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Credit Cards - UK - August 2014

“Reward schemes have the power to influence consumer behaviour and encourage more frequent credit card spending. However, providers need to ensure that not only are cardholders aware of the benefits, but that they are also kept interested and engaged so as to choose to adapt their spending in order to make use of the rewards offered.”
– Chryso Kolakkides, Senior Financial Services Analyst

This report deals with the following issues:

  • Reward schemes have the power to increase credit card spending
  • A new approach is needed to reach today’s switched-on Millennials
  • How can credit cards stand to compete with debit cards in the face of conflicting interests?
  • London buses can help drive contactless card payments

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Table of contents

  1. Introduction

      • Report scope and product definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Gross credit card lending is expected to grow steadily over the next five years
                • Figure 1: Forecast of gross credit card lending (not seasonally adjusted), 2009-19
              • Credit card numbers lag behind debit cards
                • Figure 2: Number of cards in issue, by card type, 2003-13
              • Market factors
                • Net unsecured lending more than tripled in 2013
                  • Consumers see an improvement in their financial situation
                    • Figure 3: Trends in consumers’ current financial situation compared to a year ago, December 2011-May 2014
                  • Credit card debt write-offs are falling…
                    • … but card fraud losses on an upward trend since 2011
                      • Regulatory round-up
                        • Companies, brands and innovation
                          • Barclays and LBG dominant credit card providers at group level
                            • Figure 4: Estimated group share of UK credit and charge card market (rebased to 100%), by share of customers, May 2014
                          • Adspend on credit cards increases by 18% in 2013/14
                            • Who’s innovating?
                              • The consumer
                                • Credit card ownership
                                  • Figure 5: Payment card ownership by consumers who own one or more cards, May 2014
                                • Consumer use of credit cards
                                  • Figure 6: Consumer use of credit cards, May 2014
                                • Consumer use of reward schemes
                                  • Figure 7: Consumer use of reward schemes, May 2014
                                • Attitudes towards reward schemes among users
                                  • Figure 8: Agreement with statements on credit card reward schemes, May 2014
                                • Influential factors for credit card ownership
                                  • Figure 9: Influential factors for credit card ownership, May 2014
                                • What we think
                                • Issues and Insights

                                    • Reward schemes have the power to increase credit card spending
                                      • The facts
                                        • The implications
                                          • A new approach is needed to reach today’s switched-on Millennials
                                            • The facts
                                              • The implications
                                                • How can credit cards stand to compete with debit cards in the face of conflicting interests?
                                                  • The facts
                                                    • The implications
                                                      • London buses can help drive contactless card payments
                                                        • The facts
                                                          • The implications
                                                          • Trend Application

                                                            • Personalisation of credit card reward schemes
                                                              • Preparation drives the younger credit cardholders
                                                                • Mintel’s futures: Access Anything, Anywhere
                                                                • Market Drivers

                                                                  • Key points
                                                                    • Total net unsecured lending more than tripled in 2013
                                                                      • Figure 10: Net consumer lending (non-seasonally adjusted), 2008-13
                                                                    • Consumers see an improvement in their financial situation
                                                                      • Figure 11: Trends in consumers’ current financial situation compared to a year ago, December 2011 – May 2014
                                                                    • Credit card debt write-offs reach a record low
                                                                      • Figure 12: Quarterly write-offs of lending to individuals (non-seasonally adjusted), by sector, March 2008-2014
                                                                    • Credit card interest rates continue to fall while base rate remains unchanged
                                                                      • Figure 13: Official bank base rate, three-month LIBOR, effective overdraft and credit card interest rates (monthly average), January 2007-June 2014
                                                                    • Card fraud losses have been growing since 2011
                                                                      • Figure 14: Annual plastic fraud losses on UK-issued cards, 2008-13
                                                                    • Regulatory round-up
                                                                      • FCA to probe credit card market
                                                                        • European Parliament votes for EU cap on interchange fees
                                                                          • London buses go contactless from July 2014
                                                                            • London black cabs could be forced to take card payments within two years
                                                                            • Competitor Products

                                                                              • Key points
                                                                                • Credit card numbers lag behind debit cards
                                                                                  • Figure 15: Number of cards in issue, by card type, 2003-13
                                                                                • Cash payments are declining while the use of debit cards is on the rise
                                                                                  • Figure 16: Total volume of payments in the UK, by payment method, 2003, 2008 and 2013
                                                                                • Credit cards continue to account for the majority of gross unsecured credit lending
                                                                                  • Figure 17: Gross consumer credit lending, by type, 2008-13
                                                                              • Who’s Innovating?

                                                                                • Key points
                                                                                  • Barclaycard steps into mobile point of sale market with Barclaycard Anywhere
                                                                                    • Barclaycard launches bPay contactless payment wristband
                                                                                      • Credit card wars in balance transfer offers continue…
                                                                                        • … while NatWest and RBS have stopped their introductory deals
                                                                                          • Barclaycard scraps its five cashback cards making its credit card range simpler
                                                                                            • Credit cards targeting the adverse credit market
                                                                                            • Market Size and Forecast

                                                                                              • Key points
                                                                                                • Credit card transactions in the UK increased by 5% in 2013
                                                                                                  • Figure 18: Volume and value of transactions for UK purchases, by card type, 2009-13
                                                                                                • Overseas credit card transactions increased by over 40% in 2013
                                                                                                  • Figure 19: Summary of credit and charge card transactions made outside the UK, 2013
                                                                                                • Big growth in net credit card lending
                                                                                                  • Figure 20: Gross and net credit card lending to individuals (non-seasonally adjusted), 2008-13
                                                                                                • Five-year forecast of gross credit card lending
                                                                                                  • Figure 21: Forecast of gross credit card lending (not seasonally adjusted), 2009-19
                                                                                                  • Figure 22: Forecast of gross credit card lending, 2009-19
                                                                                                • Forecast methodology
                                                                                                  • Fan chart explanation
                                                                                                  • Market Share

                                                                                                    • Key points
                                                                                                      • Barclaycard maintains its leading position in the credit card market
                                                                                                        • Figure 23: Ranking of the largest credit and charge card providers in the UK, by share of customers, May 2014
                                                                                                      • Barclays and LBG dominant credit card providers at group level
                                                                                                        • Figure 24: Estimated group share of UK credit and charge card market (rebased to 100%), by share of customers, May 2014
                                                                                                      • MasterCard and Visa dominate the credit and charge card market
                                                                                                        • Figure 25: Credit and charge cards in issue, by card scheme, 2003-13
                                                                                                    • Companies and Products

                                                                                                        • American Express
                                                                                                          • Company description
                                                                                                            • Product range
                                                                                                              • Figure 26: Summary of selected credit cards offered by American Express, UK, July 2014
                                                                                                            • Recent financial performance
                                                                                                              • Figure 27: Key annual financial data for American Express, 2012 and 2013
                                                                                                            • Recent activity
                                                                                                              • Barclaycard
                                                                                                                • Company description
                                                                                                                  • Product range
                                                                                                                    • Figure 28: Summary of selected credit cards offered by Barclaycard, UK, July 2014
                                                                                                                  • Recent financial performance
                                                                                                                    • Figure 29: Key annual financial data for Barclaycard, 2012 and 2013
                                                                                                                  • Recent activity
                                                                                                                    • HSBC Group
                                                                                                                      • Company description
                                                                                                                        • Product range
                                                                                                                          • Figure 30: Summary of selected credit cards offered by HSBC, UK, July 2014
                                                                                                                          • Figure 31: Summary of selected credit cards offered by First Direct and M&S, UK, July 2014
                                                                                                                        • Recent financial performance
                                                                                                                          • Figure 32: Key annual financial data for HSBC Bank Plc, Europe, 2012 and 2013
                                                                                                                        • Recent activity
                                                                                                                          • Lloyds Banking Group (LBG)
                                                                                                                            • Company description
                                                                                                                              • Product range
                                                                                                                                • Figure 33: Summary of selected credit cards offered by Lloyds Bank, UK, July 2014
                                                                                                                                • Figure 34: Summary of selected credit cards offered by Halifax, UK, July 2014
                                                                                                                                • Figure 35: Summary of selected credit cards offered by Bank of Scotland, UK, July 2014
                                                                                                                              • Recent financial performance
                                                                                                                                • Figure 36: Key annual financial data for Lloyds Banking Group, 2012 and 2013
                                                                                                                              • Recent activity
                                                                                                                                • MBNA Europe
                                                                                                                                  • Company description
                                                                                                                                    • Product range
                                                                                                                                      • Figure 37: Summary of selected credit cards offered by MBNA, UK, July 2014
                                                                                                                                      • Figure 38: Credit card offered by Virgin Money (and issued by MBNA)
                                                                                                                                    • Recent activity
                                                                                                                                      • RBS Group
                                                                                                                                        • Company description
                                                                                                                                          • Product range
                                                                                                                                            • Figure 39: Summary of credit cards offered by RBS and NatWest, July 2014
                                                                                                                                          • Recent financial performance
                                                                                                                                            • Figure 40: Key annual financial data for RBS Group, 2012-13
                                                                                                                                          • Recent activity
                                                                                                                                          • Brand Research

                                                                                                                                            • Brand map
                                                                                                                                                • Figure 41: Attitudes towards and usage of brands in the credit card sector, June 2014
                                                                                                                                              • Correspondence analysis
                                                                                                                                                • Brand attitudes
                                                                                                                                                  • Figure 42: Attitudes, by credit card brand, June 2014
                                                                                                                                                • Brand personality
                                                                                                                                                  • Figure 43: Credit card brand personality – macro image, June 2014
                                                                                                                                                  • Figure 44: Credit card brand personality – micro image, June 2014
                                                                                                                                                • Brand experience
                                                                                                                                                  • Figure 45: Credit card brand usage, June 2014
                                                                                                                                                  • Figure 46: Satisfaction with various credit card brands, June 2014
                                                                                                                                                  • Figure 47: Consideration of credit card brands, June 2014
                                                                                                                                                  • Figure 48: Consumer perceptions of current credit card brand performance, June 2014
                                                                                                                                                • Brand recommendation
                                                                                                                                                  • Figure 49: Recommendation of selected credit card brands, June 2014
                                                                                                                                              • Brand Communication and Promotion

                                                                                                                                                • Key points
                                                                                                                                                  • Adspend on credit cards increased by 18% in 2013/14
                                                                                                                                                    • Figure 50: Advertising expenditure on payment cards, by card type, 2011/12-2013/14
                                                                                                                                                  • Top 10 advertisers account for over 88% of adspend in the credit and charge card market
                                                                                                                                                    • Figure 51: Top 10 advertisers of credit and charge cards, 2011/12-2013/14
                                                                                                                                                  • Direct mail continues to dominate the credit and charge card market
                                                                                                                                                    • Figure 52: Adspend on credit and charge cards, by media type, 2011/12 – 2013/14
                                                                                                                                                  • A note on adspend
                                                                                                                                                  • Channels to Market

                                                                                                                                                    • Key points
                                                                                                                                                      • 45% of credit card holders applied for their cards online
                                                                                                                                                        • Figure 53: Channels used to apply for a credit card, May 2014
                                                                                                                                                      • Applications in bank and building society branches still popular
                                                                                                                                                        • More than three quarters of internet users manage their credit cards online
                                                                                                                                                          • Figure 54: Agreement with the statement ‘I tend to manage my credit card(s) online’, by age, May 2014
                                                                                                                                                      • Credit Card Ownership

                                                                                                                                                        • Key points
                                                                                                                                                          • Survey background
                                                                                                                                                            • Nearly two thirds of adults have a credit card
                                                                                                                                                              • Figure 55: Payment card ownership, May 2014
                                                                                                                                                            • Credit card ownership increases with age
                                                                                                                                                              • Figure 56: Credit card ownership, by age, May 2014
                                                                                                                                                            • Credit cards most popular among the higher earners
                                                                                                                                                              • Figure 57: Card ownership, by gross personal income, May 2014
                                                                                                                                                              • Figure 58: Card ownership, by current financial situation, May 2014
                                                                                                                                                          • Consumer Use of Credit Cards

                                                                                                                                                            • Key points
                                                                                                                                                              • Credit cards remain more popular for expensive items rather than everyday expenditure
                                                                                                                                                                  • Figure 59: Consumer use of credit cards, May 2014
                                                                                                                                                                • Young people more mindful of their credit score…
                                                                                                                                                                  • Figure 60: Consumer use of credit cards, by age, May 2014
                                                                                                                                                                • … but also checking their credit score before a credit card application
                                                                                                                                                                  • More than two thirds of adults pay off their credit card balance in full every month
                                                                                                                                                                    • Figure 61: Consumer use of credit cards, by gross personal income, May 2014
                                                                                                                                                                    • Figure 62: Agreement with the statement “I usually pay off my full credit card balance every month”, by housing situation, May 2014
                                                                                                                                                                  • Balance transfers more appealing to those with three or more credit cards
                                                                                                                                                                    • Figure 63: Consumer use of credit cards, by number of credit cards owned
                                                                                                                                                                • Consumer Use of Reward Schemes

                                                                                                                                                                  • Key points
                                                                                                                                                                    • 13% of adults are unsure if their credit card has a rewards scheme
                                                                                                                                                                        • Figure 64: Consumer use of reward schemes, May 2014
                                                                                                                                                                      • Reward schemes are clearly affecting spending behaviour…
                                                                                                                                                                          • Figure 65: General consumer use of credit cards, by consumer use of reward schemes, May 2014
                                                                                                                                                                        • … and appear to be an effective retention tool
                                                                                                                                                                          • Figure 66: Agreement with the statement “I have transferred my outstanding balance to a lower-rate credit card in the last year”, by consumer use of reward schemes, May 2014
                                                                                                                                                                        • Older adults are more likely to take advantage of their credit card rewards schemes
                                                                                                                                                                          • Figure 67: Consumer use of reward schemes, by age, May 2014
                                                                                                                                                                        • Create greater personalisation and interaction to increase engagement
                                                                                                                                                                        • Attitudes towards Reward Schemes among Users

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Cashback preferred over reward schemes by 35% of scheme members
                                                                                                                                                                              • Figure 68: Agreement with statements on credit card reward schemes, May 2014
                                                                                                                                                                              • Figure 69: Agreement with the statement ‘I would prefer to earn cashback on my credit card purchases instead of reward points’, by current financial situation compared to a year ago, May 2014
                                                                                                                                                                            • One third of credit card holders do not think it is worth paying for reward schemes
                                                                                                                                                                              • Frequent credit card users are more engaged with their reward scheme
                                                                                                                                                                                • Figure 70: Consumer use of reward schemes, by agreement with the statement ‘I use my credit card(s) for everyday expenditure’, May 2014
                                                                                                                                                                                • Figure 71: Consumer use of reward schemes, by number of credit cards owned, May 2014
                                                                                                                                                                            • Influential Factors for Credit Card Ownership

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Over half of adults consider not having to pay a credit card fee as an important factor
                                                                                                                                                                                  • Figure 72: Influential factors for credit card ownership, May 2014
                                                                                                                                                                                • More affluent consumers consider travel benefits as important…
                                                                                                                                                                                  • Figure 73: Influential factors for credit card ownership, by gross annual household income, May 2014
                                                                                                                                                                                • … while consumers with limited savings are more likely to look for a low interest rate
                                                                                                                                                                                  • Figure 74: Influential factors for credit card ownership, by value of savings, May 2014
                                                                                                                                                                                  • Figure 75: Influential factors for credit card ownership, by current financial situation, May 2014
                                                                                                                                                                                • ‘Soft searches’ considered important by 23% of consumers either struggling or in trouble financially
                                                                                                                                                                                  • Preference for cashback is stronger among the more engaged consumers
                                                                                                                                                                                    • Figure 76: Influential factors for credit card ownership, by consumer use of reward schemes, May 2014
                                                                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                                                                    • Figure 77: Volume and value of transactions for UK purchases, by card type, 2009-13
                                                                                                                                                                                    • Figure 78: Volume and value of cash withdrawals, by card type, 2009-13
                                                                                                                                                                                    • Figure 79: Forecast of gross credit card lending, 2009-19
                                                                                                                                                                                    • Figure 80: Forecast of gross credit card lending, best and worst-case scenario, 2014-18
                                                                                                                                                                                • Appendix – Market Share

                                                                                                                                                                                    • Figure 81: Market share of credit and charge card providers, by demographics, May 2014
                                                                                                                                                                                    • Figure 82: Market share of credit and charge card providers, by demographics, May 2014 (continued)
                                                                                                                                                                                    • Figure 83: Market share of credit and charge card providers, by demographics, May 2014 (continued)
                                                                                                                                                                                    • Figure 84: Market share of credit and charge card providers, by demographics, May 2014 (continued)
                                                                                                                                                                                    • Figure 85: Market share of credit and charge card providers, by demographics, May 2014 (continued)
                                                                                                                                                                                • Appendix – Brand Research

                                                                                                                                                                                    • Figure 86: Brand usage, June 2014
                                                                                                                                                                                    • Figure 87: Brand commitment, June 2014
                                                                                                                                                                                    • Figure 88: Brand momentum, June 2014
                                                                                                                                                                                    • Figure 89: Brand diversity, June 2014
                                                                                                                                                                                    • Figure 90: Brand satisfaction, June 2014
                                                                                                                                                                                    • Figure 91: Brand recommendation, June 2014
                                                                                                                                                                                    • Figure 92: Brand attitude, June 2014
                                                                                                                                                                                    • Figure 93: Brand image – macro image, June 2014
                                                                                                                                                                                    • Figure 94: Brand image – micro image, June 2014
                                                                                                                                                                                • Appendix – Channels to Market

                                                                                                                                                                                    • Figure 95: Channels used to apply for a credit card, by demographics, May 2014
                                                                                                                                                                                    • Figure 96: Channels used to apply for a credit card, by demographics, May 2014 (continued)
                                                                                                                                                                                • Appendix – Credit Card Ownership

                                                                                                                                                                                    • Figure 97: Credit card ownership – Debit card, by demographics, May 2014
                                                                                                                                                                                    • Figure 98: Credit card ownership – Credit card, by demographics, May 2014
                                                                                                                                                                                    • Figure 99: Credit card ownership – Store card, by demographics, May 2014
                                                                                                                                                                                    • Figure 100: Credit card ownership – Prepaid card, by demographics, May 2014
                                                                                                                                                                                    • Figure 101: Credit card ownership – Charge card, by demographics, May 2014
                                                                                                                                                                                • Appendix – Consumer Use of Credit Cards

                                                                                                                                                                                    • Figure 102: Response to the statement “I use my credit card(s) to pay for large/expensive items such as holiday bookings”, by demographics, May 2014
                                                                                                                                                                                    • Figure 103: Response to statement “I use my credit card(s) for everyday expenditures, such as groceries”, by demographics, May 2014
                                                                                                                                                                                    • Figure 104: Response to statement “I tend to manage my credit card(s) online”, by demographics, May 2014
                                                                                                                                                                                    • Figure 105: Response to statement “I usually pay off my full credit card balance every month”, by demographics, May 2014
                                                                                                                                                                                    • Figure 106: Response to statement “I checked my credit score before I applied for my most recent credit card”, by demographics, May 2014
                                                                                                                                                                                    • Figure 107: Response to statement “I have an idea of what my credit score is”, by demographics, May 2014
                                                                                                                                                                                    • Figure 108: Response to statement “I use my credit card(s) to improve my credit rating”, by demographics, May 2014
                                                                                                                                                                                    • Figure 109: Response to statement “I have transferred my outstanding balance to a lower-rate credit card in the last year”, by demographics, May 2014
                                                                                                                                                                                    • Figure 110: Response to statement “I use different credit cards for different purposes”^, by demographics, May 2014
                                                                                                                                                                                • Appendix – Consumer Use of Reward Schemes

                                                                                                                                                                                    • Figure 111: Consumer use of credit card reward schemes, by demographics, May 2014
                                                                                                                                                                                • Appendix – Attitudes towards Reward Schemes among Users

                                                                                                                                                                                    • Figure 112: Agreement with statements on attitudes toward reward schemes, by attitudes towards reward schemes, May 2014
                                                                                                                                                                                    • Figure 113: Agreement with statements on credit card reward schemes, by demographics, May 2014
                                                                                                                                                                                    • Figure 114: Agreement with statements on credit card reward schemes, by demographics, May 2014 (continued)
                                                                                                                                                                                • Appendix – Influential Factors for Credit Card Ownership

                                                                                                                                                                                    • Figure 115: Influential factors for credit card ownership, by demographics, May 2014
                                                                                                                                                                                    • Figure 116: Influential factors for credit card ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                    • Figure 117: Influential factors for credit card ownership, by demographics, May 2014 (continued)

                                                                                                                                                                                Credit Cards - UK - August 2014

                                                                                                                                                                                US $2,648.76 (Excl.Tax)