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Credit Cards - UK - August 2014

Published By :

Mintel

Published Date : Aug 2014

Category :

Banking

No. of Pages : 202 Pages

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

Introduction

Report scope and product definitions
Abbreviations

Executive Summary

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

Issues and Insights

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

Trend Application

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

Market Drivers

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

Competitor Products

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

Who’s Innovating?

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

Market Size and Forecast

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

Market Share

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

Companies and Products

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

Brand Research

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

Brand Communication and Promotion

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

Channels to Market

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

Credit Card Ownership

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

Consumer Use of Credit Cards

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

Consumer Use of Reward Schemes

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

Attitudes towards Reward Schemes among Users

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

Influential Factors for Credit Card Ownership

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

Appendix – Market Size and Forecast

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

Appendix – Market Share

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

Appendix – Brand Research

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

Appendix – Channels to Market

Figure 95: Channels used to apply for a credit card, by demographics, May 2014
Figure 96: Channels used to apply for a credit card, by demographics, May 2014 (continued)

Appendix – Credit Card Ownership

Figure 97: Credit card ownership – Debit card, by demographics, May 2014
Figure 98: Credit card ownership – Credit card, by demographics, May 2014
Figure 99: Credit card ownership – Store card, by demographics, May 2014
Figure 100: Credit card ownership – Prepaid card, by demographics, May 2014
Figure 101: Credit card ownership – Charge card, by demographics, May 2014

Appendix – Consumer Use of Credit Cards

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

Appendix – Consumer Use of Reward Schemes

Figure 111: Consumer use of credit card reward schemes, by demographics, May 2014

Appendix – Attitudes towards Reward Schemes among Users

Figure 112: Agreement with statements on attitudes toward reward schemes, by attitudes towards reward schemes, May 2014
Figure 113: Agreement with statements on credit card reward schemes, by demographics, May 2014
Figure 114: Agreement with statements on credit card reward schemes, by demographics, May 2014 (continued)

Appendix – Influential Factors for Credit Card Ownership

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

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