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Credit Cards - UK - September 2013

Published By :

Mintel

Published Date : Sep 2013

Category :

Cards & Payments

No. of Pages : 168 Pages

 

Contactless credit cards present an opportunity for providers to encourage customers to use their cards more frequently. Ownership and usage of these cards remains relatively low, however. Going forward, providers can develop the link between the rewards customers receive and contactless technology. This should help to demonstrate that using cards for everyday purchasing can boost the rewards customers receive and that it ‘pays’ to use a credit card like a debit card.

TABLE OF CONTENT

 

Introduction

Product definitions

Abbreviations

 

Executive Summary

The market

Gross credit card lending continues to edge upwards

Figure 1: Forecast of gross credit card lending (non-seasonally adjusted), 2008-18

Market factors

Total net unsecured lending increased by 38% in 2012

First half of 2013 shows strong improvements in consumer confidence

Losses on fraudulent activity increased in 2012

Regulatory round-up

Companies, brands and innovation

Barclaycard and LBG top the market share chart

Figure 3: Estimated group share of the UK credit and charge card market (rebased to 100), by share of customers, July 2013

Post Office leads on trust while Amex is perceived as more exclusive and differentiated

Figure 4: Attitudes towards and usage of brands in the credit card sector, June 2013

Advertising expenditure on credit cards up in 2012/13

Who’s innovating?

The consumer

Credit card ownership

Figure 5: Payment card ownership, June 2013

Barriers to credit card ownership

Figure 6: Reasons why consumers do not own credit cards, June 2013

How consumers use credit cards

Figure 7: Consumer attitudes towards credit card usage, June 2013

Contactless credit cards

Figure 8: Contactless credit cards, June 2013

Credit card reward schemes

Figure 9: Credit card reward schemes, June 2013

Attitudes towards reward schemes among users

Figure 10: Attitudes towards reward schemes among credit card users with rewards, June 2013

Attitudes towards reward schemes among non-users

Figure 11: Attitudes towards reward schemes among credit card users without rewards, June 2013

What we think

 

Issues in the Market

To what extent are contactless payments an important feature for credit card holders?

How many credit card holders receive rewards as part of their account?

What are the main barriers to credit card ownership?

How do credit and charge cards stack up against debit cards?

 

Trend Application

Reward yourself with rewards points

Using credit as debit

Mintel futures: Generation Next

 

Market Drivers

Key points

Total net unsecured lending up by two fifths in 2012

Figure 12: Net consumer credit lending (non-seasonally adjusted), 2008-12

Demand for consumer credit continues to fluctuate

Figure 13: Intended consumer credit activities, Q1/Q2 2006-Q1/2 2013

Consumer confidence brightens in the first half of 2013

Figure 14: UK consumer confidence, January 1988-June 2013

Losses on card fraud increased by around 14% in 2012

Figure 15: Annual plastic fraud losses on UK-issued cards, 2008-12

Credit card debt write-offs continue to fall

Figure 16: Quarterly write-offs of lending to individuals, by sector, March 2007-March 2013

Credit card interest rates fall slightly but the BoE base rate remains unchanged

Figure 17: Official bank base rate, three-month LIBOR and effective overdraft and credit card interest rates (monthly average), January 2006-July 2013

Debt-to-income ratio continues to fall

Figure 18: The value of personal sector debt (mortgages and consumer credit) and as a proportion of total PDI, at current prices, 2001-12

Regulatory Round-up

FCA to take responsibility for consumer credit regulation from OFT in 2014

Crackdown on excessive card surcharges

The EU wants to cap transaction fees

FCA implements new rules for recurring payments

Banks and card providers facing compensation bill of up to £1.3 billion

 

Competitor Products

Key points

Credit card numbers still continue to lag behind debit cards

Figure 19: Number of cards in issue, by card type, 2002-12

Debit cards account for almost 50% of payments in the UK

Figure 20: Share of payments in the UK, by volume, 2002 and 2012

Credit cards account for over 70% of gross consumer credit lending

Figure 21: Gross consumer credit lending, by sector (non-seasonally adjusted), 2008-12

Outstanding credit card debt remained relatively flat in 2012

Figure 22: Amount of credit card and other unsecured lending outstanding (non-seasonally adjusted), 2005-12 (at year end)

 

SWOT Analysis

Figure 23: Credit and charge card market – SWOT analysis, 2013

 

Who’s Innovating?

Key points

Barclaycard introduces its bespoke offers to the nation

MBNA launches a new rewards credit card

iZettle to allow small retailers to take credit card payments

Helping consumers understand the cost of their credit card

Buying gift cards and products by tweeting special hashtags

MasterCard testing a credit card with a screen and keyboard

Tesco Bank’s new credit card carries no fees for balance transfers

 

Market Size and Forecast

Key points

Credit and charge card spending remained relatively flat in 2012

Figure 24: Volume and value of transactions for UK purchases, by card type, 2008-12

Cash withdrawals on credit cards continue downward trend

Figure 25: Volume and value of cash withdrawals, by card type, 2008-12

Overseas credit card transactions increased in 2012

Figure 26: Summary of credit and charge card transactions made outside the UK, 2012

Net credit card lending declined by around 8% in 2012

Figure 27: Gross and net credit card lending (non-seasonally adjusted), 2007-13

Market forecast

Gross lending is expected to increase 30% over the next five years

Figure 28: Forecast of gross credit card lending (non-seasonally adjusted), 2008-18

Figure 79: Forecast of gross credit card lending, 2008-18

Forecast methodology

Fan chart explanation

 

Market Share

Key points

Barclaycard is still the number one player in the credit card market

Figure 30: Ranking of the largest credit and charge card providers in the UK, by share of customers, July 2013

The top five providers account for around 60% of credit cards issued

Figure 31: Estimated group share of the UK credit and charge card market (rebased to 100), by share of customers, July 2013

MasterCard and Visa dominate the credit and charge card market

Figure 32: Credit and charge cards in issue, by card scheme, 2012

 

Companies and Products

American Express

Description

Market position

Product range

Figure 33: Summary of selected credit cards offered by American Express, June 2013

Financial performance

Recent activity

Barclaycard

Description

Market position

Product range

Figure 34: Summary of selected credit cards offered by Barclaycard, June 2013

Financial performance

Figure 35: Key financial data for Barclaycard, 2011 and 2012

Recent activity

HSBC Group

Description

Market position

Product range

Figure 36: Summary of credit cards offered by HSBC and partners, June 2013

Financial performance

Figure 37: Key financial data of HSBC Bank Plc, 2011 and 2012

Recent activity

Lloyds Banking Group

Description

Market position

Product range

Figure 38: Summary of credit cards offered by Lloyds TSB, June 2013

Figure 39: Summary of credit cards offered by Halifax, June 2013

Financial performance

Figure 40: Key financial data for Lloyds Banking Group‘s retail division, 2011 and 2012

Recent activity

MBNA Europe

Description

Market position

Product range

Figure 41: Summary of selected credit cards offered by MBNA and partners, June 2013

Figure 42: Summary of credit cards offered by Virgin Money (and issued by MBNA), June 2013

Financial performance

Recent activity

RBS Group

Description

Market position

Product range

Figure 43: Summary of credit cards offered by RBS and NatWest, June 2013

Financial performance

Figure 44: Key financial data for RBS Group’s UK Retail Banking Division, 2011 and 2012

Recent activity

 

Brand Research

Brand map

Figure 45: Attitudes towards and usage of brands in the credit card sector, June 2013

Correspondence analysis

Brand attitudes

Figure 46: Attitudes, by credit card brand, June 2013

Brand personality

Figure 47: Credit card brand personality – macro image, June 2013

Figure 48: Credit card brand personality – micro image, June 2013

Brand experience

Figure 49: Credit card brand usage, June 2013

Figure 50: Satisfaction with various credit card brands, June 2013

Figure 51: Consideration of credit card brands, June 2013

Figure 52: Consumer perceptions of current credit card brand performance, June 2013

Brand index

Figure 53: Credit card brand index, June 2013

Target group analysis

Figure 54: Target groups, June 2013

Figure 55: Credit card brand usage, by target groups, June 2013

Group one – Conformists

Group two – Simply the Best

Group three – Shelf Stalkers

Group four – Habitual Shoppers

Group five – Individualists

 

Brand Communication and Promotion

Key points

Adspend on overall cards remained relatively flat in 2012/13

Figure 56: Advertising expenditure on credit, affinity, charge and retail/store cards, 2010/11-2012/13

Barclaycard leads the way when it comes to marketing activity

Figure 57: Top ten advertisers of credit and charge cards, 2010/11-2012/13

Direct mail campaigns dominate the credit card market

Figure 58: Adspend on credit and charge cards, by media type, 2010/11-2012/13

A note about adspend

 

Channels to Market

Key points

Around 50% of internet users apply for credit cards online

Figure 59: Channels used to apply for a credit card, July 2013

Bank/building society applications are still the most popular

 

Credit Card Ownership

Key points

Around two thirds of adults have a credit card

Figure 60: Payment card ownership, June 2013

Credit cards most popular among older customers…

Figure 61: Ownership of credit and charge cards, by age, June 2013

…but younger generations are embracing charge cards

More affluent consumers have higher ownership of credit and charge cards

Figure 62: Ownership of credit and charge cards, by socio-economic group and annual household income, June 2013

 

Barriers to Credit Card Ownership

Key points

Many overlook credit cards due to fears about being in debt

Figure 63: Reasons why consumers do not own credit cards, June 2013

Bad experiences and lack of self-trust are also barriers

Around 3% of adults have been rejected while 14% think they would be refused

Figure 64: Agreement with the statement ‘I don’t think I would be accepted for a credit card’, by household size, June 2013

One in ten prefer to use an overdraft instead of credit cards

 

How Consumers Use Credit Cards

Key points

Over 50% of adults pay off their credit balance in full every month

Figure 65: Consumer attitudes towards credit card usage, June 2013

Big-ticket items still more popular than everyday shopping expenditure

Age influences the way people use credit cards

Figure 66: Consumer attitudes towards credit card usage, by age, June 2013

Adults with multiple cards more likely to use them for expensive and everyday items

Figure 67: Consumer attitudes towards credit card usage, by payment card ownership, June 2013

Balance transfers more appealing to those with three or more cards

Figure 68: Consumer agreement with the statement ‘I have transferred my outstanding balance to a lower-rate credit card in the last year’, by credit card ownership, June 2013

 

Contactless Credit Cards

Key points

The majority of credit card holders do not have a contactless credit card

Figure 69: Contactless credit cards, June 2013

Interest among those without contactless cards is low

Figure 70: Contactless credit cards, June 2013

Young adults at the forefront of payment innovation

Figure 71: Contactless credit cards, by gender and age, June 2013

 

Credit Card Reward Schemes

Key points

Around 60% of credit card holders have some form of rewards…

Figure 72: Credit card reward schemes, June 2013

...while over a fifth are unsure if they have a benefits scheme

Adults who use their card for everyday purchases more likely to receive rewards

Figure 73: Credit card reward schemes, by consumer attitudes towards credit card usage, June 2013

Contactless users more likely to have some form of rewards

Figure 74: Credit card reward schemes, by contactless credit cards, June 2013

 

Attitudes towards Reward Schemes Among Users

Key points

A quarter of credit card holders use their card more frequently due to reward schemes

Figure 75: Attitudes towards reward schemes among credit card users with rewards, June 2013

A fifth of consumers do not think it is worth paying for reward schemes

Frequent card users are more engaged in their card reward scheme

Figure 76: Attitudes towards reward schemes among credit card users with rewards, by agreement with the statement ‘I use a credit card for everyday expenditures, such as groceries’, June 2013

 

Attitudes towards Credit Card Reward Schemes Among Non-Users

Key points

More than 50% of adults with no rewards/benefits would not pay for such schemes

Figure 77: Attitudes towards reward schemes among credit card users without rewards, June 2013

Some adults simply want a no-thrills credit card

Figure 78: Contactless credit cards, by agreement with the statement ‘I don’t see the benefit of a credit card reward scheme’, June 2013

 

Appendix – Market Size and Forecast

Figure 79: Forecast of gross credit card lending, 2008-18

Figure 80: Gross credit card lending market forecast, best and worst-case scenario, 2013-18

 

Appendix – Brand Research

Figure 83: Brand usage, June 2013

Figure 84: Brand commitment, June 2013

Figure 85: Brand momentum, June 2013

Figure 86: Brand diversity, June 2013

Figure 87: Brand satisfaction, June 2013

Figure 88: Brand attitude, June 2013

Figure 89: Brand image – macro image, June 2013

Figure 90: Brand image – micro image, June 2013

Figure 91: Profile of target groups, by demographics, June 2013

Figure 92: Psychographic segmentation, by target groups, June 2013

Figure 93: Brand usage, by target groups, June 2013

Brand index

Figure 94: Brand index, June 2013

 

Appendix – Credit Card Ownership

Figure 95: Debit card ownership, by demographics, June 2013

Figure 96: Credit card ownership, by demographics, June 2013

Figure 97: Store card ownership, by demographics, June 2013

Figure 98: Prepaid card ownership, by demographics, June 2013

Figure 99: Charge card ownership, by demographics, June 2013

 

Appendix – Barriers to Credit Card Ownership

Figure 100: Main reasons why consumers do not own credit cards, by demographics, June 2013

Figure 101: Less important reasons why consumers do not own credit cards, by demographics, June 2013

 

Appendix – How Consumers Use Credit Cards

Figure 102: Consumer attitudes towards credit card usage, by demographics, June 2013

Figure 103: Consumer attitudes towards credit card usage, by demographics, June 2013 (continued)

 

Appendix – Contactless Credit Cards

Figure 104: Contactless credit cards, by demographics, June 2013

 

Appendix – Credit Card Reward Schemes

Figure 105: Credit card reward schemes, by demographics, June 2013

Figure 106: Adults who do not have a credit card reward scheme or are unsure about their reward scheme, by demographics, June 2013

Figure 107: Contactless credit cards, by credit card reward schemes, June 2013

 

Appendix – Attitudes towards Credit Card Reward Schemes Among Users

Figure 108: Attitudes towards reward schemes among credit card users with rewards, by demographics, June 2013

Figure 109: Attitudes towards reward schemes among credit card users with rewards, by demographics, June 2013 (continued)

 

Appendix – Attitudes towards Credit Card Reward Schemes among Non-Users

Figure 110: Attitudes towards reward schemes among credit card users without rewards, by demographics, June 2013

Figure 111: Attitudes towards reward schemes among credit card users without rewards, by demographics, June 2013 (continued)

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