Sizing and Forecasting the UK Plastic Card market
Introduction
This brief provides an accurate and up to date over view of the size and composition of the UK plastic cards market from 2004 through to 2008 alongside forecasts through to 2013. This includes not only concrete market sizing data including number of cards and balances outstanding, but also an overview of the systemic challenges facing the industry, and insight into the effects of the recession
Scope
*Includes UK market sizing from 2004-2008, with metrics on card numbers, the number and value of transactions, POS, ATMs, fraud and outstandings
*Full range of five year forecasts covering the credit, debit, private label and charge card markets under a range of potential economic scenarios
*The number of cards, number of transactions and value of transactions are forecast to 2013. These are also presented by card type.
*This brief also contains macroeconomic data on the major issues affecting the card market and what they indicate for the future.
Highlights
Card use continues to grow strongly. There were more than 10 billion plastic card transactions in 2008, an average of 61.7 transactions per card (59.8 in 2007), with the average value of these transactions rising to £57.20. With merchant acceptance growing, consumers are becoming more willing to use cards for smaller day to day transactions
Card based credit is falling as a proportion of total consumer credit borrowings, falling from 28% in 2004, to 24% by 2008. With consumers becoming more risk adverse as a result of the recession this has the potential to fall further in the near term. There is a risk this may be the beginning of a longer term trend of a move away from credit.
The value of transactions for all cards remains strong and grew by a CAGR of 9.9% between 2004 and 2008, increasing by £143 billion to reach £579.5 billion in 2008. While the economic downturn will have an affect on these transaction levels, growth will remain positive through to 2013, with a CAGR of 2.4%
Reasons to Purchase
*Understand how the UK plastic card market has developed over the last five years, and learn what shape the market will take in the future
*Gain a deeper understanding of what impact the recession is having on the cards market today, and what impact it will have in the future
*Plan for the future effectively with The author's range of forecasts under neutral, optimistic, and pessimistic scenarios
Overview 1
Catalyst 1
Summary 1
TABLE OF CONTENTS 2
Table of figures 3
Table of tables 4
UK Plastic Card Market in Review and Future Outlook 5
Cards grew by a CAGR of 10.0% from 2004 to 2008, but growth will be weaker to 2013 5
Economic indicators give mixed indications for the future of the UK cards market 6
Inflation is no longer a worry for the cards market 6
Inflation may be easing, but unemployment continues to rise 7
Write-offs continue to be a problem for cards, a problem made worse by unemployment 8
Due to the recession consumer behavior with cards is turning negative for issuers 10
Both balances outstanding and transaction values are showing a decline 11
While dropping balances outstanding, remain surprisingly robust despite the downturn 13
Consumers are also using alternative forms of credit to help make ends meet 14
Changes in overdraft balances tend to follow similar patterns to changes in credit card outstandings 15
In line with long term trends, balance transfers are decreasing 16
Market Statistics and Key Trends 19
UK cards are growing as a share of the total payments market 19
The value of all card transactions is rising 20
The total number of cards in issue remains flat, with only debit showing growth 20
The decline in private label cards may be stabilizing 21
The number of credit card holders is falling 22
The variety of cards by type is polarizing into more premium and standard cards 23
Despite static card numbers, transactions are growing with over 10.1 billion in 2008 25
Transaction values are growing as a result of the growth of debit 26
Charge cards hold the highest average transaction value and shows signs of continuing growth 27
Purchases account for 66.3% of all UK card transactions 30
Debit cards showed the highest rate of growth in transaction value by type between 2004 and 2008 31
Credit transactions are dominated by purchases 32
Charge cards are seeing growth in transaction values, driven primarily by business use 33
Card scheme market shares have been volatile over the past five years 34
MasterCard now leads the credit card market 35
The charge card market has seen American Express' historic lead solidified into a dominant position 36
The increase in POS terminals have helped drive the growth in transaction volumes 37
The Independent sector continues to drive growth in ATM's 38
The number of fraudulent transactions continues to rise 39
The successful implementation of chip and pin has led to an increase in card-not-present fraud 40
The value of CNP and counterfeit card fraud continues to rise, driving up overall fraud 41
Forecasting the UK Payment Card Market 43
Despite the recession the UK cards market will continue to grow through to 2013 43
Datamonitor forecasts annual growth in the value of payment card transactions of 2.4% to 2013 43
Datamonitor's forecasting model assesses the relationship of macroeconomic factors with respect to consumer credit products 45
Datamonitor bases its neutral view on forecasts provided by the Treasury 45
The credit card market is likely to remain flat through to 2013 46
Datamonitor forecasts annual growth in the credit card market of 1.1% to 2013 46
Under an optimistic scenario Datamonitor forecasts an annual growth of 3.1% 49
Under a pessimistic view of future economic performance, Datamonitor forecasts an annul growth of -1.2% 51
Debit cards will see the most positive levels of growth over the next five years 54
Datamonitor forecasts annual growth in the debit card market of 2.9% to 2013 54
The charge card market will remain flat through to 2013 57
Datamonitor forecasts that the charge card market will see marginal annual growth of 1.1% to 2013 57
Private label cards will decline through to 2013, but at a slower rate than in the past 59
Datamonitor forecasts that the private label card market will see an annual decline of -5.7% to 2013 59
APPENDIX 61
Definitions 61
AAGR 61
APACS 61
Average transaction value 61
Balances outstanding 61
Bank of England base rate 61
CAGR 61
Charge card 61
Credit card 61
Debit card 61
EMV 62
Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions 62
Interchange 62
Non-standard 62
OFT 62
Methodology 62
Primary research 62
Secondary research 62
Forecast Methodology 63
Further reading 64
Ask the analyst 65
Datamonitor consulting 65
Disclaimer 65
LIST OF TABLES
Table 1: Forecast UK plastic cards market 2009-13 6
Table 2: Datamonitor's forecast of transaction values for the UK plastic card market, 2009-13 44
Table 3: Datamonitor's neutral scenario forecast of the total UK card market 2009-13 45
Table 4: Forecast performance of the UK consumer credit market drivers under the neutral scenario, 2009-13 46
Table 5: Datamonitor's five year forecast of the credit card market under a neutral scenario, 2009-13 47
Table 6: Market drivers for the UK credit card market under Datamonitor's forecast scenario, 2004-13 48
Table 7: Datamonitor's five year forecast of the credit card market under an Optimistic scenario, 2009-13 49
Table 8: Market drivers for the UK credit card market under an optimistic scenario, 2004-13 50
Table 9: Forecast performance of the UK consumer credit market drivers under an optimistic scenario 2009-13 51
Table 10: Datamonitor's five year forecast of the credit card market under a pessimistic scenario, 2009-13 52
Table 11: Market drivers for the UK credit card market under a pessimistic scenario, 2004-13 53
Table 12: Forecast performance of the UK consumer credit market drivers under a pessimistic scenario 2009-13 54
Table 13: Datamonitor's five year forecast of the debit card market, 2009-13 55
Table 14: Market drivers for the UK debit card market under a neutral scenario, 2004-13 56
Table 15: Datamonitor's five year forecast of the UK charge card market, 2009-13 57
Table 16: Market drivers for the UK charge card market under Datamonitor's forecasting scenario 2004-13 58
Table 17: Datamonitor's five year forecast of the UK private label market, 2009-13 59
Table 18: Market drivers for the UK private label card market under Datamonitor's forecasting scenario 2004-13 60
Table 19: Current relevant publications, 2008-09 64
Table 20: Future relevant publications, 2009 64
LIST OF FIGURES
Figure 1: Following a CAGR of 10.0% from 2004-08, growth will slow to a CAGR of 2.5% from 2009 to 2013 5
Figure 2: While a concern last year, inflation has dropped, while deflation is now a potential risk 7
Figure 3: Despite predictions card write-offs have not risen as sharply as unemployment 8
Figure 4: The index of write-offs, insolvency, and unemployment suggests probable growth in write-offs 9
Figure 5: Although momentarily stabilizing, the value of card write-offs has grown over the past 10 years 10
Figure 6: Both balances and transaction values are declining compared to their position the previous year 11
Figure 7: 2009 transaction value, continue to fall below the previous year following the collapse of Lehman 12
Figure 8: Transaction values have seen a sustained decline since December 2009 13
Figure 9: Despite some seasonal fluctuations, quarterly outstanding balances have remained broadly stable 14
Figure 10: Hard pressed consumers are turning to other forms of credit such as overdrafts 15
Figure 11: Quarter on quarter growth in overdrafts and credit card outstandings show a strong correlation 16
Figure 12: Monthly balance transfers are showing long term decline 17
Figure 13: The value of balance transfers have dropped by 52% between Q1 2006 and Q2 2009 18
Figure 14: Plastic cards have grown to a 6.5% share of the total UK payments market 19
Figure 15: The value of card transaction grew by a CAGR of 9.9% between 2004 to 2008 20
Figure 16: The total number of cards in the market has grown due to the growth of debit 21
Figure 17: The private label card market has declined 33% since 2004, but the rate of decline is slowing 22
Figure 18: The gap between debit and credit card holdings has grown since 2005 23
Figure 19: The share of platinum and co-branded cards has grown while affinity and gold cards has declined 24
Figure 20: There were over 10.1 billion card transactions in 2008, compared to 8.0 billion in 2004 25
Figure 21: The bulk of transaction growth per card is from debit cards which had an AAGR of 4.4% from 2004-08 26
Figure 22: The total value of all transaction had a CAGR of 9.9% between 2004 and 2008 27
Figure 23: Charge cards hold the highest average transaction value at £117.86 in 2008 28
Figure 24: Charge cards also hold by far the highest turnover per card at £7,505 in 2008 29
Figure 25: Debit card turnover per adult in the population is strongly led by debit at £8,661 in 2008 30
Figure 26: UK purchases continue to constitute the bulk of all UK card transactions 31
Figure 27: Debit card transaction values had a CAGR of 13.1% between 2004 and 2008 32
Figure 28: The credit market remains flat, and has had a CAGR of only 1.0% from 2004-08 33
Figure 29: Charge cards have seen the highest growth by transaction values with a CAGR of 13.9% 34
Figure 30: Visa has successfully grown its debit card market share to nearly two thirds of the sector 35
Figure 31: MasterCard has successfully grown its credit card positioning to 58.1% of the market 36
Figure 32: The charge card market remains dominated by American Express with a 50.9% share 37
Figure 33: The number of POS terminals continues to rise, growing by nearly a fifth since 2004 38
Figure 34: ATM numbers are also rising, yet 2008 saw a slight drop in the number of independent machines 39
Figure 35: Despite the introduction of EMV in 2006, instances of card fraud continue to grow 40
Figure 36: Card not present fraud and counterfeit cards are the only forms of fraud seeing growth 41
Figure 37: Following from a 15.4% decline, the value of card fraud has grown 42.8% between 2006 and 2008 42
Figure 38: The total UK card market will see growth in transaction values through to 2013 43
