Credit Card in United Kingdom: UK Plastic Cards 2010

• Publication date: November 2010

About This Report The UK consumer credit landscape remains unsettled with the government's proposed cuts package looming heavily over the industry recovery. This has led to a flat performance in many lines of consumer credit, with counter-cyclical industry s such as motor and retail finance the best performers. As the economy begins to improve, lenders will need to react quickly in order to take full advantage. What's Include...

About This Report
The UK consumer credit landscape remains unsettled with the government's proposed cuts package looming heavily over the industry recovery. This has led to a flat performance in many lines of consumer credit, with counter-cyclical industry s such as motor and retail finance the best performers. As the economy begins to improve, lenders will need to react quickly in order to take full advantage.

What's Included in This Report?
Covers a variety of industry s across the market such as unsecured personal loans, motor finance, retail finance, peer to peer and non-standard lending
Provides three different scenario projections for the consumer credit industry as a whole as well as projections for individual industries.
Includes industry share data across some of the different consumer credit segments .
Provides data from proprietary Retail Banking Consumer Survey.
Key Market Facts
The different consumer credit products all witnessed deteriorations in performance in 2009 in comparison with 2008. The alteration of conditions under the recessionary environment led to some lines performing quite robustly while others saw a significant contraction.

Although the level of competition remains low among unsecured personal loan providers, industry experts did suggest that some players have made tentative steps to boost their aggression in terms of attracting new customers.

The recession has seen the popularity of product lines such as motor and retail finance gaining in popularity as consumers have found it difficult to access funding from banks and building societies.

Why Should You Buy This Report?
Formulate industry share objectives for your industry player and track progress using our industry share and channel size data
Gain an in-depth knowledge of different consumer credit industries, from large established products to the more niche challengers.
Make informed industry entry decisions through a greater understanding of the industry and how it will perform over the next few years.

Credit Card Industry in the United Kingdom

TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Summary 2
UK Plastic Card Industry in Review and Future Outlook 2
Cards grew by a CAGR of 8.5% from 2005 to 2009, but growth will be weaker to 2014 2
Economic indicators remain mixed, with signs that consumer confidence is falling 3
Market Statistics and Key Drivers and Main Trends 5
Despite the recession, the UK cards industry will continue to grow through to 2014 13
Competitor Shares and Developments in the UK Card Industry 17
The competitive landscape has remained surprisingly unchanged over the past 12 months 17
Lloyds Group is still the largest credit card issuer by number of cards 20
Barclaycard has the highest value of balances outstanding 25
The debit card industry is led by the major high street distribution banks 28
Santander leads the private label card industry 30
Prepaid cards have strong growth potential, but the industry currently remains flat 31
Contactless, Mobile, Online and Prepaid in the UK 33
Alternative Payments Are Gaining Ground in the UK 33
Contactless Payments Are Coming, But Not Yet 35
Mobile Payments Are Focused on m-commerce and P2P Transactions 38
Online Payments Are Dominated by Debit and Credit 39
Prepaid Cards Are Growing Beyond the Underbanked 41
UK Plastic Card Industry in Review and Future Outlook 57
Cards grew by a CAGR of 8.5% from 2005 to 2009, but growth will be weaker to 2014 57
Economic indicators remain mixed, with signs that consumer confidence is falling 58
Consumer confidence is falling again and may lead to a slowdown in spending 59
Unemployment figures are plateauing, but card write-offs remain very high and will limit industry growth 60
As balances continue to fall, transaction values are beginning to rise 64
In line with long-term trends, balance transfers are decreasing 69
Market Statistics and Key Drivers and Main Trends 72
2009 has been a difficult year for the cards industry in many areas 72
The value of all card transactions is rising 72
The total number of cards in issue has fallen, with only debit showing growth 72
The number of credit card holders is falling 75
Despite the recession and the decline in card numbers, transactions increased in 2009 77
Transaction values are increasing as a result of the growth of debit 79
Charge cards hold the highest average transaction value but this began to decline in 2009 81
Purchases account for 64% of all UK card transactions 84
Debit cards showed the highest rate of growth in transaction value by type between 2005 and 2009 85
Credit transactions are dominated by purchases 87
Charge cards are now in decline as business expense usage declines 89
Card scheme industry shares have been volatile over the past five years 90
MasterCard now leads the credit card industry 91
The charge card industry has seen the consolidation of American Express’ historic lead 92
The increase in POS terminals has helped to drive the growth in transaction volumes 93
Bank owned ATMs are now driving growth, as independent ATMs continue to decline 94
The number of fraudulent transactions is falling 95
The successful implementation of chip and PIN led to a rise in card-not-present fraud 96
The value of all fraud fell in every category in 2009 97
Forecasting the UK Payment Cards Industry 99
Despite the recession, the UK cards industry will continue to grow through to 2014 99
Datamonitor projections annual growth of 5.6% in the value of payment card transactions to 2014 99
Datamonitor’s projecting model assesses the relationship between macroeconomic factors and consumer credit products 102
The credit card industry is likely to remain flat through to 2014 104
Datamonitor projections annual growth in the credit card industry of 3.6% to 2014 under a neutral scenario 104
Under an optimistic scenario Datamonitor projections an annual growth of 4.6% 107
Under a pessimistic view of future economic performance, Datamonitor projections an annul growth of 2.4% 109
Debit cards will see the most positive levels of growth over the next five years 113
Datamonitor projections annual growth of 6.3% in the debit card industry to 2014 113
The charge card industry will remain flat through to 2014 115
Datamonitor projections that the charge card industry will see marginal annual growth of 3.0% to 2014 115
Private label cards will decline through to 2014 117
Datamonitor projections that the private label card industry will see an annual decline of -4.4% to 2014 117
Competitor Shares and Developments in the UK Card Industry 119
The competitive landscape has remained surprisingly unchanged over the past 12 months 119
Some brands have exited the industry, and more are likely to follow 119
Many issuers are diversifying rather than retrenching their positioning 120
Egg and Citigroup have both launched standard cards with annual fees 126
Incentives for transactions are becoming more critical 127
Incentivizing day to day use is critical to future growth 129
Issuers have little choice but to innovate and adapt in today's industry 131
Lloyds Group is still the largest credit card issuer by number of cards 131
Barclaycard branded cards hold a steady 15.3% share of the industry 133
Barclaycard has the largest portfolio of ‘primary’ cards 134
Premium branded cards continue to constitute a significant share of the industry 137
Usage and primacy rates are driven by card features 138
The number and value of transactions per issuer is broadly in line with industry share 140
Barclaycard had the highest value of transactions in 2009 on GBP 15.6 billion 142
Frequency of use is consistent across most card issuers 143
66% of Tesco Bank cards are used all the time 144
Barclaycard has the highest value of balances outstanding 145
Egg holds the highest average balance per card 147
Repayment rates are significantly higher for cards providing incentives for transacting 148
The debit card industry is led by the major high street distribution banks 150
Santander recently passed Barclays as the largest debit card issuer, with 10.6 million cards in H1 2010 150
POS accounts for the majority of debit transactions by volume 152
£67.8 billion was spent by consumers on Barclays debit cards in 2009 153
Consumers spent an average GBP 52.70 per debit card transaction in 2009 154
Santander leads the private label card industry 156
Prepaid cards have strong growth potential, but the industry currently remains flat 159
Less than 5% of the population hold a prepaid card 160
There are 3.9 million prepaid cards in issue 161
Contactless, Mobile, Online and Prepaid in the UK 164
Alternative Payments Are Gaining Ground in the UK 164
Contactless Payments Are Coming, But Not Yet 164
Definition of contactless payments 165
Contactless cards offer speed and convenience to consumers 166
The potential opportunity for contactless cards in the UK is up to GBP 97.4 billion 166
Petrol sales provide the most potential for contactless payments in the UK 167
Contactless payments are being driven by Oyster and Barclays in the UK 169
Oyster proves that UK consumers are willing to use contactless ticketing 170
Barclaycard is the driving force behind UK contactless payment cards 172
Mobile Payments Are Focused on m-commerce and P2P Transactions 175
Mobile payments can be divided into P2P, m-commerce, and NFC payments 175
Mobile commerce and P2P applications are growing 176
Card issuers and MNOs in the UK are teaming up for a likely future push into mobile payments 177
Orange and Barclaycard are explicitly planning to launch mobile payments by 2012 177
O2 also has a card up its sleeve 179
Online Payments Are Dominated by Debit and Credit 181
Credit and debit cards account for 85% of online transactions by value 182
The most frequent online shoppers are the most likely to pay by credit card 184
Consumers spend the most on airlines and hotels, but shop more frequently for DVDs and games 186
The top quintile of consumers account for at least half of all online sales in nearly every merchant category 189
Convenience is more important than security when shopping online 190
Prepaid Cards Are Growing Beyond the Underbanked 194
Unlike other payment cards, prepaid cards typically require a program manager 194
Prepaid cards exist in a variety of forms, targeted at specific audiences and needs 195
Revenue streams for prepaid cards are based on fees and float interest 198
The UK prepaid card industry is dominated by small- to mid-size players 199
Fraud remains a concern for the UK prepaid industry 200
Mid-size banks and building societies are the largest issuers of prepaid cards in the UK 201
Appendix 206
Supplementary data 206
Online payments 206
Definitions 209
Methodology 211
Further reading 212
Ask the analyst 212
Datamonitor consulting 212
Disclaimer 212


TABLE OF FIGURES
Chart 1: Following a CAGR of 8.5% from 2005–09, growth will slow to a CAGR of 5.6% from 2010f–14f 2
Chart 2: Following an improvement throughout most of 2009, consumer confidence is falling 4
Chart 3: The value of all transactions grew by a CAGR of 7.4% between 2005 and 2009 to reach GBP 624.5 billion 5
Chart 4: Debit cards account for over half of the 156.4 million payment cards in issue 6
Chart 5: UK purchases continue to constitute the bulk of all UK card transactions 8
Chart 6: There were 10.7 billion plastic card transactions in 2009 9
Chart 7: Visa holds nearly three quarters of the debit card industry 10
Chart 8: The number of POS terminals continues to rise 12
Chart 9: Card fraud is declining across all card types 13
Chart 10: The UK cards industry will see 5.6% growth in transaction values through to 2014 14
Chart 11: The credit card industry will improve from at least 2011 onwards 17
Chart 12: MBNA has proactively switched all of its Alliance and Leicester branded cards 19
Chart 13: Only two issuers have undergone a decline in the number of card products they offer 20
Chart 14: Lloyds Banking Group leads the industry with 12.6 million credit cards in issue 21
Chart 15: Barclaycard has 4.6 million primary cards in the industry 23
Chart 16: Two million Tesco Bank cards are considered primary by cardholders 24
Chart 17: On average only 30% of cards are used ‘all the time’ according to cardholders 25
Chart 18: Barclaycard holds the highest value of balances outstanding at GBP 8.9 billion in H1 2010 26
Chart 19: Lloyds holds 23% of the industry by balances outstanding 27
Chart 20: The number of debit cards grew to reach 80.6 million cards by H1 2010 29
Chart 21: The top five debit card issuers hold between 11% and 13% of the industry 30
Chart 22: Santander has over 6.2 million private label cards in issue 31
Chart 23: 2.9 million consumers hold a prepaid card 33
Chart 24: The addressable industry for contactless payments is GBP 97.4 billion 38
Chart 25: The UK is the most advanced industry for online shopping in EUR pe 40
Chart 26: Over 40% of consumers who do not shop online prefer to get their goods the same day 41
Chart 27: Prepaid cards consist of three primary players: program managers, issuers and processors 43
Chart 28: Following a CAGR of 8.5% from 2005–09, growth will slow to a CAGR of 5.6% from 2010f–14f 57
Chart 29: Following an improvement throughout most of 2009, consumer confidence is falling 59
Chart 30: Card write-offs continue to rise, despite a deceleration in unemployment growth 60
Chart 31: Card write-offs hit record highs in 2009 and 2010, reaching GBP 2.1 billion 62
Chart 32: An index of write-offs, insolvencies, and unemployment suggests probable growth in write-offs 63
Chart 33: Balances outstanding have been declining compared to the previous year 65
Chart 34: For the longest sustained period since the onset of the downturn, transaction values are higher than the previous year 66
Chart 35: Balances outstanding have seen a sustained decline since January 2009 67
Chart 36: Overdraft balances are in decline as consumers avoid debt based spending 68
Chart 37: Monthly balance transfers are showing long-term decline in value 70
Chart 38: The value of balance transfers has dropped by 51.2% between Q1 2006 and Q2 2010 71
Chart 39: The value of all transactions grew by a CAGR of 7.4% between 2005 and 2009 to reach GBP 624.5 billion 72
Chart 40: Debit cards account for over half of the 156.4 million payment cards in issue 73
Chart 41: The private label card industry has declined by 29% since 2005 74
Chart 42: The gap between debit and credit card holdings has grown since 2005 75
Chart 43: Standard cards account for almost 10% more of the industry compared to five years ago 76
Chart 44: There were 10.7 billion plastic card transactions in 2009 78
Chart 45: Debit cards accounted for 71.9% of transactions by value in 2009 79
Chart 46: Debit cards are used an average of 107 times per year 80
Chart 47: The average transaction value on pay later cards fell in 2009 81
Chart 48: Charge card turnover fell to GBP 6,873 per card in 2009 83
Chart 49: Card turnover per adult in the population is strongly led by debit at GBP 9,312 in 2009 84
Chart 50: UK purchases continue to constitute the bulk of all UK card transactions 85
Chart 51: Debit card transaction values grew by a CAGR of 11.8% between 2005 and 2009 86
Chart 52: The credit industry remains flat, recording a CAGR of -1.3% from 2005–09 88
Chart 53: Charge card transactions fell by 8.0% in 2009 89
Chart 54: Visa holds nearly three quarters of the debit card industry 90
Chart 55: MasterCard has successfully consolidated its credit card positioning to 60.6% of the industry 91
Chart 56: American Express accounts for 51.8% of the charge card industry 92
Chart 57: The number of POS terminals continues to rise 94
Chart 58: ATM numbers are falling due to a continued drop in the number of independent machines 95
Chart 59: Card fraud is declining across all card types 96
Chart 60: Instances of fraud are declining in almost every category 97
Chart 61: Following a 38.8% increase, the value of card fraud fell by 27.8% in 2009 98
Chart 62: The UK cards industry will see 5.6% growth in transaction values through to 2014 99
Chart 63: The credit card industry will improve from at least 2011 onwards 103
Chart 64: MBNA has proactively switched all of its Alliance and Leicester branded cards 120
Chart 65: Only two issuers have undergone a decline in the number of card products they offer 122
Chart 66: Lloyds Banking Group has the largest variety of credit cards on offer 123
Chart 67: The number of balance transfer offers has increased over the past 12 months 124
Chart 68: Both MBNA and LBG have increased the number of cards with 0% BT offers 125
Chart 69: Tesco Bank is an increasingly competitive force in the industry 128
Chart 70: Barclaycard’s Freedom website includes a directory of participating distribution ers 130
Chart 71: Lloyds Banking Group leads the industry with 12.6 million credit cards in issue 132
Chart 72: Barclaycard is the largest player by brand ahead of both Lloyds TSB, and HBOS 134
Chart 73: Barclaycard has 4.6 million primary cards in the industry 136
Chart 74: Two million Tesco Bank cards are considered primary by cardholders 137
Chart 75: 36% of American Express credit cards are platinum branded 138
Chart 76: ATM withdrawals account for 1.8% of credit card transaction volumes 141
Chart 77: Transaction values follow a very similar pattern to transaction numbers, with Barclaycard and Lloyds leading the industry in 2009 143
Chart 78: All credit cards are used between 32 and 26 times per year 144
Chart 79: On average only 30% of cards are used ‘all the time’ according to cardholders 145
Chart 80: Barclaycard holds the highest value of balances outstanding at GBP 8.9 billion in H1 2010 146
Chart 81: Lloyds holds 23% of the industry by balances outstanding 147
Chart 82: Egg cards hold an average balance of GBP 1,756 148
Chart 83: Reported rates of non-payment were as high as 15% of cards for some issuers in H1 2010 149
Chart 84: The number of debit cards grew to reach 80.6 million cards by H1 2010 151
Chart 85: The top five debit card issuers hold between 11% and 13% of the industry 152
Chart 86: Debit cards are used more often at the POS than at ATMs 153
Chart 87: POS accounts for 60% of all debit transactions by value 154
Chart 88: Consumers spent an average GBP 52.70 across all types of debit transactions in 2009 155
Chart 89: Santander has over 6.2 million private label cards in issue 157
Chart 90: Debenhams is the leading brand for private label store cards 158
Chart 91: The private label segment is fragmented, with Debenhams leading with a 15% industry share 159
Chart 92: 2.9 million consumers hold a prepaid card 160
Chart 93: There are over 1 million PayPal prepaid cards in issue 161
Chart 94: The prepaid cards segment is dominated by four issuers accounting for 75% of the industry 162
Chart 95: The addressable industry for contactless payments is GBP 97.4 billion 167
Chart 96: Petrol sales alone have an addressable industry for contactless of over GBP 60 billion 168
Chart 97: The top four merchant categories in terms of opportunity could benefit from contactless payments 169
Chart 98: The Barclaycard OnePulse card uses the Oyster logo, and London imagery 172
Chart 99: Barclaycard is heavily industry ing contactless to both consumers and merchants 173
Chart 100: Barclaycard and Orange plan to launch a mobile payment service by 2012 178
Chart 101: O2 has launched the most high profile mobile-related payment tool to date 180
Chart 102: The UK is the most advanced industry for online shopping in EUR pe 181
Chart 103: Over 40% of consumers who do not shop online prefer to get their goods the same day 182
Chart 104: Credit and debit account for 85% of online transactions by value in the UK 183
Chart 105: Consumers spent GBP 20 billion on their credit cards online in 2009 184
Chart 106: Consumers who shop online the most use credit cards for 48% of transactions by value 185
Chart 107: The top 20% of online shoppers account for 72% of all transactions by value 186
Chart 108: There were 839 million online transactions by volume in 2009 187
Chart 109: Videos/DVDs/games, music, and food and drink account for 54% of all online transactions 188
Chart 110: Consumers spent GBP 18 billion on airline tickets and hotels online in 2009 189
Chart 111: The top 20% of consumers account for at least half of online sales by value in all categories other than music 190
Chart 112: Higher perceptions of security do not lead to a higher industry share 191
Chart 113: High perceptions of convenience lead to a higher industry share 192
Chart 114: Prepaid cards consist of three primary players: program managers, issuers and processors 195
Chart 115: Prepaid cards are often targeted at very specific needs 198
Chart 116: With the highest brand awareness, Virgin and PayPal lead the prepaid cards industry 201
Chart 117: The prepaid cards segment is dominated by four issuers, accounting for 75% of the industry 202


TABLE OF TABLES
Data table 1: Projection UK plastic cards industry, 2010f–14f 3
Data table 2: Projection of transaction values for the UK plastic cards industry (£m), 2010f–14f 15
Data table 3: Datamonitor’s neutral scenario projection of the total UK cards industry, 2010f–14f 15
Data table 4: Projection UK plastic cards industry, 2010f–14f 58
Data table 5: Projection of transaction values for the UK plastic cards industry (£m), 2010f–14f 100
Data table 6: Datamonitor’s neutral scenario projection of the total UK cards industry, 2010f–14f 101
Data table 7: Projection performance of the UK consumer credit industry drivers under the neutral scenario, 2010f–14f 104
Data table 8: Datamonitor’s five-year projection of the credit card industry under a neutral scenario, 2010f–14f 105
Data table 9: Industry drivers for the UK credit card industry under a neutral scenario, 2005–14f 106
Data table 10: Datamonitor’s five-year projection of the credit card industry under an optimistic scenario, 2010f–14f 107
Data table 11: Industry drivers for the UK credit card industry under an optimistic scenario, 2005–14f 108
Data table 12: Projection performance of the UK consumer credit industry drivers under an optimistic scenario, 2010f–14f 109
Data table 13: Datamonitor’s five-year projection of the credit card industry under a pessimistic scenario, 2010f–14f 110
Data table 14: Industry drivers for the UK credit card industry under a pessimistic scenario, 2005–14f 111
Data table 15: Projection performance of the UK consumer credit industry drivers under a pessimistic scenario, 2010f–14f 112
Data table 16: Datamonitor's five-year projection of the debit card industry, 2010f–14f 113
Data table 17: Industry drivers for the UK debit card industry under Datamonitor’s projecting scenario, 2005–14f 114
Data table 18: Datamonitor’s five-year projection of the UK charge card industry, 2010f–14f 115
Data table 19: Industry drivers for the UK charge card industry under Datamonitor’s projecting scenario, 2005–14f 116
Data table 20: Datamonitor’s five-year projection of the UK private label card industry, 2010f–14f 117
Data table 21: Industry drivers for the UK private label card industry under Datamonitor’s projecting scenario, 2005–14f 118
Data table 1: Consumer perceptions of the features on their credit card by brand (1 of 2) 139
Data table 2: Consumer perceptions of the features on their credit card by brand (2 of 2) 140
Data table 3: UK prepaid cards by number of cards in issue by brand and issuing group 163
Data table 25: Consumer reasons for using different payment tools 193
Data table 26: Number and value of prepaid card transactions, 2008 204
Data table 27: UK prepaid cards by number of cards in issue by brand and issuing group 204
Data table 28: Value of cash transactions by transaction value band (£m) 206
Data table 29: Contactless opportunity by segment (£m and %) 206
Data table 30: Proportion of consumers in the EU27 that have shopped online at least once in the last three months, 2008 207
Data table 31: Reasons for not shopping online, UK and global average (%) 208
Data table 32: Value of online transactions by payment tool and quintile (£m) 208
Data table 33: Value of online transactions by merchant category and quintile (£m) 209