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Travel Money - UK - May 2014

“There are opportunities for big name brands in the fragmented travel money market, where price often comes secondary to convenience, and consumers prefer the reassurance of a well-known brand. Brands have the opportunity to take advantage of the potential growth of pre-paid cards. However, if they are to do so, currency cards must be repositioned as a safe and convenient way to carry cash rather than as an alternative to credit or debit cards.”
– Alexander Hiscox, Senior Financial Services Analyst

This report deals with the following issues:

  • Pre-paid card providers need to re-educate consumers to dispel the myths
  • A strong brand is important to travel money success
  • Mobile and tablet apps have the potential for growth

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Value of overseas spending expected to increase
              • Figure 1: Forecast for annual spending abroad by UK residents, 2008-18
            • Market factors
              • Overseas visits increased in 2013
                • Companies, brands and innovations
                  • Brand promotion
                    • Figure 2: Top 4 advertisers of travel money services (including foreign currency pre-paid cards), 2013/14
                  • Who’s innovating?
                    • The consumer
                      • Travel and holiday trends
                        • Figure 3: Holiday and travel trends, March 2014
                      • Methods of spending abroad
                        • Figure 4: Methods of spending while abroad, March 2014
                      • Ways of arranging and collecting foreign currency
                        • Figure 5: Ways of arranging foreign currency, March 2014
                      • Attitudes towards using payment cards abroad
                        • Figure 6: Attitudes towards using payment cards abroad, March 2014
                      • Attitudes towards pre-paid cards
                        • Figure 7: Attitudes towards pre-paid cards, March 2014
                      • Attitudes towards travel money and spending abroad
                        • Figure 8: Attitudes towards travel money and spending abroad, March 2014
                      • What we think
                      • Issues and Insights

                          • Pre-paid card providers need to re-educate consumers to dispel the myths
                            • The facts
                              • The implications
                                • A strong brand is important to travel money success
                                  • The facts
                                    • The implications
                                      • Mobile and tablet apps have the potential for growth
                                        • The facts
                                          • The implications
                                          • Trend Application

                                            • Offering flexible rewards and taking the hassle out of purchasing pre-paid card
                                              • Promoting the security of using a pre-paid cards over taking cash
                                                • Pre-paid cards could become popular amongst the youngest generation of travellers
                                                • Market Drivers

                                                  • Key points
                                                    • Trips abroad are yet to recover from the recession
                                                      • Figure 9: The number of overseas visits by UK residents, by purpose of visit, 2006-13
                                                    • Europe remains the most popular destination for consumers
                                                      • Figure 10: Number of overseas visits by UK residents, by region visited, 2006-12
                                                    • Increased consumer confidence will drive growth in the holiday market
                                                      • Figure 11: GfK NOP Consumer Confidence Index -UK, January 2007-December 2013
                                                    • The Pound strengthens against the Dollar and euro
                                                      • Figure 12: Spot exchange rates, US Dollar, and euro into Pounds Sterling, March 2009-March 2014
                                                    • All-inclusive holidays present a challenge to travel money providers
                                                      • The long-term shifts toward independent holidays restarts
                                                        • MEPs have voted to scrap mobile roaming fees in the EU
                                                        • Who’s Innovating?

                                                          • Key points
                                                            • AmEx links up with TripAdvisor
                                                              • Thomas Cook launches interactive Holiday Budget Calculator
                                                                • TUI launches Digital Assistant to help customers plan their trip
                                                                • Market Size and Forecast

                                                                  • Key points
                                                                    • Consumers are beginning to spend more whilst on holiday
                                                                      • Figure 13: Annual expenditure on overseas trips by UK residents, at current prices, 2007-13
                                                                    • Holiday spending increases for the second successive year
                                                                      • Figure 14: Annual expenditure on overseas trips by UK residents, by purpose of visit, 2006-13
                                                                    • Visits to Europe generate the largest amount of spending
                                                                      • Figure 15: Annual expenditure on overseas trips by UK residents, by region of visit, 2006-13
                                                                    • Value of debit card expenditure abroad exceeds credit cards for the first time
                                                                      • Figure 16: Volume and value of credit and debit cards purchases outside the UK, by type, 2004-12
                                                                    • Value of overseas spending expect to continue to rise
                                                                      • Figure 17: Forecast for Annual expenditure on overseas trips by UK residents, 2008-18
                                                                      • Figure 18: Annual expenditure on overseas trips by UK residents, at current and constant prices, 2008-18
                                                                    • Forecast methodology
                                                                      • Fan chart explanation
                                                                      • Market Share

                                                                        • Key points
                                                                          • Post Office leads the way for foreign currency exchange
                                                                            • Figure 19: Ways of arranging foreign currency, March 2014
                                                                          • Largest retail banks promote currency exchange over debit card use
                                                                            • Figure 20: Main current account provider, June 2013
                                                                          • Credit cards look to beat the completion from debit cards
                                                                            • Figure 21: Top six credit card and charge card providers in the UK, by share of customers, July 2013
                                                                        • Companies and Products

                                                                          • American Express
                                                                            • Company description
                                                                              • Product range
                                                                                • Key data
                                                                                  • Figure 22: Key financial data for American Express Payment Services Ltd, 2011-12
                                                                                • Recent activity
                                                                                  • Marketing and promotion
                                                                                    • Barclays/Barclaycard
                                                                                      • Company description
                                                                                        • Product range
                                                                                          • Key data
                                                                                            • Figure 23: Key financial data for Barclays Group, 2012-13
                                                                                          • Recent activity
                                                                                            • Marketing and promotion
                                                                                              • Caxton FX
                                                                                                • Company description
                                                                                                  • Product range
                                                                                                    • Key data
                                                                                                      • Figure 24: Key financial data for Caxton FX, 2011-12
                                                                                                    • Recent activity
                                                                                                      • Marketing and promotion
                                                                                                        • FairFX
                                                                                                          • Company description
                                                                                                            • Product range
                                                                                                              • Key data
                                                                                                                • Figure 25: Key financial data for FairFX, 2012-13
                                                                                                              • Recent activity
                                                                                                                • Marketing and promotion
                                                                                                                  • M&S Bank
                                                                                                                    • Company description
                                                                                                                      • Product range
                                                                                                                        • Key data
                                                                                                                          • Figure 26: Key financial data for Marks & Spencer UK, 2012-13
                                                                                                                        • Recent activity
                                                                                                                          • Marketing and promotion
                                                                                                                            • Post Office
                                                                                                                              • Company description
                                                                                                                                • Product range
                                                                                                                                  • Key data
                                                                                                                                    • Figure 27: Key financial data for Post Office Ltd, 2012-13
                                                                                                                                  • Recent activity
                                                                                                                                    • Marketing and promotion
                                                                                                                                      • Thomas Cook
                                                                                                                                        • Company description
                                                                                                                                          • Product range
                                                                                                                                            • Key data
                                                                                                                                              • Figure 28: Key financial data for Thomas Cook Group Plc 2012-13
                                                                                                                                            • Recent activity
                                                                                                                                              • Marketing and promotion
                                                                                                                                                • Travelex
                                                                                                                                                  • Company description
                                                                                                                                                    • Product range
                                                                                                                                                      • Key data
                                                                                                                                                        • Figure 29: Key financial data for Travelex UK Ltd, 2011-12
                                                                                                                                                      • Recent activity
                                                                                                                                                        • Marketing and promotion
                                                                                                                                                          • TUI Travel
                                                                                                                                                            • Company description
                                                                                                                                                              • Product range
                                                                                                                                                                • Key data
                                                                                                                                                                  • Figure 30: Financial performance of TUI Travel Plc, 2012-13
                                                                                                                                                                • Recent activity
                                                                                                                                                                  • Marketing and promotion
                                                                                                                                                                  • Brand Communication and Promotion

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Adspend on travel money services increases in line with trips abroad
                                                                                                                                                                        • Figure 31: Adspend on travel money services (including foreign currency pre-paid cards), 2011/12-2013/14
                                                                                                                                                                      • The Post Office’s travel money expenditure pays off with high usage
                                                                                                                                                                        • Figure 32: Top 10 advertisers of travel money services (including foreign currency pre-paid cards), 2011/12-2013/14
                                                                                                                                                                      • Press leads the way in travel money adspend
                                                                                                                                                                        • Figure 33: Adspend on travel money services (including foreign currency pre-paid cards), by media type, 2011/12-2013/14
                                                                                                                                                                      • A note about adspend
                                                                                                                                                                      • Travel and Holiday Trends

                                                                                                                                                                        • Key points
                                                                                                                                                                          • The majority of consumers have taken a holiday abroad in the past year
                                                                                                                                                                            • Figure 34: Holiday and travel trends, March 2014
                                                                                                                                                                          • European destinations continue to lead the way
                                                                                                                                                                            • Financial situation affects travel habits
                                                                                                                                                                              • Figure 35: Holiday and travel trends, by financial situation, March 2014
                                                                                                                                                                            • Under-35s are more likely to travel abroad
                                                                                                                                                                              • Figure 36: Holiday and travel trends, by age, March 2014
                                                                                                                                                                            • Cosmopolitan Londoners are more likely to have travelled to Europe
                                                                                                                                                                              • Figure 37: Holiday and travel trends, by region, March 2014
                                                                                                                                                                          • Methods of Spending Abroad

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Almost three quarters of travellers used payment cards abroad in the last year
                                                                                                                                                                                • Figure 38: Types of travel money used, March 2014
                                                                                                                                                                              • Travellers cheques decrease in popularity could benefit pre-paid cards
                                                                                                                                                                                • Under-35s are more comfortable using debit cards abroad
                                                                                                                                                                                  • Figure 39: Types of travel money used, by demographics, March 2014
                                                                                                                                                                                • There is no relationship between age and use of pre-paid cards
                                                                                                                                                                                  • Travellers to Europe are more likely to have used foreign currency
                                                                                                                                                                                    • Figure 40: Types of travel money used, by Holiday and travel trends, March 2014
                                                                                                                                                                                • Ways of Arranging and Collecting Foreign Currency

                                                                                                                                                                                  • Key points
                                                                                                                                                                                    • The Post Office remains the most popular way for consumers to arrange foreign currency
                                                                                                                                                                                      • Figure 41: Ways of arranging foreign currency, March 2014
                                                                                                                                                                                    • Few consumers exchange their money at airports
                                                                                                                                                                                      • Most consumers arranged their currency in the UK
                                                                                                                                                                                        • Most people prefer to order and collect currency in person
                                                                                                                                                                                          • Figure 42: Ways of collecting foreign currency, March 2014
                                                                                                                                                                                        • Retail presence helps to improve use of in branch foreign currency services
                                                                                                                                                                                          • Figure 43: Ways of collecting foreign currency, by ways of arranging foreign currency, March 2014
                                                                                                                                                                                        • Almost half of consumers used an ATM to arrange travel money at their holiday destination
                                                                                                                                                                                          • Travellers outside Europe more likely to use online ordering methods
                                                                                                                                                                                            • Figure 44: Ways of collecting foreign currency, by holiday and travel trends, March 2014
                                                                                                                                                                                        • Attitudes towards Using Payment Cards Abroad

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • Payment cards give 55% of consumers a feeling of security
                                                                                                                                                                                              • Figure 45: Attitudes towards using payment cards abroad, March 2014
                                                                                                                                                                                            • Older consumers are more likely to monitor their spending using a payment card
                                                                                                                                                                                              • Figure 46: Attitudes towards using payment cards abroad, by age and working status, March 2014
                                                                                                                                                                                            • A fear of running out of money could be holding back use of pre-paid cards
                                                                                                                                                                                              • Figure 47: Attitudes towards using payment cards abroad, by types of payment card used, March 2014
                                                                                                                                                                                            • Three out of ten consumers who have used payment cards abroad feel the charges are too high
                                                                                                                                                                                            • Attitudes towards Pre-paid Cards

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • A recognisable brand is important to encourage consumers to use pre-paid cards
                                                                                                                                                                                                  • Figure 48: Attitudes towards pre-paid cards, March 2014
                                                                                                                                                                                                • Providers need to change consumers’ perceptions of pre-paid cards
                                                                                                                                                                                                  • Figure 49: Attitudes towards pre-paid cards, by age, March 2014
                                                                                                                                                                                                • Security and budgeting are the main attractions of using pre-paid cards
                                                                                                                                                                                                  • Younger consumers are most worried that pre-paid cards will not be accepted
                                                                                                                                                                                                    • Figure 50: Attitudes towards pre-paid cards, by age, March 2014
                                                                                                                                                                                                  • The potential demand for pre-paid cards is high
                                                                                                                                                                                                    • Figure 51: Attitudes towards pre-paid cards, by age, March 2014
                                                                                                                                                                                                • General Attitudes towards Travel Money and Spending Abroad

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • A third of consumers prefer to be more relaxed when spending abroad
                                                                                                                                                                                                      • Figure 52: Attitudes towards travel money and spending abroad, March 2014
                                                                                                                                                                                                    • Almost half of consumers save up before going on holiday
                                                                                                                                                                                                      • Figure 53: Responses to the statement: ‘I tend to save up my spending money before I travel on holiday abroad’, by methods of spending abroad, March 2014
                                                                                                                                                                                                    • Online tools likely to help consumers to keep track of what they are spending
                                                                                                                                                                                                      • Figure 54: Attitudes towards spending abroad, by age, March 2014
                                                                                                                                                                                                    • Only 15% of consumers who use cards are surprised by charges
                                                                                                                                                                                                      • Figure 55: Travel money attitudes of consumers who have used specific payment methods, March 2014
                                                                                                                                                                                                    • A third use a price comparison site to find the best rates for foreign currency
                                                                                                                                                                                                      • Figure 56: Responses to the statement: ‘I look for the best exchange rate for my cash by using an online comparison site’, by ways of arranging foreign currency, March 2014
                                                                                                                                                                                                  • Appendix – Market Size and Forecast

                                                                                                                                                                                                      • Figure 57: Best and worst case forecast for total value of annual spending abroad by UK residents, 2013-2018
                                                                                                                                                                                                  • Appendix – Travel and Holiday Trends

                                                                                                                                                                                                      • Figure 58: Holiday and travel trends, by demographics, March 2014
                                                                                                                                                                                                  • Appendix – Methods of Spending Abroad

                                                                                                                                                                                                      • Figure 59: Types of travel money used, by demographics, March 2014
                                                                                                                                                                                                  • Appendix – Ways of Arranging and Collecting Foreign Currency

                                                                                                                                                                                                      • Figure 60: Most popular ways of arranging foreign currency, by demographics, March 2014
                                                                                                                                                                                                      • Figure 61: Next most popular ways of arranging foreign currency, by demographics, March 2014
                                                                                                                                                                                                      • Figure 62: Ways of arranging foreign currency, by demographics, March 2014
                                                                                                                                                                                                  • Appendix – Attitudes towards Using Payment Cards Abroad

                                                                                                                                                                                                      • Figure 63: Most popular attitudes towards using payment cards abroad, by demographics, March 2014
                                                                                                                                                                                                      • Figure 64: Next most popular attitudes towards using payment cards abroad, by demographics, March 2014
                                                                                                                                                                                                  • Appendix – Attitudes towards Pre-paid Cards

                                                                                                                                                                                                      • Figure 65: Agreement with the statement ‘I would only take out a pre-paid travel card from a well-known brand’, by demographics, March 2014
                                                                                                                                                                                                      • Figure 66: Agreement with the statement ‘I’m concerned about the charges incurred on these cards’, by demographics, March 2014
                                                                                                                                                                                                      • Figure 67: Agreement with the statement ‘Using a pre-paid travel card would give me a feeling of security when spending abroad’, by demographics, March 2014
                                                                                                                                                                                                      • Figure 68: Agreement with the statement ‘A pre-paid travel card would help me to stay on budget whilst abroad’, by demographics, March 2014
                                                                                                                                                                                                      • Figure 69: Agreement with the statement ‘I would be worried that the card would not be accepted when paying for goods and services abroad’, by demographics, March 2014
                                                                                                                                                                                                      • Figure 70: Agreement with the statement ‘I am interested in using a pre-paid travel card in the future’, by demographics, March 2014
                                                                                                                                                                                                      • Figure 71: Agreement with the statement ‘I think arranging a pre-paid travel card would be a lot of hassle’, by demographics, March 2014
                                                                                                                                                                                                      • Figure 72: Agreement with the statement ‘I have never heard of a pre-paid travel card before now’, by demographics, March 2014
                                                                                                                                                                                                  • Appendix – Attitudes towards Travel Money

                                                                                                                                                                                                      • Figure 73: Attitudes towards travel money and spending abroad, by demographics, March 2014
                                                                                                                                                                                                      • Figure 74: Attitudes towards travel money and spending abroad (continued), by demographics, March 2014

                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                  • Amazon UK
                                                                                                                                                                                                  • American Express Company (The)
                                                                                                                                                                                                  • American Express UK
                                                                                                                                                                                                  • Barclays Bank plc
                                                                                                                                                                                                  • Emirates
                                                                                                                                                                                                  • First Choice Holidays & Flights Ltd
                                                                                                                                                                                                  • HSBC Holdings plc
                                                                                                                                                                                                  • London Stock Exchange plc
                                                                                                                                                                                                  • Marks & Spencer
                                                                                                                                                                                                  • MasterCard UK
                                                                                                                                                                                                  • Post Office Limited
                                                                                                                                                                                                  • SMS
                                                                                                                                                                                                  • Sony (UK) Ltd
                                                                                                                                                                                                  • Thomas Cook Group PLC
                                                                                                                                                                                                  • Travelex
                                                                                                                                                                                                  • TripAdvisor LLC
                                                                                                                                                                                                  • TUI UK
                                                                                                                                                                                                  • Twitter, Inc.

                                                                                                                                                                                                  Travel Money - UK - May 2014

                                                                                                                                                                                                  US $2,583.33 (Excl.Tax)