technology into the everyday
If even vending machines can change…
…then why not the flexible friend?
 TREND 2: NO MIDDLEMAN
Cutting out the middleman
Can the card market go against the flow?
The custom card?
INTERNAL MARKET ENVIRONMENT
Key points
The credit crunch has had a significant impact on the credit card market
Lenders tighten criteria further
Debt levels continue to rise, but so do repayment intentions
Growth in basic bank accounts as financial inclusion improves
Growing number of people concerned about finances
Figure 2: Concerns about social issues amongst UK consumers, November 2007
Payment card fraud transaction volumes are on the increase
Figure 3: Volume of fraudulent transactions, by type of card, 2001-07
The value of fraudulent activity is also rising…
Figure 4: Value of fraudulent transactions, by card type, 2002-07
…although recorded cases of identity theft have declined in 2007
Figure 5: Number of reported cases of identity theft, 1999-2007
BROADER MARKET ENVIRONMENT
Key points
Low predictions for GDP growth
Inflation is above government target…
…and the RPI has increased…
…leading to pressures on budgets
Unemployment has increased slightly over the last quarter but down over the year
Confidence slumps to levels of early 1990s
Figure 6: Consumer confidence barometer, June 2007-08
Millions cutting back on food and family treats as credit crunch bites
Overall internet penetration rises slightly
Consumers look to save money by trimming back insurance policies
PPI investigation to have an impact on margins?
COMPETITIVE CONTEXT
Key points
Continuing decline of the cheque
Figure 7: Volume of cheque and plastic card transactions, millions, 2002-07
The store card market continues to shrink
Borrowing on overdrafts has stabilised following a period of growth
Figure 8: Total borrowing on overdrafts, £ blillion, 2002-07
Remortgaging remains flat and is likely to do so given the availability of mortgage funds
Figure 9: Value of remortgaging, £ millions, 2002-07
Decline in the size of the personal loans market
Figure 10: Unsecured personal loans, £ billions, 2002-07
STRENGTHS AND WEAKNESSES IN THE MARKET
 DEBIT CARDS
Strengths
Weaknesses
 CREDIT CARDS
Strengths
Weaknesses
WHO’S INNOVATING?
Key points
Contactless cards still a niche market…
…but considerable development activity
Prepaid cards are growing in popularity
Green and ethical cards
Figure 11: Green and ethical credit card schemes
The mobile phone is the new wallet?
TRADE PERSPECTIVE
Key points
The economic climate and impact of the ‘credit crunch’
Could tightening conditions change card usage patterns?
Strategies to combat customer churn
Protecting margins in a fiercely competitive market
Future trends and product innovation
MARKET SIZE AND FORECAST
Key points
Credit card borrowing remains flat in 2007
Figure 12: Credit card borrowing, £ billion, 2002-07
Payment card growth remains relatively flat for the third year in succession
Figure 13: Number of payment cards in issue, by type, 2002-07
Transaction volumes remain level…
Figure 14: Volume of UK purchases, by card type, 2002-07
…although values increased further in 2007
Figure 15: Value of UK purchases, by card type, 2002-07
Average purchase values remain relatively high
Figure 16: Average purchase value, by card type, 2002-07
Debit cards are used most frequently
Figure 17: Card usage frequency for purchases in the UK, by card type, 2002-07
 FORECAST
Figure 18: Forecast of credit cards: Total value and volume of purchases, 2003-13
Average expenditure on credit cards to peak in 2008/ 09
Forecast reflects tightening budgets
Debit cards winners in current climate
Figure 19: Forecast of debit cards: total value and volume of purchases, 2003-13
Factors used in the forecast
SEGMENT PERFORMANCE
Key points
 DEBIT CARDS
Visa debit the market leader
Figure 20: Debit cards in issue, by scheme, 2002-07
Debit card transaction volumes continue to grow…
Figure 21: Debit card transaction volumes, by scheme, 2002-07
…as do debit card transaction values
Figure 22: Debit card transaction value, by scheme, 2002-07
Scope to encourage debit card usage for smaller purchases
Figure 23: Debit card average transaction values, by scheme, 2002-07`
Cash acquisition continues to grow
Figure 24: Debit card cash acquisition, by scheme, 2002-07
 CREDIT CARDS
MasterCard shows the strongest growth
Figure 25: Credit and charge cards in issue, by scheme, 2002-07
Overall transaction volumes remain flat in 2007…
Figure 26: Credit and charge card transaction volumes, by scheme, 2002-07
…as do overall purchase volumes
Figure 27: Credit and charge card purchase volumes, by scheme, 2002-07
Credit and charge card purchases increase in value
Figure 28: Credit and charge card purchase values, by scheme, 2002-07
MasterCard and Visa on a par for average values
Figure 29: Average credit and charge card purchase values, by scheme, 2002-07
Cash acquisition on credit and charge cards is increasingly unpopular
Figure 30: Credit and charge card cash acquisition volumes, by scheme, 2002-07
Figure 31: Credit and charge card cash acquisition value, by scheme, 2002-07
SPENDING BEHAVIOUR
Key points
Food and drink account for the largest volumes of purchases
Figure 32: Credit and debit card purchase volumes, by sector, 2007
The value of purchases on debit cards is higher than on credit cards across all sectors
Figure 33: Credit and debit card purchase value, by sector, 2007
Hotels and travel – the big-ticket buys
Figure 34: Average value of purchases, by sector, 2002-07
Credit cards are still favoured for overseas use
Figure 35: Summary of credit and debit card transactions outside the UK, annual transaction value and volume, 2007
MARKET SHARE
Key points
 DEBIT CARDS
The ‘Big Five’ have maintained market leadership
Figure 36: Volume share of current account market, March 2006-August 2007
 CREDIT CARDS
Despite strong competition, the ‘Big Five’ also dominate credit cards
Figure 37: Provider share, by brand, April 2008
COMPANIES AND PRODUCTS
Key points
Incremental revenue opportunities sought by credit card providers
Loyalty schemes vs. lower APRs
 COMPANY PROFILES
Barclays/Barclaycard
Lloyds TSB
GE Money
HSBC
MBNA
Capital One
Egg/Citigroup
RBS Group plc
BRAND COMMUNICATION AND PROMOTION
Key points
Cards a key advertising sector…
Figure 38: Proportion of advertising expenditure, by financial sector, 2007/08
…and credit cards lead the way
Figure 39: Plastic card advertising expenditure, by type of card, 2006/07 and 2007/08
Direct mail still the key channel
Figure 40: Credit card adspend, by outlet, 2007/08
The majority of brands are spending less on the marketing of credit cards…
Figure 41: Credit card adspend, by provider, 2006/07 and 2007/08
…reflecting a difficult market
Brand positioning
Playing the green card?
BRAND ELEMENTS
 BRAND MAP
Figure 42: Attitudes and usage of credit card brands, May 2008
 CAPITAL ONE
What the brand is trying to achieve
What the consumer thinks
Figure 43: Attitudes towards the Capital One brand, May 2008
 BARCLAYCARD
What the brand is trying to achieve.
What the consumer thinks
Figure 44: Attitudes towards the Barclaycard brand, May 2008
 EGG
What the brand is trying to achieve
What the consumer thinks
Figure 45: Attitudes towards the Egg brand, May 2008
 BRAND QUALITIES OF CREDIT CARD BRANDS
High street brands most competent
Figure 46: Personalities of various credit card brands, May 2008
 EXPERIENCE OF CREDIT CARD BRANDS
Barclaycard and Capital One most used brands
Figure 47: Consumer usage of various credit card brands, May 2008
 BRAND INTENTIONS FOR CREDIT CARD BRANDS
Barclaycard best retention; Amex least relevant
Figure 48: Consideration of various credit card brands, May 2008
 BRAND MOMENTUM FOR CREDIT CARD BRANDS
Capital One gaining ground with Virgin?
Figure 49: Momentum of various credit card brands, May 2008
 BRAND SATISFACTION FOR CREDIT CARD BRANDS
HSBC keeping its customers happy
Figure 50: Satisfaction with various credit card brands, May 2008
 BRAND COMMITMENT TO CREDIT CARD BRANDS
Few would pay more for their card
Figure 51: Commitment to various credit card brands, May 2008
 ROUND UP
THE CONSUMER – CREDIT OWNERSHIP AND BRAND SHARE
Key points
 CREDIT OWNERSHIP
Credit cards the most common form of unsecured debt
Figure 52: Forms of credit held, April 2008
Almost a third have a mortgage…
…but they’re outnumbered by unsecured borrowers
ABC1s remain the key target market
Figure 53: Types of outstanding debt held, by gender and socio-economic group, April 2008
The consumer credit generation
Figure 54: Types of outstanding debt held, by product type and age group, April 2008
Paying the price for family life
Figure 55: Types of outstanding debt held, by product type and lifestage, April 2008
 BRAND SHARE
High street banks dominate
Figure 56: Credit card ownership and provider share, April 2008
Half of cardholders don’t carry a balance
US operators account for a fifth of cards
Figure 57: Provider share, by type of lender, April 2008
ABs share their business around
Figure 58: Provider share, by gender, age, socio-economic, marital status, lifestage and Mintel’s Special Groups, April 2008
Assessing priorities
As income increases, so does multiple ownership
Figure 59: Provider share, by working status, household income, tenure, region and ACORN group, April 2008
Sainsbury’s and Tesco – converting customers?
Figure 60: Provider share, by media and supermarket usage, April 2008
THE CONSUMER – CREDIT AND DEBIT CARD USAGE
Key points
 DEBIT CARD USAGE
Debit cards – replacing cash as well as cheques?
Figure 61: Debit card usage, April 2008
Who is driving the cashless economy?
Figure 62: Debit card usage, by gender, age, socio-economic group, marital status, lifestage and Mintel’s Special Groups, April 2008
Low earners facing financial exclusion?
Figure 63: Debit card usage, by working status, household income, tenure, region and ACORN group, April 2008
Virtual lives – virtual cash?
Figure 64: Debit card usage, by media and supermarket usage, April 2008
 CREDIT CARD USAGE
Debit cards still the everyday option
Figure 65: Credit card usage, April 2008
Two in five clear their balance every month
Time to concentrate on rewards?
Affluent retirees rarely borrow money from month to month
Figure 66: Credit card usage, by gender, age, socio-economic group, marital status, lifestage and Mintel’s Special Groups, April 2008
Squeeze on incomes could see soaring bad debt
Figure 67: Credit card usage, by working status, household income, tenure, region and ACORN group, April 2008
Tabloid readers reacting to high charges?
Figure 68: Credit card usage, by media and supermarket usage, April 2008
THE CONSUMER – CREDIT CARD SWITCHING AND SELECTION
Key points
Card switching activity waning?
Figure 69: Credit card switching behaviour, 2006-08
Older cardholders show greater degree of loyalty
Figure 70: Credit card switching behaviour, by gender, age, socio-economic group, marital status, lifestage, Mintel’s Special Groups and working status, April 2008
Lower earners playing safe and sticking with their existing provider
Figure 71: Credit card switching behaviour, by household income, tenure, TV region and ACORN group, April 2008
The risk of online switchers
Figure 72: Credit card switching behaviour, by media and supermarket usage, April 2008
Most are happy with their existing card
Figure 73: Credit card selection and borrowing, April 2008
Satisfaction with existing credit cards is relatively high
Less affluent show signs of dissatisfaction
Pre-/no family respondents shop around for the best deal
Working status leading to credit confidence
More savvy – or simply just more creditworthy?
Clear regional differences
 TARGETING OPPORTUNITIES
Three in ten cardholders have multiple accounts
Figure 80: number of credit cards held, Among whole sample and among credit card holders, April 2008
High earners share their business around
Figure 81: Attitudinal groups crossed with gross household income, April 2008
Three key target groups
Figure 82: Attitudinal groups among Credit card holders, April 2008
Figure 83: Attitudes to credit cards among key target groups, April 2008
‘Always paid’ – happily oblivious to their interest costs
‘High users’ – the researchers
‘Extra source’ – struggling to make ends meet
What are the triggers for shopping around for an additional card?
Figure 84: Attitudinal groups crossed with number of cards held, April 2008

This report is supplied in accordance with Mintel's terms and conditions.  
© Mintel Group Ltd.