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Travel Money - UK - December 2012

“Foreign currency and debit/credit cards continue to be the most popular methods of spending abroad, with most other products overlooked by the majority of consumers. Uptake of currency cards is still relatively low, despite this being the main area of innovation, with only one in two adults having heard about this product. Currency card providers need to increase product awareness, while focusing on the security element of these products in their advertising campaigns – in order to broaden their appeal to consumers that prefer to leave their debit/credit cards at home when travelling overseas.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • Have distribution channels changed in the travel money market?
  • Are prepaid cards now more popular than travellers cheques?
  • What are the most important factors when consumers arrange travel money?
  • Can providers develop and offer bundle packages to travellers?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Value of overseas spending is expected to increase from 2014
              • Figure 1: Forecast for annual spending abroad by UK residents, 2007-17
            • Channels to market
              • Market factors
                • Overseas holiday numbers remain below peak levels
                  • New measures coming in at the end of 2012 following a review by the OFT
                    • More adults choosing to go on package and all-inclusive holidays
                      • Weakness of Sterling means consumers getting less currency for their money
                        • Companies, brands and innovations
                          • Post Office is the number one player in the travel money market
                            • Brand promotion
                              • Who’s innovating?
                                • The consumer
                                  • Travel and holiday trends
                                    • Figure 2: Holidays taken in the last 12 months, August 2012
                                  • Methods of spending abroad
                                    • Figure 3: Travel money usage, August 2012
                                  • Travel money arrangements
                                    • Figure 4: Travel money arrangement, August 2012
                                  • Amount of foreign currency taken
                                    • Figure 5: Amount of currency taken abroad, August 2012
                                  • Important factors when arranging travel money
                                    • Figure 6: Important factors when arranging travel money, August 2012
                                  • Consumer attitudes towards currency cards
                                    • Figure 7: Currency card attitudes, August 2012
                                  • Consumer attitudes towards travel money
                                    • Figure 8: Attitudes towards travel money and spending, August 2012
                                  • What we think
                                  • Issues in the Market

                                      • Have distribution channels changed in the travel money market?
                                        • Are prepaid cards now more popular than travellers cheques?
                                          • What are the most important factors when consumers arrange travel money?
                                            • Can providers develop and offer bundle packages to travellers?
                                            • Trend Application

                                              • A one stop shop for travellers holiday needs
                                                • Facilitating currency exchange between overseas travellers
                                                  • 2015: Access Anything, Anywhere
                                                  • Market Drivers

                                                    • Key points
                                                      • Holiday numbers remain significantly down from 2008 levels
                                                        • Figure 9: Number of overseas visits by UK residents, by purpose of visit, 2006-11
                                                      • Europe is the most popular destination for UK holidaymakers
                                                        • Figure 10: Number of overseas visits by UK residents, by region visited, 2006-11
                                                      • OFT’s measures to improve the foreign currency market to begin by end of 2012…
                                                        • …and should benefit overseas travellers
                                                          • Growing number of travellers taking package and all-inclusive holidays
                                                            • Increase in the number of consumers with homes abroad
                                                              • Figure 11: Number of English households with a second home abroad (three-year moving averages), 2000/01-2009/10
                                                            • Economic uncertainty is a challenge for consumers and the travel money market
                                                              • Figure 12: GDP quarterly percentage change, Q1 2008-Q3 2012
                                                            • Holidays are still important to consumers
                                                              • Figure 13: What people choose to spend any extra money on, November 2012
                                                            • Holidaymakers still getting less for their money
                                                              • Figure 14: Spot exchange rates, US dollar and euro into Pound Sterling, January 2008-November 2012
                                                          • SWOT Analysis

                                                              • Figure 15: Travel money – SWOT analysis, 2012
                                                          • Who’s Innovating?

                                                            • Key points
                                                              • Prepaid cards expanding their services
                                                                • Promotion goes online
                                                                  • Technological innovation focus on mobile apps…
                                                                    • …but ‘e-wallets’ are something to watch in the future
                                                                    • Market Size and Forecast

                                                                      • Key points
                                                                        • Overseas spending has been relatively flat over the last three years
                                                                          • Figure 16: Annual spending abroad by UK residents, at current prices, 2007-12
                                                                        • Holiday visits account for around 68% of overseas spending
                                                                          • Figure 17: Annual spending abroad by UK residents, by purpose of visit, 2004-11
                                                                        • Overseas spending largely channelled to European destinations
                                                                          • Figure 18: Annual spending abroad by UK residents, by region of visit, 2004-11
                                                                        • Gap between the value of debit and credit card transactions is closing
                                                                          • Figure 19: Volume and value of credit and debit cards purchases outside the UK, by type, 2003-11
                                                                        • Market forecast
                                                                          • Value of overseas spending is expected to increase from 2014
                                                                            • Figure 20: Forecast for annual spending abroad by UK residents, 2007-17
                                                                            • Figure 21: Annual spending abroad by UK residents, at current and constant prices, 2007-17
                                                                          • Forecast methodology
                                                                            • Fan chart explanation
                                                                            • Market Share

                                                                              • Key points
                                                                                • Post Office is the number one player in the travel money market
                                                                                  • Figure 22: Travel money market share, August 2012
                                                                                • Lloyds TSB, Barclays and NatWest are the top three current account providers
                                                                                  • Figure 23: Main current account provider, by individual brand, April 2012
                                                                              • Companies and Products

                                                                                • American Express
                                                                                  • Company description
                                                                                    • Product range
                                                                                      • Key data
                                                                                        • Figure 24: Key financial data for American Express Payment Services Limited, 2010-11
                                                                                      • Marketing and promotion
                                                                                        • Barclays/Barclaycard
                                                                                          • Company description
                                                                                            • Product range
                                                                                              • Key data
                                                                                                • Figure 25: Key financial data for Barclays Group, 2010-11
                                                                                              • Marketing and promotion
                                                                                                • Caxton FX
                                                                                                  • Company description
                                                                                                    • Product range
                                                                                                      • Key data
                                                                                                        • Figure 26: Key financial data for Caxton FX, 2011-12
                                                                                                      • Recent activity
                                                                                                        • Marketing and promotion
                                                                                                          • FairFX
                                                                                                            • Company description
                                                                                                              • Product range
                                                                                                                • Key data
                                                                                                                  • Figure 27: Key financial data for Fair Fx, 2010-11
                                                                                                                • Recent activity
                                                                                                                  • M&S Bank
                                                                                                                    • Company description
                                                                                                                      • Product range
                                                                                                                        • Key data
                                                                                                                          • Figure 28: Key financial data for Marks & Spencer UK, 2010-11
                                                                                                                        • Recent activity
                                                                                                                          • Marketing and promotion
                                                                                                                            • Post Office
                                                                                                                              • Company description
                                                                                                                                • Product range
                                                                                                                                  • Key data
                                                                                                                                    • Figure 29: Key financial data for Royal Mail Group, 2010-11
                                                                                                                                  • Recent activity
                                                                                                                                    • Marketing and promotion
                                                                                                                                      • Thomas Cook
                                                                                                                                        • Company description
                                                                                                                                          • Product range
                                                                                                                                            • Key data
                                                                                                                                              • Figure 30: Key financial data for Thomas Cook UK, 2010-11
                                                                                                                                            • Marketing and promotion
                                                                                                                                              • Travelex
                                                                                                                                                • Company description
                                                                                                                                                  • Product range
                                                                                                                                                    • Key data
                                                                                                                                                      • Figure 31: Key financial data for Travelex UK ltd, 2010-11
                                                                                                                                                    • Recent activity
                                                                                                                                                      • Marketing and promotion
                                                                                                                                                        • TUI Travel
                                                                                                                                                          • Background
                                                                                                                                                            • Financial performance and strategy
                                                                                                                                                              • Figure 32: Financial performance of TUI Travel Plc, 2010-11
                                                                                                                                                            • Recent activity
                                                                                                                                                              • Marketing and promotion
                                                                                                                                                              • Brand Communication and Promotion

                                                                                                                                                                • Key points
                                                                                                                                                                  • Adspend is significantly down from 2008/09 levels
                                                                                                                                                                    • Figure 33: Topline advertising expenditure in the travel money market, 2007/08-2011/12*
                                                                                                                                                                  • The Post Office and M&S Bank account for 72% of total adspend
                                                                                                                                                                    • Figure 34: Top 10 advertisers of travel money services, 2007/08-2011/12
                                                                                                                                                                • Channels to Market

                                                                                                                                                                  • Key points
                                                                                                                                                                    • A large number of adults use online resources to compare the best rates
                                                                                                                                                                      • Figure 35: Agreement with the statement ‘I use the internet to compare the best rates’, August 2012
                                                                                                                                                                    • Branch business is still the dominant sales channel
                                                                                                                                                                      • Figure 36: Sales channels used for foreign currency in the UK, 2008-10
                                                                                                                                                                  • Travel and Holiday Trends

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Around 55% of internet users holidayed abroad in the last 12 months
                                                                                                                                                                        • Figure 37: Holidays taken in the last 12 months, August 2012
                                                                                                                                                                      • Only a small proportion of consumers take multiple holidays abroad
                                                                                                                                                                        • Figure 38: Number of holidays taken abroad in the last year, August 2012
                                                                                                                                                                      • Income and socio-economic standing are highly influential on holiday trends
                                                                                                                                                                        • Figure 39: Holidays taken in the last 12 months, by socio-economic grouping and gross annual household income, August 2012
                                                                                                                                                                      • Londoners are more likely to travel abroad
                                                                                                                                                                        • Figure 40: Holidays taken in the last 12 months, by region, August 2012
                                                                                                                                                                      • Independent holidays are most popular with consumers
                                                                                                                                                                        • Figure 41: Type of holiday taken, August 2012
                                                                                                                                                                    • Methods of Spending Abroad

                                                                                                                                                                      • Key points
                                                                                                                                                                        • The majority of travellers take some foreign currency when going abroad
                                                                                                                                                                          • Figure 42: Travel money usage, August 2012
                                                                                                                                                                        • Currency card usage overtakes travellers cheques
                                                                                                                                                                          • Product usage influenced by a number of factors
                                                                                                                                                                            • Travel destination has an impact on preferred methods of spending
                                                                                                                                                                              • Figure 43: Methods of spending abroad, by travel and holiday trends, August 2012
                                                                                                                                                                          • Arranging Travel Money

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Post Office is the most popular way to arrange travel money
                                                                                                                                                                                • Figure 44: Travel money arrangement, August 2012
                                                                                                                                                                              • Retailers, airports and other sources account for some business
                                                                                                                                                                                • Travellers to Asia are more likely to purchase currency at destination
                                                                                                                                                                                  • Figure 45: Travel money arrangement, by destination of holidays taken in the last 12 months, August 2012
                                                                                                                                                                                • Travel agents are more popular among travellers on all-inclusive and package holidays
                                                                                                                                                                                  • Figure 46: Travel money arrangement, by type of holiday taken, August 2012
                                                                                                                                                                              • Amount of Foreign Currency Taken

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • One in two travellers takes between £250-1,000 when leaving the UK
                                                                                                                                                                                    • Figure 47: Amount of currency taken abroad, August 2012
                                                                                                                                                                                  • Higher earners more likely to take higher amounts of foreign currency
                                                                                                                                                                                    • Figure 48: Amount of currency taken abroad, by gross household income, August 2012
                                                                                                                                                                                  • Currency cards and travellers cheques more popular when taking higher sums
                                                                                                                                                                                    • Figure 49: Travel money usage, by amount of currency taken abroad, August 2012
                                                                                                                                                                                • Important Factors When Arranging Travel Money

                                                                                                                                                                                  • Key points
                                                                                                                                                                                    • Commission-free services and exchange rates are most important factors
                                                                                                                                                                                      • Figure 50: Important factors when arranging travel money, August 2012
                                                                                                                                                                                    • Holidaymakers are even more likely to emphasise the importance of exchange rates
                                                                                                                                                                                      • Figure 51: Important factors when arranging travel money, by holidays taken in the last 12 months, August 2012
                                                                                                                                                                                    • All-inclusive travellers more likely to emphasise buy back guarantee
                                                                                                                                                                                      • Figure 52: Important factors when arranging travel money, by type of holiday taken, August 2012
                                                                                                                                                                                    • Buying currency from banks appeals to those wanting to order online
                                                                                                                                                                                      • Figure 53: Important factors when arranging travel money, by travel money arrangement, August 2012
                                                                                                                                                                                    • Travellers taking over £1,000 most likely to seek a buy back guarantee
                                                                                                                                                                                      • Figure 54: Important factors when arranging travel money, by amount of currency taken abroad, August 2012
                                                                                                                                                                                  • Consumer Attitudes Towards Currency Cards

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Security and budgeting aspects of currency cards are appealing
                                                                                                                                                                                        • Figure 55: Attitudes towards currency cards, August 2012
                                                                                                                                                                                      • Lack of awareness and perceived hassle are a sticking point
                                                                                                                                                                                        • Awareness is higher among more affluent consumers
                                                                                                                                                                                          • Figure 56: Attitudes towards currency cards, by gross annual household income, August 2012
                                                                                                                                                                                        • Users are much more positive about currency cards
                                                                                                                                                                                          • Figure 57: Currency card attitudes, by travel money usage, August 2012
                                                                                                                                                                                      • Consumer Attitudes Towards Travel Money

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Majority of consumer prefer to have some foreign currency when travelling
                                                                                                                                                                                            • Figure 58: Attitudes towards travel money and spending, August 2012
                                                                                                                                                                                          • Credit/debit cards are a convenience for some, a risk for others
                                                                                                                                                                                            • Travellers taking higher amounts are more likely to shop around
                                                                                                                                                                                              • Figure 59: Attitudes towards shopping around for travel money, by amount of currency taken abroad, August 2012
                                                                                                                                                                                            • Buy back guarantees more important to those that exchange currency on return
                                                                                                                                                                                              • Figure 60: Important factors when arranging travel money, by agreement with the statement ‘I exchange all leftover foreign currency when I come back to the UK’, August 2012
                                                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                                                              • Figure 61: Best and worst case forecast for total value of annual spending abroad by UK residents, 2012-17
                                                                                                                                                                                          • Appendix – Travel and Holiday Trends

                                                                                                                                                                                              • Figure 62: Most popular holiday destinations by demographics, August 2012
                                                                                                                                                                                              • Figure 63: Next most popular holidays destinations, by demographics, August 2012
                                                                                                                                                                                              • Figure 64: Type of holiday taken, by demographics, August 2012
                                                                                                                                                                                              • Figure 65: Types of holidays taken abroad, by demographics, August 2012
                                                                                                                                                                                          • Appendix – Methods of Spending Abroad

                                                                                                                                                                                              • Figure 66: Travel money usage, by demographics, August 2012
                                                                                                                                                                                          • Appendix – Arranging Travel Money

                                                                                                                                                                                              • Figure 67: Most popular travel money arrangement, by demographics, August 2012
                                                                                                                                                                                              • Figure 68: Next most popular travel money arrangement, by demographics, August 2012
                                                                                                                                                                                          • Appendix – Amount of Foreign Currency Taken

                                                                                                                                                                                              • Figure 69: Amount of currency taken, by demographics, August 2012
                                                                                                                                                                                          • Appendix – Important Factors When Arranging Travel Money

                                                                                                                                                                                              • Figure 70: Importance of best exchange rate when arranging travel money, by demographics, August 2012
                                                                                                                                                                                              • Figure 71: Importance of a commission-free service when arranging travel money, by demographics, August 2012
                                                                                                                                                                                              • Figure 72: Importance of a convenient location when arranging travel money, by demographics, August 2012
                                                                                                                                                                                              • Figure 73: Importance of no minimum purchase limit when arranging travel money, by demographics, August 2012
                                                                                                                                                                                              • Figure 74: Importance of a buy back guarantee when arranging travel money, by demographics, August 2012
                                                                                                                                                                                              • Figure 75: Importance of a free delivery service of foreign currency when arranging travel money, by demographics, August 2012
                                                                                                                                                                                              • Figure 76: Importance of an option to order currency online when arranging travel money, by demographics, August 2012
                                                                                                                                                                                          • Appendix – Consumer Attitudes Towards Currency Cards

                                                                                                                                                                                              • Figure 77: Agreement with the statements ‘I like the fact that you cannot spend more than the amount pre-loaded onto the card’ and ‘I like the security of using a card that is not linked to your debit/credit card’, by demographics, August 2012
                                                                                                                                                                                              • Figure 78: Agreement with the statements ‘I have never heard of these cards’ and ‘I think that these cards are a good idea’, by demographics, August 2012
                                                                                                                                                                                              • Figure 79: Agreement with the statements ‘I can’t really see the advantage of using a pre-paid currency card’ and ‘I think these cards are more hassle than buying foreign currency’, by demographics, August 2012
                                                                                                                                                                                          • Appendix – Consumer Attitudes Towards Travel Money

                                                                                                                                                                                              • Figure 80: Agreement with the statements ‘I always like to have some local currency on me when I am on holiday’, by demographics, August 2012
                                                                                                                                                                                              • Figure 81: Agreement with the statements ‘I would only buy travel money after shopping around for the best rate’ and ‘I exchange all leftover foreign currency when I come back to the UK’, by demographics, August 2012
                                                                                                                                                                                              • Figure 82: Agreement with the statements ‘I tend to organise my travel money at the last minute’ and ‘I use the internet to compare the best rates’, by demographics, August 2012
                                                                                                                                                                                              • Figure 83: Agreement with the statements ‘It is best to leave your debit/credit cards at home when travelling abroad’ and ‘Taking a card is more convenient than arranging other forms of travel money’, by demographics, August 2012
                                                                                                                                                                                              • Figure 84: Attitudes towards travel money, by methods of spending abroad, August 2012

                                                                                                                                                                                          Companies Covered

                                                                                                                                                                                          • American Express UK
                                                                                                                                                                                          • Barclaycard
                                                                                                                                                                                          • Barclays Bank plc
                                                                                                                                                                                          • Channel 4
                                                                                                                                                                                          • Facebook, Inc.
                                                                                                                                                                                          • First Choice Holidays & Flights Ltd
                                                                                                                                                                                          • Google, Inc.
                                                                                                                                                                                          • HSBC Investments (UK) Limited
                                                                                                                                                                                          • Marks & Spencer
                                                                                                                                                                                          • MasterCard UK
                                                                                                                                                                                          • Post Office Limited
                                                                                                                                                                                          • The Prince's Trust
                                                                                                                                                                                          • Thomas Cook Group PLC
                                                                                                                                                                                          • Thomson Holidays
                                                                                                                                                                                          • Travelex
                                                                                                                                                                                          • TUI UK

                                                                                                                                                                                          Travel Money - UK - December 2012

                                                                                                                                                                                          £1,995.00 (Excl.Tax)