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Credit and Debit Cards - UK - July 2011

Consumer attitudes towards credit and borrowing have become more cautious following the credit crisis and recession. This is evident in the credit card market with a drop in the number of cards in issue and a growing reluctance for consumers to maintain a credit balance. Although credit card transactions held up reasonably well despite the difficult economic backdrop, cardholders are increasingly using their cards as payment tools rather than as a form of borrowing.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Gross lending picked up in 2010...
              • Figure 1: Forecast of gross credit card lending, 2006-16
            • ...but net lending remains subdued
              • Credit cards are in decline but debit card numbers grow strongly
                • Figure 2: Number of payment cards in issue, by type, 2005-10
              • Market factors
                • Consumer appetite for credit remains weak
                  • Figure 3: Intended consumer credit activities, Q3/Q4 2002-Q1/Q2 2011
                • Credit card margins under pressure
                  • Companies, brands and innovations
                    • Barclaycard is the leading provider of credit cards
                      • Figure 4: Estimated market share of the top credit card providers (individual brands), May 2011
                    • Lloyds Banking Group tops list of debit card providers
                      • Contactless payments are main focus for innovation
                        • American Express is the most differentiated credit card brand
                          • Figure 5: Attitudes towards and usage of credit card brands, April 2011
                        • The consumer
                          • Scope to expand credit card ownership
                            • Preference for cash remains
                              • Figure 6: Consumer attitudes towards different payment methods, May 2011
                            • Awareness of Consumer Credit Act section 75
                              • Almost a fifth have tried to reduce their credit card usage
                                • Figure 7: Consumer attitudes towards managing credit cards, May 2011
                              • What we think
                              • Issues in the Market

                                  • To what extent has the downturn affected the consumer appetite for borrowing on credit cards?
                                    • How are credit cards performing in relation to other forms of borrowing and credit?
                                      • What impact is the expansion of contactless payments having on the UK card market?
                                        • How are changes in the wider payments market affecting the credit and debit card sectors?
                                          • Do consumers value the protection provided by the CCA section 75 when purchasing goods and services?
                                          • Future Opportunities

                                            • Credit cards could benefit from some positive PR
                                              • Credit cards provide a route to independence
                                              • Internal Market Environment

                                                • Key points
                                                  • A new era of responsible lending
                                                    • Credit and Store Card Review leads to new consumer rights…
                                                      • …but has implications for card providers
                                                        • The Consumer Credit Directive takes effect
                                                          • The Lending Code is updated
                                                            • Consultation over future regulation of the consumer credit market
                                                              • Credit card rates continue to rise
                                                                • Figure 8: Official end-of-month bank rate and monthly average bank and building society overdraft and credit card interest rates, January 2004-April 2011
                                                              • Lending conditions show slight improvements…
                                                                • …but margins remain under pressure
                                                                  • Contactless card rollout continues…
                                                                    • …but security concerns could hamper consumer uptake
                                                                      • Figure 9: Consumer attitudes towards payment technology – agreement with statements, May 2011
                                                                    • Mobile payments become a reality
                                                                      • Fraud losses continue to decline
                                                                        • Figure 10: Annual plastic card fraud losses on UK-issued cards 2006-10
                                                                    • Broader Market Environment

                                                                      • Key points
                                                                        • Consumer confidence remains subdued
                                                                          • Figure 11: Monthly, 3-monthly and 12-monthly UK consumer confidence indices, January 1988-March 2011
                                                                        • Appetite for borrowing continues to decline
                                                                          • Figure 12: Savings, investment, borrowing and debt repayment – consumers’ expected activity, 2-quarter moving average basis, Q3/Q4 2002-Q1/Q2 2011
                                                                        • Consumers take a more cautious approach
                                                                          • Figure 13: Trends in agreement with lifestyle statements on finance, 2006-10
                                                                        • Most people are getting by…
                                                                          • Figure 14: Consumer financial situation, June 2010-June 2011
                                                                        • …but household incomes are being squeezed
                                                                          • Figure 15: RPI and average weekly earnings, 2005-11
                                                                        • Retail sales have held up during recent economic turmoil
                                                                          • Figure 16: Value and volume of retail sales at current prices, non-seasonally adjusted, 2002-10
                                                                      • Competitive Context

                                                                        • Key points
                                                                          • Credit card share of the consumer credit market increases
                                                                            • Figure 17: Gross consumer credit lending, by type, 2004-11
                                                                          • Demand for loans and car finance drops sharply
                                                                            • Figure 18: Intended consumer credit activities, Q3/Q4 2002-Q1/Q2 2011
                                                                          • Debit cards account for a growing proportion of the payments market
                                                                            • Figure 19: Share of payments, by volume (excluding cash), 2000 and 2010
                                                                          • Store card ownership declines
                                                                            • Figure 20: Trends in type of cards owned, 2006-10
                                                                        • Strengths and Weaknesses in the Market

                                                                            • Figure 21: SWOT analysis – UK credit and debit card market, 2011
                                                                        • Who's Innovating?

                                                                          • Key points
                                                                            • 12.9 million contactless cards issued by end of 2010
                                                                              • Mobile payments – the new battleground?
                                                                                • Barclaycard and Orange team up for Quick Tap
                                                                                  • Google to launch a digital wallet
                                                                                    • Visa also develops a digital wallet
                                                                                      • American Express launches rival to PayPal
                                                                                        • Olympics should boost contactless payment use in the UK
                                                                                          • Confused.com develops a credit card checker
                                                                                            • New reward schemes launched
                                                                                            • Market Size and Forecast – Credit Card Lending

                                                                                              • Key points
                                                                                                • Gross credit card lending remains robust...
                                                                                                  • Figure 22: Gross and net credit card lending, 2004-11
                                                                                                • ...but net figures show most credit is repaid each month
                                                                                                  • Growth rate for credit card borrowing has declined
                                                                                                    • Figure 23: Growth rate of net credit card lending to individuals (12-month), January 2008-April 2011
                                                                                                  • Outstanding balances follow a downward trend
                                                                                                    • Figure 24: Outstanding credit card balances (seasonally adjusted), January 2010-May 2011
                                                                                                  • Forecast
                                                                                                    • Figure 25: Forecast of gross credit card lending, 2006-16
                                                                                                    • Figure 26: Forecast of gross credit card lending, at current and constant prices, 2006-16
                                                                                                  • Forecast methodology
                                                                                                  • Market Size – Cards in Issue and Card Usage

                                                                                                    • Key points
                                                                                                      • Credit cards in decline but debit cards show strong growth
                                                                                                        • Figure 27: Number of payment cards in issue, by type, 2005-10
                                                                                                      • Debit card transaction volumes increase sharply
                                                                                                        • Figure 28: Volume of transactions for UK purchases, by card type, 2005-10
                                                                                                      • Transaction value data reflect economic backdrop
                                                                                                        • Figure 29: Value of transactions for UK purchases, by card type, 2005-10
                                                                                                      • A mixed picture for cash acquisition transactions
                                                                                                        • Figure 30: Cash acquisition in the UK, for credit and debit cards, by volume and value, 2005-10
                                                                                                      • A summary of overseas card transactions
                                                                                                        • Figure 31: Summary of credit and debit card transactions outside the UK, transaction volumes and values, 2010
                                                                                                    • Market Share

                                                                                                      • Key points
                                                                                                        • Card provider share
                                                                                                          • Barclaycard is the leading credit card provider
                                                                                                            • Figure 32: Estimated market share of the top credit card providers (individual brands), May 2011
                                                                                                          • One in four credit card holders have a Barclaycard
                                                                                                            • Figure 33: Ownership of credit card brands (group and brand level) – all adults and credit card holders, May 2011
                                                                                                          • US card providers and retailers appeal to different groups
                                                                                                            • Lloyds Banking Group accounts for three in ten current accounts
                                                                                                              • Figure 34: Share of main current account holder customer base, by banking group, April 2011
                                                                                                            • Card scheme share
                                                                                                              • MasterCard leads the way in the credit card market…
                                                                                                                • Figure 35: Credit and charge cards in issue, by card scheme, 2010
                                                                                                              • …but Visa is the leading provider in the debit card market
                                                                                                                • Figure 36: Debit cards in issue, by card scheme, 2010
                                                                                                            • Companies and Products

                                                                                                              • Barclaycard
                                                                                                                  • Figure 37: Credit card range – Barclaycard, May 2011
                                                                                                                  • Figure 38: Key financial data for Barclaycard, 2009 and 2010
                                                                                                                • HSBC (including M&S Money Credit Cards)
                                                                                                                    • Figure 39: Selected credit cards – HSBC, May 2011
                                                                                                                    • Figure 40: Key financial data of HSBC Bank Plc, 2009 and 2010
                                                                                                                  • Lloyds Banking Group
                                                                                                                      • Figure 41: Credit card range – Lloyds TSB, May 2011
                                                                                                                      • Figure 42: Credit card range – Halifax/Bank of Scotland*, May 2011
                                                                                                                      • Figure 43: Key financial data for Lloyds Banking Group (Retail Division), 2009 and 2010
                                                                                                                    • MBNA
                                                                                                                        • Figure 44: Selected credit cards – MBNA, May 2011
                                                                                                                        • Figure 45: Key financial data for Global Card Services segment of Bank of America, 2009 and 2010
                                                                                                                      • RBS Group
                                                                                                                          • Figure 46: Credit card range – RBS/NatWest*, May 2011
                                                                                                                          • Figure 47: Key financial data for RBS Group (UK Retail Banking Division), 2009 and 2010
                                                                                                                      • Channels to Market

                                                                                                                        • Key points
                                                                                                                          • A shift towards online applications
                                                                                                                            • Figure 48: Trends in how applied for credit card, 2008-10
                                                                                                                          • Most people are prepared to arrange credit card online
                                                                                                                            • Figure 49: Consumer appetite for arranging credit cards and current accounts online, May 2011
                                                                                                                        • Brand Communication and Promotion

                                                                                                                          • Key points
                                                                                                                            • Plastic card adspend grows by 66% in 2010
                                                                                                                              • Figure 50: Plastic card adspend, by sub-category, 2008-10
                                                                                                                            • American Express was leading advertiser in 2010
                                                                                                                              • Figure 51: Plastic card adspend, by company (top ten in 2010), 2008-10
                                                                                                                            • Direct mail dominates plastic card adspend
                                                                                                                              • Figure 52: Plastic card adspend, by media type, 2008-10
                                                                                                                            • A note about adspend data
                                                                                                                            • Brand Research

                                                                                                                              • Brand map
                                                                                                                                  • Figure 53: Attitudes towards and usage of credit card brands, April 2011
                                                                                                                                • Brand attitudes
                                                                                                                                  • Figure 54: Attitudes, by credit card brand, April 2011
                                                                                                                                • Brand personality
                                                                                                                                  • Figure 55: Credit card brand personality – macro image, April 2011
                                                                                                                                  • Figure 56: Credit card brand personality – micro image, April 2011
                                                                                                                                • Correspondence analysis
                                                                                                                                  • Brand experience
                                                                                                                                    • Figure 57: Credit card brand usage, April 2011
                                                                                                                                    • Figure 58: Satisfaction with various credit card brands, April 2011
                                                                                                                                    • Figure 59: Consideration of credit card brands, April 2011
                                                                                                                                    • Figure 60: Consumer perceptions of current credit card brand performance, April 2011
                                                                                                                                    • Figure 61: Credit card brand recommendation – Net Promoter Score, April 2011
                                                                                                                                  • Brand index
                                                                                                                                    • Figure 62: Credit card brand index, April 2011
                                                                                                                                    • Figure 63: Credit card brand index vs. recommendation, April 2011
                                                                                                                                  • Target group analysis
                                                                                                                                    • Figure 64: Target groups, April 2011
                                                                                                                                    • Figure 65: Credit card brand usage, by target groups, April 2011
                                                                                                                                  • Group One – The Conformists
                                                                                                                                    • Group Two – Simply the Best
                                                                                                                                      • Group Three – Shelf Stalkers
                                                                                                                                        • Group Four – Habitual Shoppers
                                                                                                                                          • Group Five – The Individualists
                                                                                                                                          • Card Ownership

                                                                                                                                            • Key points
                                                                                                                                              • Credit card ownership
                                                                                                                                                • More than four in ten do not have a credit card
                                                                                                                                                  • Figure 66: Credit card ownership, May 2011
                                                                                                                                                • Opportunities to expand ownership
                                                                                                                                                  • A growing dislike of credit
                                                                                                                                                    • Slight decline in multi-card ownership
                                                                                                                                                      • Figure 67: Trends in number of credit cards held, 2008-10
                                                                                                                                                    • Barclaycard tops the list of credit card providers
                                                                                                                                                      • Figure 68: Credit card providers, May 2011
                                                                                                                                                      • Figure 69: Credit card providers, by repertoire of credit card providers, May 2011
                                                                                                                                                    • Debit card ownership and usage
                                                                                                                                                      • 85% of debit card holders have a single card
                                                                                                                                                        • Figure 70: Trends in number of debit cards held, 2006-10
                                                                                                                                                      • Debit card usage is increasing
                                                                                                                                                        • Figure 71: Trends in frequency of use of debit card to buy goods and services, 2006-10
                                                                                                                                                      • 57% of cardholders withdraw cash from ATM on weekly basis
                                                                                                                                                        • Figure 72: Trends in frequency of use of debit card to obtain cash from a cash machine or ATM, 2009 and 2010
                                                                                                                                                    • Attitudes Towards Payment Methods

                                                                                                                                                      • Key points
                                                                                                                                                        • Cash is still preferred for small purchases...
                                                                                                                                                          • Figure 73: Consumer attitudes towards different payment methods, May 2011
                                                                                                                                                        • ...but is under threat from the expansion of contactless technology
                                                                                                                                                          • Awareness of contactless payment cards
                                                                                                                                                            • Figure 74: Consumers with contactless payment cards, by age, May 2011
                                                                                                                                                          • Cheques still have support among over-55s
                                                                                                                                                            • Figure 75: Responses to the statement ‘I still use cheques occasionally (once a month or so)’, by age, May 2011
                                                                                                                                                          • More than a third of credit card holders are aware of CCA section 75
                                                                                                                                                            • Higher earners are more likely to have used CCA section 75
                                                                                                                                                              • Figure 76: Awareness of additional consumer protection provided through credit cards, by age and annual household income, May 2011
                                                                                                                                                            • 30% of credit card holders only use cards in emergency
                                                                                                                                                            • Credit Card Management

                                                                                                                                                              • Key points
                                                                                                                                                                • Most credit card holders clear their balance each month
                                                                                                                                                                  • Figure 77: Consumer attitudes towards managing credit cards, May 2011
                                                                                                                                                                • A fifth of cardholders have tried to reduce credit card usage
                                                                                                                                                                  • Figure 78: Responses to the statement ‘I’ve tried to reduce the amount I use my credit card over the last two years’, by age and annual household income, May 2011
                                                                                                                                                                • Frequent credit card usage declines
                                                                                                                                                                  • Figure 79: Trends in frequency of use of credit card to buy goods and services, 2006-10
                                                                                                                                                                • Consumers looking to reduce card activity are more likely to transfer balance
                                                                                                                                                                  • Figure 80: Consumer attitudes towards managing credit cards, by most popular consumer attitudes towards managing credit cards, May 2011
                                                                                                                                                                • Those without credit card debts use a range of payment methods
                                                                                                                                                                  • Figure 81: Consumer attitudes towards payment methods, by most popular consumer attitudes towards managing credit cards, May 2011
                                                                                                                                                                • Most multiple card owners clear credit card balance each month
                                                                                                                                                                  • Figure 82: Consumer attitudes towards managing credit cards, by repertoire of credit card providers, May 2011
                                                                                                                                                                • Balance transfer deals lose some appeal
                                                                                                                                                                  • Figure 83: Trends in factors influencing choosing credit cards, 2006-10
                                                                                                                                                              • Credit Card Targeting Opportunities

                                                                                                                                                                • Key points
                                                                                                                                                                  • Credit card management target groups
                                                                                                                                                                    • Figure 84: Credit cards – target groups, May 2011
                                                                                                                                                                  • No balance cardholders
                                                                                                                                                                    • Active and engaged cardholders
                                                                                                                                                                      • Credit balance cardholders
                                                                                                                                                                          • Figure 85: Consumer attitudes towards managing credit cards, by target groups, May 2011
                                                                                                                                                                      • Appendix – Internal Market Environment

                                                                                                                                                                        • Credit and Store Card Review
                                                                                                                                                                          • Consumer Credit Directive
                                                                                                                                                                            • Credit card write-offs
                                                                                                                                                                              • Figure 86: Quarterly write-offs of credit card lending to individuals, 2004-11
                                                                                                                                                                          • Appendix – Market Forecast

                                                                                                                                                                              • Figure 87: Best- and worst-case forecasts for gross credit card lending, 2011-16
                                                                                                                                                                          • Appendix – Market Share

                                                                                                                                                                              • Figure 88: Credit card providers, by demographics, May 2011
                                                                                                                                                                              • Figure 89: Credit card providers continued, by demographics, May 2011
                                                                                                                                                                              • Figure 90: Credit card providers (retailers), by demographics, May 2011
                                                                                                                                                                          • Appendix – Brand Research

                                                                                                                                                                              • Figure 91: Brand usage, April 2011
                                                                                                                                                                              • Figure 92: Brand commitment, April 2011
                                                                                                                                                                              • Figure 93: Brand momentum, April 2011
                                                                                                                                                                              • Figure 94: Brand diversity, April 2011
                                                                                                                                                                              • Figure 95: Brand satisfaction, April 2011
                                                                                                                                                                              • Figure 96: Brand recommendation, April 2011
                                                                                                                                                                              • Figure 97: Brand attitude, April 2011
                                                                                                                                                                              • Figure 98: Brand image – Macro image, April 2011
                                                                                                                                                                              • Figure 99: Brand image – Micro image, April 2011
                                                                                                                                                                              • Figure 100: Profile of target groups, by demographics, April 2011
                                                                                                                                                                              • Figure 101: Psychographic segmentation, by target groups, April 2011
                                                                                                                                                                              • Figure 102: Brand usage, by target groups, April 2011
                                                                                                                                                                            • Brand index
                                                                                                                                                                              • Figure 103: Brand index, April 2011
                                                                                                                                                                          • Appendix – Credit Card Ownership

                                                                                                                                                                              • Figure 104: Credit card and non-credit card holders, by demographics, May 2011
                                                                                                                                                                          • Appendix – The Consumer – Attitudes Towards Payment Methods

                                                                                                                                                                              • Figure 105: Most popular consumer attitudes towards payment methods, by demographics, May 2011
                                                                                                                                                                              • Figure 106: Next most popular consumer attitudes towards payment methods, by demographics, May 2011
                                                                                                                                                                              • Figure 107: Consumer attitudes towards payment methods, by most popular credit card providers, May 2011
                                                                                                                                                                          • Appendix – The Consumer – Credit Card Management

                                                                                                                                                                              • Figure 108: Most popular credit card providers, by demographics, May 2011
                                                                                                                                                                              • Figure 109: Next most popular credit card providers, by demographics, May 2011
                                                                                                                                                                          • Appendix – The Consumer – Credit Card Targeting Opportunities

                                                                                                                                                                              • Figure 110: Target groups, by demographics, May 2011
                                                                                                                                                                              • Figure 111: Consumer attitudes towards payment methods, by target groups, May 2011
                                                                                                                                                                              • Figure 112: Credit card providers, by target groups, May 2011

                                                                                                                                                                          Companies Covered

                                                                                                                                                                          • Amazon.co.uk
                                                                                                                                                                          • American Express Company (The)
                                                                                                                                                                          • American Express UK
                                                                                                                                                                          • Asda Group Ltd
                                                                                                                                                                          • Bank of America Corporation
                                                                                                                                                                          • Bank of England
                                                                                                                                                                          • Barclaycard
                                                                                                                                                                          • Barclays Bank plc
                                                                                                                                                                          • British Bankers' Association (BBA)
                                                                                                                                                                          • BT Group plc
                                                                                                                                                                          • Building Societies Association
                                                                                                                                                                          • Buyagift Limited
                                                                                                                                                                          • Cancer Research UK
                                                                                                                                                                          • Capital One Bank (Europe) plc
                                                                                                                                                                          • Citigroup Private Bank
                                                                                                                                                                          • Co-operative Group
                                                                                                                                                                          • Egg plc
                                                                                                                                                                          • Facebook, Inc.
                                                                                                                                                                          • Financial Services Authority (The)
                                                                                                                                                                          • First Direct
                                                                                                                                                                          • Freeview
                                                                                                                                                                          • Gfk NOP
                                                                                                                                                                          • Google UK
                                                                                                                                                                          • Grupo Santander Central Hispano S.A.
                                                                                                                                                                          • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                          • HSBC Private Bank (UK) Limited
                                                                                                                                                                          • Ipsos MORI
                                                                                                                                                                          • J. Sainsbury
                                                                                                                                                                          • John Gilbert Financial Research
                                                                                                                                                                          • John Lewis Partnership
                                                                                                                                                                          • Kantar Media
                                                                                                                                                                          • Liverpool Football Club
                                                                                                                                                                          • Lloyds Banking Group
                                                                                                                                                                          • Lloyds TSB Insurance
                                                                                                                                                                          • Lonely Planet Publications
                                                                                                                                                                          • Manchester City Football Club
                                                                                                                                                                          • Marks & Spencer
                                                                                                                                                                          • MasterCard UK
                                                                                                                                                                          • MBNA Europe
                                                                                                                                                                          • National Australia Bank
                                                                                                                                                                          • Nationwide Building Society
                                                                                                                                                                          • NatWest
                                                                                                                                                                          • Nectar
                                                                                                                                                                          • Office of Fair Trading
                                                                                                                                                                          • Orange plc (UK)
                                                                                                                                                                          • PayPal Inc.
                                                                                                                                                                          • Royal Bank of Scotland Group plc
                                                                                                                                                                          • Samsung Electronics (UK) Ltd
                                                                                                                                                                          • Sony (UK) Ltd
                                                                                                                                                                          • Superbreak Mini Holidays
                                                                                                                                                                          • T-Mobile (UK) Ltd
                                                                                                                                                                          • Tesco Plc
                                                                                                                                                                          • Thomas Cook Group PLC
                                                                                                                                                                          • Virgin Money
                                                                                                                                                                          • Visa Europe
                                                                                                                                                                          • Waitrose
                                                                                                                                                                          • Wm Morrison Supermarkets
                                                                                                                                                                          • Yorkshire Bank PLC

                                                                                                                                                                          Credit and Debit Cards - UK - July 2011

                                                                                                                                                                          £1,995.00 (Excl.Tax)