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Credit Cards - UK - August 2018

“The credit card market is going through an interesting phase. On the one hand, providers are withdrawing their most generous deals, as they seek to offset extra costs linked to new regulation. On the other hand, they are pumping investment into new payment innovation, as they face growing competition from a new generation of connected payment services.”

- Sarah Hitchcock, Senior Finance Analyst

This report will cover the following areas:

  • New rules tackling persistent debt could help 2.7 million cardholders
  • Cardholders want greater customisation and cashback on spending

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Gross credit card lending predicted to reach £205 billion in 2018
              • Figure 1: Forecast of gross credit card lending (non-seasonally adjusted) – fan chart, 2013-23
            • Over £70 billion owed on credit cards
              • 60 million credit cards in issue
                • Credit card write-offs were stable in 2017, but could rise again in 2018
                  • Early days of Open Banking
                    • FCA introduces new rules to tackle persistent debt
                      • Companies and brands
                        • LBG and Barclays are the largest credit card issuers in the UK
                          • Figure 2: Estimated group (volume) share of UK credit and charge card market, May 2018
                        • Other retailers and specialist card providers
                          • Providers rein in their generosity…
                            • …while investing more in product development
                              • Adspend falls by 30% in the year to May 2018
                                • The consumer
                                  • 68% of adult internet users own a credit card
                                    • Figure 3: Number of credit cards owned, May 2018
                                  • Borrowers account for half the market
                                    • Figure 4: Length of time held credit card debt, May 2018
                                  • A third who owe money on their credit cards are concerned about how long it will take to repay it
                                    • Figure 5: Concerns about credit card debt, May 2018
                                  • 34% of cardholders get cashback on spending while 27% are rewarded for their loyalty
                                    • Figure 6: Ownership of and interest in selected card benefits, May 2018
                                  • Significant interest in mobile credit cards and account aggregation services
                                    • Figure 7: Interest in mobile credit cards and smart cards/aggregator apps, May 2018
                                  • Around a fifth of non-cardholders may get a credit card in the future
                                    • Figure 8: Likelihood of getting a credit card in the future, May 2018
                                  • What we think
                                  • Issues and Insights

                                    • New rules tackling persistent debt could help 2.7 million cardholders
                                      • The facts
                                        • The implications
                                          • Cardholders want greater customisation and cashback on spending
                                            • The facts
                                              • The implications
                                              • The Market – What You Need to Know

                                                • Strong credit card lending
                                                  • Credit card balances reach £71 billion
                                                    • 60 million credit cards in issue
                                                      • New rules spawn innovation and tackle persistent debt
                                                      • Market Size and Forecast

                                                        • Credit card lending continues to rise
                                                          • Figure 9: Gross and net credit card lending (non-seasonally adjusted), 2013-18
                                                        • Outlook for credit card borrowing
                                                          • Figure 10: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2013-23
                                                          • Figure 11: Forecast of gross credit card lending, at current and constant prices, 2018-23
                                                        • Forecast methodology
                                                        • Spending Patterns and the Payment Card Market

                                                          • 60 million credit cards in issue
                                                            • Figure 12: Number of debit, credit and charge cards in issue, 2004-17
                                                          • Growth of contactless
                                                            • Consumers transacted 35 billion payments in 2017…
                                                              • …of which, 8% of were made by credit card
                                                                • Figure 13: Share of total payment volumes, 2017
                                                              • New innovations could potentially lead to a fall in online card payments
                                                                • Credit card volumes predicted to grow by 26% over the next decade
                                                                  • Figure 14: Volume of payments, by type, 2017 and 2027
                                                                • Increase in balance transfer activity
                                                                  • Figure 15: Volume and value of credit card transactions by UK residents, by type of transaction, 2013-17
                                                                • Credit cards are increasingly being used for everyday purchases
                                                                  • Figure 16: Average credit card transaction value, by type of transaction, 2013-17
                                                              • Market Drivers

                                                                • Consumer confidence holding up against a backdrop of disappointing economic data
                                                                    • Figure 17: Personal financial situation, 2016-18
                                                                  • Credit cards account for over two thirds of gross unsecured lending
                                                                    • Figure 18: Gross consumer credit lending, by sector (non-seasonally adjusted), 2004-17
                                                                  • Consumer credit net lending has risen over the past two years
                                                                    • Figure 19: Net consumer credit lending, by sector (non-seasonally adjusted), 2004-17
                                                                  • Total credit card debt outstanding grew by 5% in 2017
                                                                    • Figure 20: Amount of credit card and other unsecured lending outstanding (non-seasonally adjusted), 2004-17 (at year end)
                                                                  • Credit card write-offs stable in 2017…
                                                                    • Figure 21: Annual write-offs of lending to individuals, by sector, 2008-17
                                                                  • …although there are signs that they could rise in 2018
                                                                    • Average advertised credit card interest rate stable at 18%
                                                                      • Figure 22: Official bank base rate, and quoted household overdraft, personal loan and credit card interest rates, June 2016-May 2018
                                                                    • Cost of card fraud down 8% in 2017
                                                                      • Figure 23: Annual fraud losses on UK-issued payment cards, 2008-17
                                                                  • Regulatory and Legislative Changes

                                                                    • Surcharges for paying by credit card abolished
                                                                      • The dawn of Open Banking
                                                                        • FCA introduces rules to help those in persistent debt
                                                                        • Companies and Brands – What You Need to Know

                                                                          • Largest card providers
                                                                            • Credit card customers receiving less generous terms
                                                                              • New regulation leads to increased product development
                                                                                • Credit card providers cut back on above-the-line adspend
                                                                                • Market Share

                                                                                  • On an individual brand basis, Barclaycard leads the market by a comfy margin…
                                                                                    • Figure 24: Largest credit and charge card providers in the UK, by share of customers, May 2018
                                                                                  • …but on a group basis, LBG just nudges ahead
                                                                                    • Figure 25: Estimated group (volume) share of UK credit and charge card market, May 2018
                                                                                • Competitive Strategies and Innovation

                                                                                  • Reduced availability of introductory deals
                                                                                    • Cost of credit card borrowing rising
                                                                                      • Providers reduce cashback rates and cut back on some rewards…
                                                                                        • …and broaden their product ranges to target different customer needs
                                                                                          • Scope for more cobranded cards
                                                                                            • New product launches
                                                                                              • New entrants: Curve and Tandem
                                                                                                • What next for market innovation?
                                                                                                • Advertising and Marketing Activity

                                                                                                  • Credit card providers cut back on above-the-line adspend
                                                                                                    • Figure 26: Total above-the-line, direct mail and online display advertising expenditure on credit cards, 2013/14-2017/18
                                                                                                  • Social media increasingly used to support ad campaigns
                                                                                                    • Direct mail remains the offline channel of choice for card issuers
                                                                                                      • Figure 27: Above-the-line advertising expenditure on credit and charge cards, by media type, 2016-18
                                                                                                    • Capital One invested the most in above-the-line advertising over the past year
                                                                                                      • Figure 28: Top 15 above-the-line, direct mail and online display advertisers of payment cards, 2016-18
                                                                                                    • Nielsen Ad Intel coverage
                                                                                                    • Brand Research

                                                                                                        • Brand map
                                                                                                          • Figure 29: Attitudes towards and usage of selected brands, May 2018
                                                                                                        • Key brand metrics
                                                                                                          • Figure 30: Key metrics for selected brands, May 2018
                                                                                                        • American Express’ products are “worth paying more for”
                                                                                                          • Figure 31: Attitudes, by brand, May 2018
                                                                                                        • Virgin Money has the “fun” factor while Nationwide’s brand is most closely aligned with “ethical” values
                                                                                                          • Figure 32: Brand personality – macro image, May 2018
                                                                                                        • Barclays struggles to shake off the “greedy bank” image
                                                                                                          • Figure 33: Brand personality – micro image, May 2018
                                                                                                        • Brand analysis
                                                                                                          • American Express stands out from the crowd
                                                                                                            • Barclays, TSB and Vanquis Bank need to work on brand image
                                                                                                              • Nationwide and Virgin Money are most likely to be recommended by their customers
                                                                                                                • First Direct and Santander are the most progressive alongside Virgin Money
                                                                                                                • The Consumer – What You Need to Know

                                                                                                                  • 68% of adult internet users own a credit card
                                                                                                                    • Borrowers represent half the market
                                                                                                                      • 34% of borrowers are concerned about how long it will take them to repay their debt
                                                                                                                        • 40% of cardholders express interest in mobile credit cards
                                                                                                                          • 22% of non-cardholders may get one in the future
                                                                                                                          • Credit Card Ownership

                                                                                                                            • 68% of adults have a credit card
                                                                                                                              • Figure 34: Credit card ownership, May 2018
                                                                                                                            • Multiple card ownership is commonplace
                                                                                                                              • Figure 35: Number of credit cards owned, May 2018
                                                                                                                          • Identifying Cardholders in Persistent Debt

                                                                                                                            • Around half of all credit card holders are “borrowers”
                                                                                                                              • Figure 36: Credit card balance following last monthly payment, May 2018
                                                                                                                            • 1.4 million credit card holders have an outstanding balance of £10,000 or more
                                                                                                                              • The more credit cards people have, the more they tend to owe
                                                                                                                                • Figure 37: Credit card balance following last monthly payment, by number of credit cards owned, May 2018
                                                                                                                              • Age influences behaviour
                                                                                                                                • 2.7 million in long-term debt
                                                                                                                                  • Figure 38: Length of time held credit card debt, May 2018
                                                                                                                                • 31% of cardholders who owe at least £5,000 have held their debt for more than three years
                                                                                                                                  • Figure 39: Length of time held credit card debt, by credit card balance, May 2018
                                                                                                                              • Concerns about Credit Card Debt

                                                                                                                                • 31% of cardholders are concerned about interest rates rising…
                                                                                                                                  • Figure 40: Concerns about credit card debt, by credit card balance, May 2018
                                                                                                                                • …and 22% are concerned about falling into arrears
                                                                                                                                  • 49% of those who’ve held credit card debt for at least three years are worried about how long it will take to clear their balance
                                                                                                                                    • Figure 41: Concerns about credit card debt, by length of time held credit card debt, May 2018
                                                                                                                                • Interest in Specific Card Benefits and New Digital Innovations

                                                                                                                                  • 34% of credit card holders earn cashback on purchases, while a further 48% would like to
                                                                                                                                    • Figure 42: Ownership of and interest in selected card benefits, May 2018
                                                                                                                                  • 27% get rewards for loyalty, with a further 54% who’d like to join them
                                                                                                                                    • 40% of cardholders would be interested in getting a mobile credit card
                                                                                                                                      • Figure 43: Interest in new mobile credit cards and smart cards/aggregator apps, May 2018
                                                                                                                                  • Reasons for Not Having a Credit Card

                                                                                                                                    • Around half of all non-credit card holders don’t feel they need one…
                                                                                                                                      • Figure 44: Reasons for not owning a credit card, May 2018
                                                                                                                                    • …but roughly one in five would consider getting one in the future
                                                                                                                                      • Figure 45: Likelihood of getting a credit card in the future, May 2018
                                                                                                                                    • One in five future prospects say they don’t have a credit card due to an impaired or limited credit history
                                                                                                                                      • Figure 46: Reasons for not owning a credit card – by all non-cardholders and those who would consider getting one in the future, May 2018
                                                                                                                                  • Appendix – Data Sources and Abbreviations

                                                                                                                                      • Abbreviations
                                                                                                                                        • Consumer research methodology
                                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                                          • Market forecast – best- and worst-case scenarios
                                                                                                                                            • Figure 47: Forecast of gross credit card lending – best- and worst-case scenarios, at current prices, 2018-23
                                                                                                                                          • Forecast methodology

                                                                                                                                          Credit Cards - UK - August 2018

                                                                                                                                          US $2,693.85 (Excl.Tax)