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Credit Cards - UK - September 2013

Published By :

Mintel

Published Date : Sep 2013

Category :

Banking

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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