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CREDIT CARDS - UK - AUGUST 2018

Published By :

Mintel

Published Date : Aug 2018

Category :

Cards & Payments

No. of Pages : N/A

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.

Table of contents
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

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