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Travel Money - UK - January 2010

This report covers the overall UK travel money market, as well as the individual sectors within the market, namely foreign-currency exchange/bureau de change, spending on credit and debit cards abroad, prepaid travel cards and travellers’ cheques.

  • Mintel estimates that total spending abroad by UK residents will fall by 18% in 2009, from £36.8 billion in 2008 to £30.1 billion in 2009.
  • Although consumers have cut back on holidays abroad during the recession, over the long term, the number of people taking holidays (and indeed multiple holidays) abroad has increased, with independent holidays also becoming more popular.
  • According to Mintel's consumer reaserch, pre-departure foreign currency is the most common method of spending abroad, with four fifths of recent holidaymakers (16.4 million people) buying foreign currency in the UK before their trip.
  • The use of travellers’ cheques continues to decline, having lost out to plastic cards. According to one trade source, the market is declining at a rate of around 20-30% per year.
  • Plastic cards are a major growth segment. Debit cards account for the vast majority of cash withdrawals abroad – 89% (£6.7 billion) in 2008, while credit cards account for the majority of all purchases abroad – 67% (£11.6 billion) in 2008.
  • Prepaid travel cards are tipped to be a major growth area although Mintel's consumer research shows that just 2% of people who have been abraod in the last 12 months use them. A lack of awareness is key here - half of the people we asked had never heard of these cards before.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Market definitions and scope of the report
          • Abbreviations
          • Future Opportunities

            • Increasing transparency in the prepaid travel card sector
              • Mintel’s Consistency trend helps frame the argument
                • How can online providers penetrate the foreign currency market?
                  • A new targeting strategy – the Rise of the Screenager
                    • Bundled travel money products could also benefit online providers
                    • Market in Brief

                      • The travel money market declined in 2009
                        • Figure 1: Annual spending abroad, by UK residents, at current prices, 2004-09
                      • People cut back on holidays in 2009…
                        • …but the long-term outlook is much better
                          • A diverse market, with a number of different sectors
                            • Figure 2: Estimated size of the travel money market customer base, November 2009
                          • Spending on debit cards abroad has increased significantly
                            • Figure 3: Volume and value of foreign credit and debit card transactions, by type, 2003-08
                          • The Post Office is the leading foreign currency provider
                            • When it comes to arranging foreign currency, the branch is key
                              • Figure 4: Sources used to buy foreign currency in the UK, November 2009
                            • Most people take foreign currency with them when they go abroad
                              • ABs like the safety and convenience of plastic
                                • Figure 5: Attitudes towards spending abroad, November 2009
                              • Awareness of prepaid travel cards is extremely low
                              • Internal Market Environment

                                • Key points
                                  • Most people don’t have a choice when it comes to foreign currency
                                    • More people taking all-inclusive holidays in 2009
                                      • Fewer people travelling abroad during the recession
                                        • Figure 6: Number of overseas visits by UK residents, by purpose of visit, 2003-08
                                      • 2009 – the year of the staycation
                                        • More people are visiting countries outside of the eurozone
                                          • Figure 7: Number of overseas visits by UK residents, by region visited, 2003-08
                                        • People spend more money on visits to non-European countries
                                          • Growth in the number of people with a second home abroad
                                            • Figure 8: Number of English households with a second home abroad (three-year moving averages), 2000/01- 2007/08
                                          • The eurozone is expanding
                                          • Broader Market Environment

                                            • Key points
                                              • Consumer confidence has started to increase again
                                                • Figure 9: Monthly, three-monthly and 12-monthly UK consumer confidence index, January 1982-September 2009
                                              • Long-term growth in PDI is good news for travel money providers…
                                                • Figure 10: UK population aged 16+, PDI and consumer expenditure (at constant 2004 prices and per capita), 2004-14
                                              • …as is the growing number of affluent consumers
                                                • Figure 11: Structure of the UK population, by socio-economic group, 2004-14
                                              • Unemployment has increased during the recession
                                                • Figure 12: UK unemployment levels (seasonally adjusted), 2002-09
                                              • An ageing population – changing holiday trends
                                                • Figure 13: Structure of the UK population, by lifestage, 2004-14
                                              • The value of the Pound has fallen
                                                • Figure 14: Pounds Sterling to euro and US Dollar currency rates, January 2007-October 2009
                                            • SWOT Analysis

                                                • Figure 15: Travel money – SWOT analysis, 2009
                                            • Who’s Innovating?

                                              • Key points
                                                • Prepaid travel cards – a growth segment
                                                  • Foreign-currency ATMs becoming more popular
                                                    • MasterCard launches a new travel website
                                                      • Other developments
                                                      • Trade Perspective

                                                        • A mixed approach with regards to travel money
                                                          • Holiday trends are changing
                                                            • Consumers are more rate-sensitive now
                                                              • A lot of support for prepaid cards, and their benefits…
                                                                • …but also some issues that need to be addressed
                                                                  • Some prepaid card users are very savvy
                                                                    • The decline of travellers’ cheques continues
                                                                      • Market size commentary
                                                                      • Market Size and Forecast

                                                                        • Key points
                                                                          • The size of the market is expected to decline by 18% in 2009
                                                                            • Figure 16: Annual spending abroad by UK residents, at current prices, 2004-09
                                                                          • Holidays account for the majority of all overseas spending
                                                                            • Figure 17: Annual spending abroad by UK residents, by purpose of visit, 2004-08
                                                                          • Europe accounts for the majority of all spending abroad
                                                                            • Figure 18: Annual spending abroad by UK residents, by region of visit, 2004-08
                                                                          • Market forecast
                                                                            • Figure 19: Annual spending abroad by UK residents, at current prices, 2004-14
                                                                          • Factors used in this forecast
                                                                          • Market Segmentation – Product Trends

                                                                            • Key points
                                                                              • Cash is still king in the travel money market
                                                                                • Figure 20: Estimated size of the travel money market customer base, November 2009
                                                                              • Debit cards account for 89% of all cash withdrawals abroad…
                                                                                • Figure 21: Volume and value of foreign credit and debit card transactions, by type, 2003-08
                                                                              • …but credit cards account for the majority of purchases
                                                                                • Prepaid travel cards are tipped to be a major growth area
                                                                                  • Declining demand for travellers’ cheques
                                                                                    • Bureaux de change are still a major segment of the market…
                                                                                      • …and don’t forget about overseas visitors to the UK
                                                                                        • Niche alternatives
                                                                                        • Market Share

                                                                                          • Key points
                                                                                            • The Post Office is the leading foreign currency provider
                                                                                              • American Express dominates the travellers’ cheques market
                                                                                                • Lloyds Banking Group is the biggest debit card provider…
                                                                                                  • Figure 22: Main or primary current account providers market share, March 2009
                                                                                                • …and also has the largest market share of credit cards
                                                                                                  • Figure 23: Market share of the main credit card providers, April 2009
                                                                                              • Companies and Products

                                                                                                • Key points
                                                                                                  • Exchange rates vary by channel, provider and even region
                                                                                                    • Figure 24: Margin above euro spot rate for different types of travel money providers, November 2009
                                                                                                  • Prepaid cards are cheaper than credit/debit cards but fees vary
                                                                                                    • Figure 25: Cost of using debit cards versus prepaid travel cards abroad, by selected card issuers, October 2009
                                                                                                  • Company profiles
                                                                                                    • American Express
                                                                                                      • Barclays/Barclaycard
                                                                                                        • Caxton FX
                                                                                                          • FairFX
                                                                                                            • M&S Money
                                                                                                              • Post Office
                                                                                                                • Thomas Cook
                                                                                                                  • Travelex
                                                                                                                  • Brand Communication and Promotion

                                                                                                                    • Key points
                                                                                                                      • Travel money adspend has increased by 49% since 2004/05
                                                                                                                        • Figure 26: Topline travel money adspend*, 2004/05-2008/09
                                                                                                                      • Advertising for prepaid cards has increased substantially
                                                                                                                        • Figure 27: Travel money adspend, by brand category, 2006/07-2008/09
                                                                                                                      • The Post Office is the biggest advertiser of travel money services
                                                                                                                        • Figure 28: Travel money adspend*, by company (top 20 advertisers in 2008/09), 2006/07-2008/09
                                                                                                                      • Press is the most popular method of advertising
                                                                                                                        • Figure 29: Travel money adspend*, by media type, 2008/09
                                                                                                                    • Channels to Market

                                                                                                                      • Key points
                                                                                                                        • When it comes to arranging foreign currency, the branch is key
                                                                                                                          • Figure 30: Sources used to buy foreign currency in the UK, November 2009
                                                                                                                        • People do shop around on the internet, but few buy online
                                                                                                                          • Figure 31: Agreement with statements about buying travel money, November 2009
                                                                                                                        • Travellers’ cheques are sold by third-party distributors
                                                                                                                          • Figure 32: Source used to buy travellers’ cheques, 2006 and 2007
                                                                                                                      • The Consumer – Holiday Trends and Expenditure

                                                                                                                        • Key points
                                                                                                                          • Two fifths of people did not have a holiday last year
                                                                                                                            • Figure 33: Holidays taken in the last 12 months, November 2009
                                                                                                                          • Wealth is key when it comes to having a holiday
                                                                                                                            • Figure 34: Holidays taken in the last 12 months, by destination, by demographics, November 2009
                                                                                                                          • Europe is the most popular destination for UK holidaymakers
                                                                                                                            • Figure 35: Number of holidays abroad taken in the last 12 months, by destination, November 2009
                                                                                                                          • Multiple holidays abroad are reserved for high earners
                                                                                                                            • Figure 36: Number of holidays abroad taken in the last 12 months, by demographics, November 2009
                                                                                                                          • Half of people spend less than £1,500 on holidays abroad
                                                                                                                            • Figure 37: Total amount spent on holidays abroad in the last 12 months, November 2009
                                                                                                                          • Men and middle-aged adults spend the most on holidays abroad
                                                                                                                            • Figure 38: Total amount spent on holidays abroad in the last 12 months, by demographics, November 2009
                                                                                                                          • Couples and married people are also big spenders
                                                                                                                          • The Consumer – Methods of Spending Abroad

                                                                                                                            • Key points
                                                                                                                              • Four fifths of holidaymakers take foreign currency with them
                                                                                                                                • Figure 39: Use of different methods of spending abroad, November 2009
                                                                                                                              • Debit cards are more commonly used for withdrawing cash
                                                                                                                                • Men are more likely to use debit cards abroad
                                                                                                                                  • Figure 40: Use of different methods of spending abroad, by demographics, November 2009
                                                                                                                                • Wealthy people are more likely to use credit cards abroad
                                                                                                                                  • A detailed look at prepaid card holders
                                                                                                                                    • Figure 41: Prepaid card holders, by demographics, 2009
                                                                                                                                  • Most people who take foreign currency with them go to a bank
                                                                                                                                    • Figure 42: Use of different methods of spending abroad, by use of different methods of spending abroad, November 2009
                                                                                                                                  • Savvy consumers use credit cards just for purchases abroad
                                                                                                                                    • Travellers’ cheques used more for non-European destinations
                                                                                                                                      • Figure 43: Use of different methods of spending abroad, by the number of holidays taken/destination in the past 12 months, November 2009
                                                                                                                                    • Big holiday spenders are more likely to use niche methods
                                                                                                                                      • Figure 44: Use of different methods of spending abroad, by the total amount spent on holidays abroad in the last 12 months, November 2009
                                                                                                                                  • The Consumer – Attitudes towards Spending Abroad

                                                                                                                                    • Key points
                                                                                                                                      • A third of people shop around for the best deal on travel money
                                                                                                                                        • Figure 45: Attitudes towards spending abroad, November 2009
                                                                                                                                      • 45-64-year-olds are the more price-sensitive age group
                                                                                                                                        • Figure 46: Most popular attitudes towards spending abroad, by demographics, November 2009
                                                                                                                                      • ABs like the safety and convenience of using cards abroad
                                                                                                                                        • Internet researchers are more likely to use prepaid travel cards
                                                                                                                                          • Figure 47: Attitudes towards spending abroad, by use of different methods of spending abroad, November 2009
                                                                                                                                        • People who spend a lot on holidays are more likely to use plastic
                                                                                                                                          • Figure 48: Total annual amount spent on holidays abroad, by attitudes towards spending abroad, November 2009
                                                                                                                                      • The Consumer – Prepaid Travel Cards

                                                                                                                                        • Key points
                                                                                                                                          • Half of consumers have never heard of prepaid travel cards
                                                                                                                                              • Figure 49: Attitudes towards prepaid travel cards, November 2009
                                                                                                                                            • Awareness and support is higher amongst the affluent
                                                                                                                                              • Figure 50: Most popular attitudes towards prepaid travel cards, by demographics, November 2009
                                                                                                                                            • Big holiday spenders are more aware of prepaid travel cards
                                                                                                                                              • Figure 51: Attitudes towards prepaid travel cards, by total amount spent on holidays abroad in the last 12 months, November 2009
                                                                                                                                            • It’s worth targeting people who use credit and debit cards abroad
                                                                                                                                              • Figure 52: Attitudes towards prepaid travel cards, by methods used for spending abroad, November 2009
                                                                                                                                          • The Consumer – Attitudinal Groups

                                                                                                                                            • Key points
                                                                                                                                              • Savvies are on the ball when it comes to travel money
                                                                                                                                                • Figure 53: Attitudes towards spending abroad, by attitudinal groups, November 2009
                                                                                                                                              • The Last Minute Mob are more influenced by exchange rates
                                                                                                                                                • Savvies are more likely to use prepaid travel cards
                                                                                                                                                  • Figure 54: Use of different methods of spending abroad, by attitudinal groups, November 2009
                                                                                                                                                • Card Lovers are more likely to use debit cards abroad
                                                                                                                                                  • Savvies are a lot more likely to be third agers
                                                                                                                                                    • Figure 55: Attitudinal groups, by demographics, November 2009
                                                                                                                                                  • Card Lovers are more likely to be high earners
                                                                                                                                                  • Appendix – Internal Market Environment

                                                                                                                                                      • Figure 56: Average length of stay, average spend per visit and per day, by region and purpose of visit, 2008
                                                                                                                                                  • Appendix – The Consumer – Holiday Trends and Expenditure

                                                                                                                                                      • Figure 57: Holidays taken in last 12 months, by detailed demographics, November 2009
                                                                                                                                                      • Figure 58: Statements on number of holidays taken in past 12 months, by detailed demographics, November 2009
                                                                                                                                                      • Figure 59: Total amount spent on holidays abroad in the last 12 months, by detailed demographics, November 2009
                                                                                                                                                  • Appendix – The Consumer – Attitudes Towards Spending Abroad

                                                                                                                                                      • Figure 60: Use of different methods of spending abroad, by detailed demographics, November 2009
                                                                                                                                                      • Figure 61: Attitudes towards spending abroad, by detailed demographics, November 2009
                                                                                                                                                  • Appendix – The Consumer – Prepaid Travel Cards

                                                                                                                                                      • Figure 62: Attitudes towards prepaid travel cards, by detailed demographics, November 2009
                                                                                                                                                      • Figure 63: Attitudes towards prepaid travel cards, by number of holidays taken in past 12 months, November 2009
                                                                                                                                                  • Appendix – The Consumer – Attitudinal Groups

                                                                                                                                                      • Figure 64: Attitudinal groups, by detailed demographics, November 2009

                                                                                                                                                  Companies Covered

                                                                                                                                                  • Alliance & Leicester
                                                                                                                                                  • Asda Group Ltd
                                                                                                                                                  • Bank of Ireland
                                                                                                                                                  • Barclaycard
                                                                                                                                                  • Barclays Bank plc
                                                                                                                                                  • British Market Research Bureau (BMRB)
                                                                                                                                                  • Citibank
                                                                                                                                                  • Clydesdale Bank
                                                                                                                                                  • Co-operative Group
                                                                                                                                                  • Competition Commission
                                                                                                                                                  • Evening Standard
                                                                                                                                                  • Facebook, Inc.
                                                                                                                                                  • Financial Services Authority (The)
                                                                                                                                                  • Gfk NOP
                                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                  • Holiday Hypermarket
                                                                                                                                                  • HSBC Private Bank (UK) Limited
                                                                                                                                                  • Lloyds Banking Group
                                                                                                                                                  • Marks & Spencer
                                                                                                                                                  • Matalan Ltd
                                                                                                                                                  • NatWest
                                                                                                                                                  • Novotel
                                                                                                                                                  • Office for National Statistics
                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                  • Sainsbury's Bank
                                                                                                                                                  • Tesco Plc
                                                                                                                                                  • The Boston Consulting Group Inc.
                                                                                                                                                  • Thomas Cook Group PLC
                                                                                                                                                  • Travelex
                                                                                                                                                  • Visa Europe
                                                                                                                                                  • Yorkshire Bank PLC
                                                                                                                                                  • YouTube, Inc.

                                                                                                                                                  Travel Money - UK - January 2010

                                                                                                                                                  US $2,583.33 (Excl.Tax)