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CREDIT CARDS - UK - AUGUST 2019

Published By :

Mintel

Published Date : Aug 2019

Category :

Cards & Payments

No. of Pages : N/A

People continue to use their credit cards for spending, making the most of benefits and extra protection. They are hesitant about taking on unnecessary debt and are keen to repay as soon as possible. Providers are rethinking their proposition, to meet the needs of both transactors and borrowers amid the threat of disruption from challengers. In a competitive market, support and flexibility will be key.

Table of contents

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Gross credit card lending keeps on rising but net lending contracts
Figure 1: Net consumer credit lending, by type of credit (non-seasonally adjusted), 2009-18
Growth to continue as consumers take advantage of extra benefits
Figure 2: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2014-24
Balance transfer activity falls
Regulatory focus on protecting vulnerable borrowers
Consumer sentiment and confidence rise despite Brexit uncertainty
Companies and brands
Barclaycard is the largest individual provider
Figure 3: Largest credit and charge card providers in the UK, by share of customers, May 2019
Flexible repayments offer consumers choice
Providers signal that they have customers’ best interests at heart
Rethink of benefits, rewards and loyalty among established brands
Challengers continue to innovate and disrupt the credit card market
Above-the-line adspend recovers driven by high-profile TV campaigns
The consumer
71% of online adults have a credit card
Figure 4: Credit card ownership, May 2019
Two thirds of borrowers expect to pay off balance within a year
Figure 5: Time expected to pay off credit card balance, May 2019
No overwhelmingly dominant reason for owning a credit card
Figure 6: Reasons for owning a credit card, May 2019
Satisfaction is high but rates and benefits may become deal breakers
Figure 7: Satisfaction with features of main credit card, May 2019
People like easy-to-access benefits and cash(back) is king
Figure 8: Interest in credit card features, May 2019
People trust traditional providers over tech giants and challengers
Figure 9: Interest in alternative credit card providers, May 2019
What we think
ISSUES AND INSIGHTS
Market focus on responsible lending and sustainable borrowing
The facts
The implications
Renewed interest in credit scores
The facts
The implications
Cash(back) is king
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Gross credit card lending keeps on rising but net lending contracts
Growth to continue as consumers take advantage of extra benefits
Balance transfer activity falls
Regulatory focus on protecting vulnerable borrowers
Consumer sentiment and confidence rise
MARKET SIZE AND FORECAST
Gross credit card lending continues to rise
Figure 10: Gross and net credit card lending (non-seasonally adjusted), 2014-19
Gross lending expected to grow steadily
Figure 11: Forecast of gross credit card lending (non-seasonally adjusted) – Fan chart, 2014-24
Figure 12: Forecast of gross credit card lending, at current and constant prices, 2019-24
Forecast methodology
CARDS AND SPENDING PATTERNS
Number of credit cards in issue remains stable
Figure 13: Number of debit and credit cards in issue, 2004-18
Balance transfer activity falls
Figure 14: Volume and value of credit card transactions by UK residents, by type of transaction, 2014-18
Credit cards continue to be used for lower-value transactions
Figure 15: Average credit card transaction value, by type of transaction, 2014-18
75% of credit cards are contactless
Figure 16: Payment cards with contactless functionality, April 2019
PAYMENTS MARKET
Credit card transactions expected to grow by 27% by 2028
Figure 17: Volume of payments, by type, 2018 and 2028
Credit cards account for 8% of all payments in the UK
Figure 18: Share of total payment volumes, by payment type, 2018
CHANNELS TO MARKET
Price comparison sites are the main channel used for research
Figure 19: Credit card research channels, March 2019
77% apply online or in-app
Figure 20: Credit card purchase channels, March 2019
Cardholders more likely to go to a provider other than their main bank
Figure 21: Financial products ownership, by proportion held with main current account provider, June 2018
MARKET DRIVERS
Gross credit card lending growing faster than other unsecured credit
Figure 22: Gross consumer lending, by type of credit (non-seasonally adjusted), 2009-18
Net credit card lending has contracted for first time in five years
Figure 23: Net consumer credit lending, by type of credit (non-seasonally adjusted), 2009-18
Total credit card debt outstanding grew by 3% in 2018
Figure 24: Amounts outstanding of credit card and other unsecured lending (non-seasonally adjusted), 2009-18
Credit card write-offs remain stable in 2018
Figure 25: Annual write-offs of lending to individuals, by type of credit, 2009-18
Credit card rates overtake overdrafts
Figure 26: Base interest rate, SONIA and consumer credit quoted interest rates to UK households, June 2015-June 2019
Financial wellbeing is up in 2019
Figure 27: Financial wellbeing index, May 2015-May 2019
Financial confidence rises
Figure 28: Index of consumer sentiment for the coming year, May 2015-May 2019
REGULATORY AND LEGISLATIVE CHANGES
Helping people in persistent debt
Overhaul to ‘dysfunctional’ overdraft market
Renewed focus on vulnerable people…
…and affordable credit
PPI deadline looms
NPSO rebranded Pay.UK
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Barclaycard is the largest individual provider
Flexible repayments offer consumers choice
Providers signal that they have customers’ best interests at heart
Rethink of benefits, rewards and loyalty among established brands
Challengers continue to innovate and disrupt the credit card market
Above-the-line adspend recovers driven by high-profile TV campaigns
MARKET SHARE
Barclaycard is the largest individual provider
Figure 29: Largest credit and charge card providers in the UK, by share of customers, May 2019
Older consumers more likely to deal with multiple providers
Figure 30: Repertoire of number of credit card providers used, by age, May 2019
COMPETITIVE STRATEGIES
Flexible repayments offer consumers choice
Providers signal that they have customers’ best interests at heart
Barclaycard launches and heavily promotes its repayment calculator
Comparethemarket.com goes beyond meerkats to focus on product
Providers rethinking benefits, rewards and loyalty
HSBC launches new rewards card incentivising loyalty
CYBG’s rebrand into Virgin Money will highlight Virgin rewards
Amazon cuts credit card rewards on non-Amazon purchases
Less choice for overseas benefits from established providers
Saga withdraws its Platinum card
Barclaycard Platinum removes free overseas usage for new customers
Open Banking and Credit Cards
LAUNCH ACTIVITY AND INNOVATION
Apple launches a credit card in the US
New provider Jaja acquires BoI’s UK credit card portfolio
Figure 31: Jaja credit card and app
Tandem adds credit building card
Figure 32: Tandem Journey credit card
Curve extends its cashback offer
Zopa gets banking licence and looks to launch credit cards
Innovative solutions and the blurring of credit…
…led by a mix of foreign players, established brands and UK start-ups
Coming soon: Zilch
ADVERTISING AND MARKETING ACTIVITY
Credit card above-the-line adspend recovers…
Figure 33: Total above-the-line, online display and direct mail advertising expenditure on credit and charge cards, 2014/15-2018/19
…driven by increased spend on TV ads…
Figure 34: Above-the-line advertising expenditure on credit and charge cards, by media type, 2014/15-2018/19
…led by Barclaycard
Figure 35: Top 15 above-the-line, direct mail and online display advertisers of payment cards, 2016/17-2018/19
Nielsen Ad Intel coverage
BRAND RESEARCH
What you need to know
Brand map
Figure 36: Attitudes towards and usage of selected brands in the credit card market, May 2019
Key brand metrics
Figure 37: Key metrics for selected brands in the credit card market, May 2019
Brand attitudes: Tesco Bank perceived as rewarding loyalty
Figure 38: Attitudes, by brand, May 2019
Brand personality: American Express seen as exclusive
Figure 39: Brand personality – Macro image, May 2019
High street banks leverage their expertise and scope
Figure 40: Brand personality – Micro image, May 2019
Brand analysis
High street banks benefit from size, recognisable brand and high usage
American Express’ strong brand is highly differentiated
Other specialists lose out on trust
THE CONSUMER – WHAT YOU NEED TO KNOW
71% of online adults have a credit card
Two thirds of borrowers expect to pay off credit card debt within a year
No overwhelmingly dominant reason for owning a credit card
Satisfaction is high but rates and benefits may become deal breakers
People like easy-to-access benefits and cash(back) is king
People trust traditional providers over tech giants and challengers
CREDIT CARD OWNERSHIP
71% of adults have a credit card
Figure 41: Credit card ownership, May 2019
44% of cardholders own two or more cards
Figure 42: Number of credit cards owned, May 2019
CREDIT CARD BALANCE STATUS
36% of cardholders have an outstanding balance
Figure 43: Proportion with an outstanding credit card balance, May 2019
Two thirds of borrowers expect to pay off within a year…
…but more than 10% expect to carry their balance for over two years
Figure 44: Time expected to pay off credit card balance, May 2019
Borrowers with multiple cards are more at risk of persistent debt
Figure 45: Time expected to pay off credit card balance, by number of credit cards owned, May 2019
REASONS FOR OWNING A CREDIT CARD
People want credit cards to finance large purchases…
…and to provide peace of mind…
…including overseas
17% want to improve their credit score
Looking beyond benefits
Figure 46: Reasons for owning a credit card, May 2019
SATISFACTION WITH MAIN CREDIT CARD
People are happy with basic product features
The relationship can always improve
Scope for a more competitive market…
Figure 47: Satisfaction with features of main credit card, May 2019
…but vast majority of cardholders are ultimately satisfied with their card
Figure 48: Overall satisfaction with main credit card, May 2019
SATISFACTION: KEY DRIVER ANALYSIS
Leveraging the positives
Figure 49: Key drivers of overall satisfaction with credit card used most frequently, May 2019
Figure 50: Overall satisfaction with main credit card – key driver output, May 2019
Building trust
Room for improvement: overseas fees
Rates and benefits: deal breakers?
INTEREST IN CREDIT CARD FEATURES
People like easy-to-access benefits
A message around privacy is likely to resonate
Once again, overseas fees are a good differentiator
Figure 51: Interest in credit card features, May 2019
Credit score building features as a rewarding extra
Figure 52: Interest in credit card features – CHAID – Tree output, May 2019
TURF Analysis: cash(back) is king…
…and can be personalised, flexible and exciting
Figure 53: Interest in credit card features – TURF Analysis, May 2019
INTEREST IN ALTERNATIVE CREDIT CARD PROVIDERS
People trust traditional financial services providers
30% simply don’t know
Figure 54: Interest in alternative credit card providers, May 2019
Stark differences by demographics
Figure 55: Appeal of alternative credit card providers, by age, May 2019
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
Key Driver Analysis methodology
Interpretation of results
Figure 56: Overall satisfaction with main credit card – key driver output, May 2019
Figure 57: Satisfaction with main credit card, by feature, May 2019
CHAID analysis methodology
Figure 58: Interest in credit card features CHAID analysis – Table output, May 2019
Figure 59: Number of credit cards CHAID analysis – table output, May 2019
Figure 60: Credit card balance status CHAID analysis – Table output, May 2019
TURF analysis methodology
Figure 61: Credit cards TURF analysis – Table output, May 2019
APPENDIX – MARKET SIZE AND FORECAST
Market forecast – Best- and worst-case scenarios
Figure 62: Forecast of gross credit card lending, at current and constant prices, 2019-24
Forecast methodology

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