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
Introduction 5
The UK plastic card market continued to grow in 2006 and this trend is set to continue 5
Datamonitor forecasts that the value of payment card spending will reach £645 billion in 2011 8
The resilience of the economy, consumer attitudes and an expanding infrastructure have sustained the market 9
The market has benefited from consumers using their payment cards more often 9
Competition in the market has continued to encourage multiple cardholding, while the drive for efficiency has seen dormant accounts close 10
Plastic cards are growing in importance as payment tools. Card spending is equal to 63% of the value of retail sales 11
Plastic cards are also growing in popularity as a means of accessing credit 12
From 2002-05, the performance of the economy was an important driver of the market 14
A sustained boom in the UK housing market has driven spending and card-based borrowing 14
Falling levels of unemployment have also bolstered the market 15
The increased spending levels are reflected in the solid GDP growth in the UK 16
While economic fundamentals remain sound, economic conditions are no longer driving the credit card market forward 17
Inflationary pressure has caused the Bank of England to raise interest rates 18
Uncertainty in the housing market has compounded the problem 20
Collectively, these factors have reduced overall consumer confidence in the UK 21
As a result of decreased consumer confidence, the demand for unsecured consumer credit has fallen 22
Gross advances on credit cards have broadly matched the wider consumer credit trend 22
Cards and Payments Team view 23
Despite the slowdown in the credit card section of the market, the infrastructure has continued to expand 24
The growth in the number of ATMS has been fueled by the independent sector 25
Summary 26
Market Statistics and Key Trends 27
Credit and debit cards continue to dominate the market in terms of issuance 27
Credit and debit cards accounted for 87% of the total number of UK-issued payment cards in 2006 27
Multiple cardholding continues to be an important feature of the market 29
Within the credit card market, the number of co-branded and premium cards grew at the expense of standard varieties from 2003-06 29
The private label card market remains in decline 32
Limited acceptance and card limits-and consequently usage-have severely restricted issuer profitability 33
Migration to general purpose credit cards has proved to be an effective solution to many of these problems for certain players 33
Datamonitor Cards and Payments Team view 34
Debit cards continue to account for the lion's share of card activity 35
More than 76% of all plastic card transactions were made by debit card in 2006 35
Debit cards are the most frequently used card product 37
In 2006, over two thirds of the value of total plastic card transactions were accounted for by debit cards 39
Average transaction values are highest on charge cards 41
Card turnover is highest on charge cards. However, debit cards enjoy the greatest total activity per adult 42
UK consumers have shown a growing willingness to use plastic cards for payments and when abroad 43
UK consumers are using payment cards for more purchase transactions than ever before 43
This trend is most evident in the debit card market 44
Credit cards have traditionally been used for purchases 45
Purchases dominate transactions abroad, but cash acquisition transactions are growing in importance 47
In 2006, debit cards accounted for a higher value of transactions abroad than credit cards 48
Growth in online commerce represents a major opportunity 49
Summary 50
Forecasting The UK Payment Card Market 51
Datamonitor's forecast for the UK plastic card market 51
Datamonitor forecasts annual growth in the value of payment card transactions of 6.6% to 2011 51
Datamonitor's forecasting model assesses the relationship of macroeconomic factors with respect to consumer credit products 53
Datamonitor bases its neutral view on forecasts provided by the Treasury 53
Forecasting the credit card market 54
Datamonitor forecasts annual growth in the credit card market of 3.9% to 2011 54
Under an optimistic view of future economic performance, Datamonitor forecasts an annual growth of 5.5% 57
Under a pessimistic view of future economic performance, Datamonitor forecasts annual growth of -0.7% 61
Forecasting the charge card market 65
Datamonitor forecasts annual growth in the charge card market of 3.4% to 2010 65
Forecasting the debit card market 68
Datamonitor forecasts annual growth in the debit card market of 7.6% to 2011 68
Forecasting the private label card market 69
Datamonitor forecasts that the private label card market will decline at an annual average rate of 2.6% to 2011 69
APPENDIX 72
Supplementary data 72
Definitions 72
AAGR 72
APACS 72
Average transaction value 72
Balances outstanding 72
Bank of England base rate 72
CAGR 72
Charge card 73
Credit card 73
CVV 73
Debit card 73
EMV 73
Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions 73
Interchange 73
Non-standard 74
OFT 74
Methodology 74
Primary research 74
Secondary research 74
Further reading 75
Ask the analyst 76
Datamonitor Consulting 76
Disclaimer 76
List of Tables
Table 1: Growth in the UK payment card market, 2002-06 7
Table 2: Datamonitor's five-year forecast for the UK plastic card market, 2007-11 9
Table 3: Number of UK payment cards in issue by type, 2001-05 28
Table 4: Credit cards in issue in the UK by type, 2002-06 (000s) 31
Table 5: Number of transactions made on UK-issued payment cards by product line, 2002-06 36
Table 6: Frequency of transaction by card type in the UK, 2002-06 38
Table 7: Value of UK-issued plastic card transactions by product line, 2002-06 40
Table 8: Datamonitor's forecast for the UK plastic card market, 2006-11. (£m) 52
Table 9: Forecast performance of the UK consumer credit market drivers under the neutral scenario, 2005-11 53
Table 10: Datamonitor's five-year forecast for the UK credit card market, 2007-11 55
Table 11: Market drivers for the UK credit card market under Datamonitor's forecasting scenario, 2002-11 (1/2) 56
Table 12: Market drivers for the UK credit card market under Datamonitor's forecasting scenario, 2002-11 (2/2) 57
Table 13: Datamonitor's five-year forecast for the UK credit card market under an optimistic scenario, 2007-11 58
Table 14: Forecast performance of the UK consumer credit market drivers under the optimistic scenario, 2005-11 58
Table 15: Market drivers for the UK credit card market under an optimistic scenario, 2002-11 (1/2) 60
Table 16: Market drivers for the UK credit card market under an optimistic scenario, 2002-11 (2/2) 61
Table 17: Datamonitor's five-year forecast for the UK credit card market under a pessimistic scenario, 2007-11 62
Table 18: Forecast performance of the UK consumer credit market drivers under the pessimistic scenario, 2005-11 62
Table 19: Market drivers for the credit card market under a pessimistic scenario, 2002-11f (1/2) 64
Table 20: Market drivers for the credit card market under a pessimistic scenario, 2002-11 (2/2) 65
Table 21: Datamonitor's five-year forecast for the UK charge card market, 2007-11 66
Table 22: Market drivers for the UK charge card market under Datamonitor's forecasting scenario, 2002-11 67
Table 23: Datamonitor's five-year forecast for the UK debit card market, 2007-11 68
Table 24: Market drivers for the UK debit card market under Datamonitor's forecasting scenario, 2002-11 69
Table 25: Datamonitor's five-year forecast for the UK private label card market, 2006-11 70
Table 26: Market drivers for the UK private label card market under Datamonitor's forecasting scenario, 2002-11 71
Table 27: Value of online spending in the UK, 1997-2006, (£m) 72
Table 28: Current relevant Datamonitor publications, 2007 75
Table 29: Future relevant Datamonitor publications, 2007 76
List of Figures
Figure 1: The value of transactions made on UK-issued plastic cards has grown at a compound average rate of 10.2% from 2002-06 6
Figure 2: Datamonitor forecasts that the value of transactions made on UK-issued payment cards will grow at a CAGR of 6.6% from 2002-11 8
Figure 3: Increased frequency of use has been the key driver of the UK card market, 2002-06 10
Figure 4: Plastic cards account for a growing share of UK retail sales, 1998-06 12
Figure 5: Plastic cards in the UK have grown as a proportion of total outstanding consumer debt, 2002-06 13
Figure 6: UK property prices have surged, 1997-2007 15
Figure 7: UK unemployment continues to decline, 1997-2007 16
Figure 8: GDP growth for the UK remains sound, 1997-2006 17
Figure 9: The base rate has been gradually increasing, 2006-07 18
Figure 10: The number of personal insolvencies looks to have peaked in early 2007 20
Figure 11: Overall consumer confidence in the UK has plunged, 2004-06 21
Figure 12: Overall demand for unsecured consumer credit in the UK has declined, Q2 1998-Q2 2007 22
Figure 13: After years of growth, the value of credit card spending in the UK has fallen in 2006 and 2007 23
Figure 14: Growth in the UK acceptance network has seen the ratio of population to terminals decline, 2002-06 24
Figure 15: Growth in the number of ATMs in the UK has been driven by the increase in the number of independently owned ATMS, and this has reduced the ration of population to ATMs 25
Figure 16: Credit and debit cards continue to dominate the UK market, 2002-06 28
Figure 17: Average cardholding in the UK has grown over time, but declined in 2005 29
Figure 18: Standard and classic credit cards dominate the UK market, but co-branded cards have enjoyed the most rapid growth, 2002-06 31
Figure 19: The UK private label market continues to struggle, 2002-06 32
Figure 20: Nearly 75% of all plastic card transactions in the UK were made by debit card in 2006 36
Figure 21: Debit cards are used for more transactions per card than any other type of payment card in the UK, 2002--06 38
Figure 22: Debit cards account for over two-thirds of the value of plastic card transactions, 2002-06 40
Figure 23: The value of the average charge card transaction is close to double that of the market average, 2002-06 42
Figure 24: Charge cards enjoy the highest turnover per card, but spend per adult is greatest on debit cards in the UK, 2006 43
Figure 25: Purchase transactions account for a growing share of total card transaction values in the UK, 2001-05 44
Figure 26: Purchases account for a growing share of debit card transaction values in the UK, 1997-2006 45
Figure 27: UK-issued credit cards are primarily used for purchase transactions, 2002-06 46
Figure 28: Purchases account for the majority of transactions abroad, but cash acquisition is growing in importance, 1997-2006 47
Figure 29: Credit cards dominate transactions abroad, but debit cards are growing in importance, 1996-2005 48
Figure 30: UK online retail spending has grown dramatically over time, 1997-2006 49
Figure 31: Datamonitor forecasts that debit card use will be the primary driver of growth in the UK market, 2007-11 52
