Abstract
In the 20 years since the debit card was first introduced in the UK, card payment has transformed the way we shop. For the past two years, cards have been more popular than cash as a means of payment, while the explosive growth of the Internet as a retail medium has been entirely dependent on the ability to make card transactions. Today, the card is evolving and the barriers between card types are beginning to come down as financial services providers make use of cards to differentiate and add value to a broad range of other product offerings. Other competitors are lurking in the wings too -- the Internet has spawned its own payment schemes, some of which are coming into more widespread use. Banks, merchants and consumers are also engaged in a struggle between the desire to minimise costs and the need to run schemes profitably.
This report examines the changing credit and debit card market. It looks at the effects of regulation, technological change and the wider economic environment on the habits of card users. The size of the card market is assessed by the number, value and type of transactions undertaken. The battle against fraud is assessed. The strategies adopted by the main providers to maintain and improve both their market share and reduce their exposure to credit risk are outlined. Finally, Mintel -- having commissioned consumer research exclusively for the purposes of this report -- has drawn on its research to understand and analyse the behaviour and attitudes of consumers toward card use, their loyalty to particular brands and their concerns about debt, fraud and privacy.
Table of Contents
- Issues in the MarketMain issues
- Abbreviations
- Market in Brief
- Card transactions worth £320 billionCredit card growth stalled
- Debit cards on the rise
- The fight against fraud is a war of attrition
- Marketing expenditure squeezed
- Consumer research confirms wider market trends...
- ...with younger people swapping cards for cash
- The affluent making greatest use of their cards
- Internal Market Environment
- Key Points
- Regulation cuts profits
- The cheque is dead
- Fraud not yet under control
- Figure 1: Summary of plastic card fraud losses, 2001-06
- Credit squeezed
- Figure 2: Consumer debt levels, 2001-06
- Bad debt on the up
- Figure 3: Consumer debt write-offs, 2001-06
- External Market Environment
- Key Points
- Interest rates -- hurting
- Figure 4: Bank of England base rate, RPI and real rate of interest, 1990-2007
- Consumers getting keener on saving
- Figure 5: Total PDI, consumer expenditure and savings, 2003-12
- The economy -- tougher conditions
- Figure 6: GDP annual growth and proportion of workforce unemployed -- UK, 1997-2007
- Consumers are getting cautious
- Figure 7: Agreement with selected financial lifestyle statements, 1993-2006
- Online spending -- 40% of adults now shop online...
- ...but new fraud opportunities open up...
- ...and new challengers enter the market
- Competitive Context
- Key Points
- Overdrafts: cheaper and more accessible
- Figure 8: Value of overdraft advances (MBBG only), 1998-2006
- Personal loans -- further signs of belt-tightening?
- Figure 9: Gross lending on unsecured and secured personal loans, 2000-06
- Mortgage equity withdrawal popular
- Figure 10: Gross mortgage lending, by type of advance, 1997-2006
- Store cards dying out
- Figure 11: Store cards, number of cards in issue and number of transactions, 2001-06
- Strengths and Weaknesses in the Market
- Debit cards
- Strengths
- Weaknesses
- Credit cards
- Strengths
- Weaknesses
- Market Size and Forecast
- Key Points
- Number of payment cards in issue flattens
- Figure 12: Number of payment cards in issue, by type, 2001-06
- Transaction volumes remain level...
- Figure 13: Volume of UK purchases, by card type, 2001-06
- ...while values edge up slightly
- Figure 14: Value of UK purchases, by card type, 2001-06
- Average purchase value -- room at the bottom
- Figure 15: Average purchase value, by card type, 2001-06
- Transaction frequency -- too much, too rarely?
- Figure 16: Card usage frequency, by card type, 2001-06
- Forecast
- Debit card purchases to continue to grow...
- Figure 17: Forecast of debit cards: number in issue, total value and volume of purchases, 2002-12
- ...extending the gap between debit and credit cards
- Figure 18: Forecast of credit cards: number in issue, total annual transaction volumes and value, 2002-12
- Factors used in the forecast
- Segment Performance
- Key Points
- Debit cards
- Steady growth in card numbers...
- Figure 19: Debit cards in issue by scheme, 2001-06
- ...while transaction numbers approach the seven million mark
- Figure 20: Debit card transaction volumes by scheme, 2001-06
- Visa Debit continues to lead the market
- Figure 21: Debit card scheme market share, by transaction volume, 2001-06
- Transaction values top £361 billionFigure 22: Debit card transaction values by scheme, 2001-06
- Electron and Solo transactions reflect target market
- Figure 23: Debit card average transaction value by scheme, 2001-06
- Average cash withdrawals on the up
- Figure 24: Debit card cash acquisition value by scheme, 2001-06
- Credit cards
- MasterCard shows strongest growth...
- Figure 25: Credit and charge cards in issue by scheme, 2001-06
- ...although Visa still accounts for more transactions
- Figure 26: Credit and charge card transaction volumes by scheme, 2001-06
- Purchase volumes approaching two billion
- Figure 27: Credit and charge card purchase volumes by scheme, 2001-06
- Value fails to keep pace with inflation
- Figure 28: Credit and charge card purchase values by scheme, 2001-06
- Cash acquisition falls back in 2006...
- Figure 29: Credit and charge card cash acquisition volumes by scheme, 2001-06
- ...in terms of value, as well as volume
- Figure 30: Credit and charge card cash acquisition by value, 2001-06
- Figure 31: Credit and charge card average cash acquisition transaction value by scheme, 2001-06
- Turnover per card
- Figure 32: Credit and charge card turnover per card, by scheme, 2001-06
- Spending Behaviour
- Key Points
- Spending by sector
- Figure 33: Analysis of debit and credit card purchases, by sector, 2006
- Leisure drives purchasing growth
- Figure 34: Credit and debit card spending, combined growth by sector, 2001-06
- Overseas transactions reflect travel habits
- Figure 35: Summary of credit and debit card transactions outside the UK, annual transaction value and volume, 2006
- Market Share
- Key Points
- The big five still account for the vast majority of the debit card market
- Figure 36: Volume share of current account market, 2003-07
- Barclays and Lloyds TSB still lead the pack
- Figure 37: Provider share, by brand, April 2007
- Market dynamics by provider
- Figure 38: Provider share, by type of lender, 2004-07
- Companies and Products
- Key Points
- Balance transfer cards still a key weapon...
- ...but the offer has changed
- Reward schemes repositioned
- Company Profiles
- Lloyds TSB
- RBS Group
- Barclays
- HSBC
- HBOS
- MBNA
- Capital One
- Brand Communication and Promotion
- Key Points
- Credit cards account for the bulk of adspend
- Figure 39: Plastic card advertising expenditure, by type of card, years to April 2006 and April 2007
- Debit card adspend
- Figure 40: Debit card adspend, by outlet, year to April 2007
- Figure 41: Debit card adspend, by provider, years to April 2006 and April 2007
- Credit card adspend dominated by direct mail
- Figure 42: Credit card adspend, by outlet, year to April 2007
- Capital One top spenders in the credit card market
- Figure 43: Credit card adspend, by provider, years to April 2006 and April 2007
- A shift in marketing focus
- Card Ownership and Brand Shares
- Key points
- Credit ownership -- cards lead the way
- Figure 55: Ownership of selected credit products, April 2007
- The rise of the debit card
- Figure 56: Debit, credit and charge card ownership, 2000-07
- Under 25s shunning credit cards?
- Figure 57: Debit, credit and charge card ownership, by gender and age, April 2007
- Most affluent most likely to have a credit card
- Figure 58: Debit, credit and charge card ownership, by affluence and lifestage, April 2007
- Established players under increasing pressure
- Figure 59: Provider share, by brand, 2004-07
- The big five continue to dominate...
- Figure 60: Provider share, by type of lender, 2004-07
- ...particularly among younger cardholders
- Figure 61: Credit card brand share, by gender and age, April 2007
- Women and families turn to retailers
- ABs defect to the US operators
- Figure 62: Credit card brand share, by socio-demographic group, April 2007
- Internet users and young people also more likely to venture away from traditional providers
- Card Ownership and Brand Shares -- Detailed Demographics
- Card ownership
- Figure 63: Card ownership, by socio-demographic group, April 2007
- Brand share
- Figure 64: Credit card brand share, by socio-demographic group, April 2007
- Card Usage
- Key points
- Debit card usage -- replacing cash, or supplementing it?
- Figure 65: Attitudes towards cash and debit cards, April 2007
- Debit card usage skewed towards younger consumers and high earners
- Figure 66: Most popular attitudes towards cash and debit cards, by gender, age, socio-economic group and lifestage, April 2007
- Ladies get their cashback
- Cards replacing cash for younger consumers?
- Figure 67: Next most popular attitudes towards cash and debit cards, by gender, age, socio-economic group and lifestage, April 2007
- Consumers reining back credit card borrowing
- Figure 68: Plastic card usage, by socio-demographic group, April 2007
- Responsible credit card usage
- Online usage -- under threat from a reduced appetite for debt?
- Providing Incentives
- The young and the cardless
- Figure 69: Most popular attitudes towards plastic card usage, by socio-demographic group, April 2007
- Savvy, affluent, and online
- Men and affluent the most frequent users
- Figure 70: Next most popular attitudes towards plastic card usage, by socio-demographic group, April 2007
- The potential for building reward schemes
- Card Usage -- Detailed Demographics
- Figure 71: Most popular attitudes towards cash and debit cards, by socio-demographic group, April 2007
- Figure 72: Next most popular attitudes towards cash and debit cards, by socio-demographic group, April 2007
- Figure 73: Most popular attitudes towards plastic card usage, by socio-demographic group, April 2007
- Figure 74: Next most popular attitudes towards plastic card usage, by socio-demographic group, April 2007
