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Credit Cards - UK - August 2016

Published By :

Mintel

Published Date : Aug 2016

Category :

Banking

No. of Pages : N/A

Consumers are price sensitive when it comes to credit cards, attracted by the best reward schemes and longer interest-free periods. However, cards that offer longer-term value are more likely to guarantee customer loyalty. Mintel’s consumer research shows that two in five consumers think that the interest rate is the most important factor when looking for a credit card.

Overview

What you need to know
Products covered in this Report

Executive Summary

The market
Market growth expected to slow in 2016
Figure 1: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2011-21
Number of credit cards in issue grows by 4%
Figure 2: Number of debit, credit and charge cards in issue, 2001-15
Volume of credit card transactions up by 12%
Companies and brands
Barclaycard dominates credit card market…
Figure 3: Estimated volume share of UK credit and charge card market, May 2015
Disparity among credit card providers
Figure 4: Attitudes towards and usage of selected brands, May 2016
The consumer
Nearly two thirds of adults own a credit card
Figure 5: Ownership of credit and other payment cards, May 2016
Nearly half have no outstanding balance on their credit cards
Figure 6: Level of credit card debt, May 2016
Majority are unlikely to switch
Figure 7: Likelihood to switch credit card provider, May 2016
No fees are important when choosing a provider
Figure 8: Most important features when choosing a credit card, May 2016
Credit card market lacks loyalty
Figure 9: Credit card user future behaviour, May 2016
What we think

Issues and Insights

Doing more to help ‘minimum repayers’ avoid difficulties
The facts
The implications
Virtual cards will change credit-spending habits
The facts
The implications
Credit card market sees low levels of switching
The facts
The implications

The Market – What You Need to Know

Market Size and Forecast

Market growth expected to slow in 2016
Figure 10: Gross and net credit card lending (non-seasonally adjusted), 2011-16
Credit card market expected to reach £241 billion by 2021
Figure 11: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2011-21
Figure 12: Forecast of gross credit card lending, 2011-21
Forecast methodology

Size of the Payment Card Market

Number of credit cards in issue grows by 4%
Figure 13: Number of debit, credit and charge cards in issue, 2001-15
Share of cash payments falls dramatically
Figure 14: Share of consumer payment volumes, 2015

Card Spending Patterns

Volume of credit card transactions up by 12%
Figure 15: Volume and value of credit and debit card purchase transactions, 2011-15`
Average purchase value falls by 5%

Market Drivers

‘Other consumer credit’ growth outstripping credit cards
Figure 16: Gross consumer credit lending (excluding student loans), 2009-15
Credit card rates remain steady
Figure 17: UK interest rates, January 2009-May 2016
Decline in write-offs for credit cards stalls
Figure 18: Value of write-offs to loans to individuals, 2010-15 (not seasonally adjusted)
Financial well-being falters following Brexit vote
Figure 19: The financial well-being index, January 2009-July 2016
Value of fraud losses continues to rise
Figure 20: Annual plastic fraud losses on UK-issued cards, 2008-15

Regulatory and Legislative Changes

Interchange fees ruling has little impact on cost of borrowing
Credit card competition working well according to FCA market study
Consumer Credit Act Review

Companies and Brands – What You Need to Know

Barclaycard dominates credit card market
Interest-free periods get longer…
Credit card adspend falls by 12%
Wide disparity in consumer trust of brands

Market Share

Barclaycard dominates the credit card market…
Figure 21: Credit card market share, by proportion of consumers who have cards with selected brands, May 2016
…but the combined force of LBG means it shares the top spot
Figure 22: Estimated volume share of UK credit and charge card market, May 2015

Competitive Strategies

Cashback and reward schemes continue to attract customers…
Retailers and supermarket banks
Over-50s reward cards
‘Incumbent challengers’
…but changes to interchange rules leads to a re-think on rewards
Interest-free periods get longer…
Virgin Money
Subprime credit card market sees growth
Credit card providers embrace contactless payment technology
Plastic cards will be replaced by contactless
Barclays
MasterCard
MBNA launches loan-alternative credit card
Paid-for current accounts pose a threat to reward-based cards

Advertising and Marketing Activity

Credit card spend falls by 12%
Figure 23: Total above-the-line, online display and direct mail advertising expenditure on plastic cards, 2013/14-2015/16
Direct mail continues to attract the highest amount of spend
Figure 24: Total above-the-line, online display and direct mail advertising expenditure on credit and charge cards, by media type, 2013/14-2015/16
Barclaycard accounts for over a third of all spend
Figure 25: Total above-the-line, online display and direct mail advertising expenditure on credit and charge cards, by advertiser, 2013/14-2015/16
Credit card providers embrace digital channels
Figure 26: Number of twitter followers, by credit card provider, July 2016
Nielsen Ad Intel coverage

Brand Research

What you need to know
Brand map
Figure 27: Attitudes towards and usage of selected brands, May 2016
Key brand metrics
Figure 28: Key metrics for selected brands, May 2016
Brand attitudes: Sainsbury’s Bank best at rewarding loyalty
Figure 29: Attitudes, by brand, May 2016
Brand personality: American Express differentiated by its exclusivity
Figure 30: Brand personality – Macro image, May 2016
Monoliners need to improve their brand image
Figure 31: Brand personality – Micro image, May 2016
Brand analysis
High-street banks benefit from having strong brands with high consumer trust
American Express stands apart from all other brands
Other credit card specialists struggle to differentiate their brand image
Supermarket banks best at using credit cards to reward loyalty

The Consumer – What You Need to Know

Nearly two thirds of adults own a credit card
Nearly half have no outstanding balance of their credit card
Majority are unlikely to switch
No fees are important when choosing a provider

Payment Card Ownership

Nearly two thirds of adults own a credit card
Figure 32: Ownership of credit and other payment cards, May 2016
Increase in credit card ownership
Figure 33: Trend in credit card ownership, 2012-16
Card ownership highest among 65+-year-olds
Figure 34: Credit card ownership, by age, May 2016

Level of Credit Card Debt

Nearly half have no outstanding balance
Figure 35: Level of credit card debt, May 2016
Credit card balances vary across age groups
Figure 36: Level of credit card debt, by age, May 2016

Likelihood to Switch Providers

Majority are unlikely to switch
Efforts to improve communication at the end of promotional period
Figure 37: Likelihood to switch credit card provider, May 2016
Younger age groups more likely to switch
Figure 38: Likelihood to switch credit card provider, by age, May 2016
People with higher credit card debt are more likely to switch
Figure 39: Likelihood to switch credit card provider, by level of credit card debt, May 2016

Most Important Features when Choosing a Credit Card

No fees are important when choosing a provider
Figure 40: Most important features when choosing a credit card, May 2016
A third want interest-free periods
Low minimum repayments can lead to persistent levels of debt
Better-off consumers can afford to look beyond interest rates
Figure 41: Most important features when choosing a credit card, by financial situation, May 2016
Switchers looking for interest-free periods
Figure 42: Most important features when choosing a credit card, by likelihood to switch, May 2016
People want multiple features

Recent and Future Credit Card Behaviour

Credit card market lacks loyalty
Figure 43: Credit card user future behaviour, May 2016
Over half clear their balance every month…
Figure 44: Credit card user behaviour, May 2016
… but those with outstanding balances more likely to switch
Figure 45: Credit card user behaviour, by likelihood to switch, May 2016
Quarter of 18-24s use other credit products before a credit card…
…but they’re most likely to increase their spending over the next 12 months
Figure 46: Credit card user behaviour, by age, May 2016

Attitudes towards Credit Cards

More than a third happy to use credit card for day-to-day expenses
Figure 47: Attitudes towards credit cards, May 2016
Interest rate is most important for those with higher levels of debt
Figure 48: Attitudes towards credit cards, by level of credit card debt, May 2016

Attitudes towards Virtual Credit

Need for plastic cards declining
Over a third would be interested in using virtual credit
Millennials confident in the role of global tech companies in financial services
But there are potential long-term impacts of moving credit online
Figure 49: Attitudes towards virtual credit cards, May 2016

Appendix – Data Sources, Abbreviations and Supporting Information

Abbreviations
Consumer research methodology

Appendix – Market Size and Forecast

Forecast of gross credit card lending
Figure 50: Forecast of gross credit card lending (non-seasonally adjusted), at constant and current prices, 2016-21
Forecast methodology

List of Table

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