Sizing and Forecasting the UK Plastic Card market
Introduction
This brief is the first section of Datamonitor's "UK Plastic Cards 2008" report. The UK plastic card market is sized by the number of cards, and the value and number of transactions. Data is segmented by card type. It contains discussions of the drivers of market performance and an analysis of the impact of the credit crunch on the market. It concludes with forecasts to 2012 for all card types.
Scope
*The brief sizes the UK market from 2003-2007, examining the metrics of card numbers, the number of transactions and the values of transactions.
*The brief sizes the market segmented by card type. That is to say by debit, credit, charge and private label cards
*The number of cards, number of transactions and value of transactions are forecast to 2012. These are also presented by card type.
*This brief does not cover competitor market shares. These are available in the competitor section of the UK Plastic Cards series (BFFS0620)
Highlights
After declining in 2005 and 2006, the number of cards in issue grew again in 2007. The decline in cards has been due to a falling number of both private label and credit cards, but this has been offset by a growing number of debit cards in issue.
Multiple cardholding remains an important feature of the market. Driven by a combination of issuer competition and the growing affinity for payment cards among consumers, the average number of cards held by cardholders has increased over time. At the end of 2007, the average debit cardholder had 1.7 debit cards, up from 1.4 in 2000. At the same time, the average credit cardholder had 2.2 credit cards, up from 1.8 in 2000.
Between 2003 and 2007, the number of ATMs in The UK grew from 46,461 to 63,420. While the number of ATMs owned by banks increased just 8% during this period, the number of independently operated machines doubled from 14,436 to 28,963. The massive growth in this sector reflects how lucrative the market is for independent operators.
Reasons to Purchase
*Learn how the UK plastic card market has developed over the last five years.
*Understand how the credit crunch has impacted upon the UK cards market and how it is likely to do so in the future.
*Discover how the market will develop to 2012, including credit card forecasts for optimistic, neutral and pessimistic economic scenarios.
Overview 1
Catalyst 1
Summary 1
Table of Contents 2
Table of figures 3
Table of tables 3
UK Plastic Card Market in Review and Future Outlook 4
Introduction 4
Payments cards have gained importance in the UK payments landscape 4
The UK plastic card market continued to grow in 2007 and this trend is set to continue 5
Card spending is equal to 63% of the value of retail sales 7
This has been manifested in the increased use of payment cards 8
Datamonitor forecasts that the value of payment card spending will reach £750 billion in 2012 9
The credit crunch and the economic slowdown have created a headache for credit card issuers 11
A deteriorating economic situation poses many threats for credit card issuers 11
A dramatic fall in consumer confidence has underpinned issuers' worries 13
While optimism about future employment fades, there are mixed views on spending 14
House prices, the cornerstone of consumer spending for the last decade, have started to fall 14
Unemployment has started to rise, further repressing spending and lowering sentiment 15
However, the level of personal insolvencies in the UK appears to be falling 16
The credit card market has been robust so far in 2008, in the face of falling consumer confidence 17
Credit card transactions have been steady so far in 2008 17
After two years of falling outstandings, credit card debt is on the rise again 19
The strong performance of the card market in the first half of 2008 could be masking some dangerous developments 20
Falling levels of consumer confidence appears to be boosting credit card spending in the near term, but could spell trouble 21
Having peaked in 2004, the value of balance transfers continues to fall 23
Datamonitor believes the outlook for card issuers hinges on employment 25
The outlook for issuers really hinges on the level of employment 25
The consumer confidence index does not appear to be reflected in consumer behavior 25
The fall in house prices should be seen in the context of the bigger picture 27
Personal insolvencies are continuing to fall 27
Datamonitor is cautiously optimistic about the outlook for the UK cards market 27
Market Statistics and Key Trends 28
Credit and debit cards continue to dominate the market in terms of issuance 28
There are now more debit cards than credit cards 28
The number of credit cards has been in decline since 2005 28
Private label cards have been in decline since 2003 28
Multiple cardholding continues to be an important feature of the market 30
Within the credit card market, the number of co-branded and premium cards grew at the expense of standard varieties from 2003-07 30
The private label card market remains in decline 32
Limited acceptance and card limits-and consequently usage-have severely restricted issuer profitability 33
Datamonitor Cards and Payments Team view 35
Debit cards continue to account for the lion's share of card activity 36
More than 76% of all plastic card transactions were made by debit card in 2007 36
Debit cards are the most frequently used card product 37
In 2007, 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 46
Purchases dominate transactions abroad but cash acquisition transactions are growing in importance 47
By 2007, debit and credit cards counted for equal shares of the value of payments abroad 48
Growth in online commerce represents a major opportunity 49
The increase in card use has been bolstered by the expanding infrastructure 50
The growth in the number of ATMS has been fueled by the independent sector 51
However, the number of fraudulent transactions is on the rise again 51
The successful introduction of chip & pin has led to growth of card-not-present fraud 52
The value of fraudulent transactions has slightly risen to £535 million 53
Summary 54
Forecasting The UK Payment Card Market 55
Datamonitor's forecast for the UK plastic card market 55
Datamonitor forecasts annual growth in the value of payment card transactions of 5.9% to 2012 55
Datamonitor's forecasting model assesses the relationship of macroeconomic factors with respect to consumer credit products 57
Datamonitor bases its neutral view on forecasts provided by the Treasury 57
Forecasting the credit card market 58
Datamonitor forecasts annual growth in the credit card market of 2.0% to 2012 58
Under an optimistic view of future economic performance, Datamonitor forecasts an annual growth of 2.9% 60
Under a pessimistic view of future economic performance, Datamonitor forecasts annual growth of 0.7% 64
Forecasting the charge card market 67
Datamonitor forecasts annual growth in the charge card market of 1.8% to 2012 67
Forecasting the debit card market 69
Datamonitor forecasts annual growth in the debit card market of 7.6% to 2011 69
Forecasting the private label card market 71
Datamonitor forecasts that the private label card market will decline at an annual average rate of 5.1% to 2012 71
Appendix 73
Supplementary data 73
Definitions 73
AAGR 73
APACS 73
Average transaction value 73
Balances outstanding 73
Bank of England base rate 73
CAGR 73
Charge card 73
Credit card 74
CVV 74
Debit card 74
EMV 74
Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions 74
Interchange 74
Non-standard 75
OFT 75
Methodology 75
Primary research 75
Secondary research 75
Further reading 76
Ask the analyst 77
Datamonitor consulting 77
Disclaimer 77
List of Tables
Table 1: Growth in the UK payment card market, 2003-07 7
Table 2: Datamonitor's five-year forecast for the UK plastic card market, 2008-12 11
Table 3: Number of UK payment cards in issue by type, 2003-07 29
Table 4: Credit cards in issue in the UK by type, 2003-07 (000s) 32
Table 5: Number of transactions made on UK-issued payment cards by product line, 2003-07 37
Table 6: Frequency of transaction by card type in the UK, 2003-07 39
Table 7: Value of UK-issued plastic card transactions by product line, 2003-07 40
Table 8: Average value of UK-issued plastic card transactions by product line, 2003-07 42
Table 9: Datamonitor's forecast for the UK plastic card market, 2007-12. 56
Table 10: Forecast performance of the UK consumer credit market drivers under the neutral scenario, 2007-12 57
Table 11: Datamonitor's five-year forecast for the UK credit card market, 2007-11 58
Table 12: Market drivers for the UK credit card market under Datamonitor's forecasting scenario, 2002-11 (1/2) 59
Table 13: Market drivers for the UK credit card market under Datamonitor's forecasting scenario, 2002-11 (2/2) 60
Table 14: Datamonitor's five-year forecast for the UK credit card market under an optimistic scenario, 2008-12 61
Table 15: Forecast performance of the UK consumer credit market drivers under the optimistic scenario, 2007-12 61
Table 16: Market drivers for the UK credit card market under an optimistic scenario, 2003-12 63
Table 17: Datamonitor's five-year forecast for the UK credit card market under a pessimistic scenario, 2008-12 64
Table 18: Forecast performance of the UK consumer credit market drivers under the pessimistic scenario, 2007-12 65
Table 19: Market drivers for the UK credit card market under an pessimistic scenario, 2003-12 66
Table 20: Datamonitor's five-year forecast for the UK charge card market, 2008-12 67
Table 21: Market drivers for the UK charge card market under Datamonitor's forecasting scenario, 2003-12 68
Table 22: Datamonitor's five-year forecast for the UK debit card market, 2008-12 69
Table 23: Market drivers for the UK debit card market under Datamonitor's forecasting scenario, 2003-12 70
Table 24: Datamonitor's five-year forecast for the UK private label card market, 2008-12 71
Table 25: Market drivers for the UK private label card market under Datamonitor's forecasting scenario, 2003-12 72
Table 26: Value of online spending in the UK, 1998-2007, (£m) 73
Table 27: Current relevant Datamonitor publications, 2008 76
Table 28: Future relevant Datamonitor publications, 2008 76
List of Figures
Figure 1: The proportion of total consumer transaction value accounted for by cards has increased, 2003-2007 5
Figure 2: The value of transactions made on UK-issued plastic cards has grown at a compound average rate of 8.3% from 2003-07 6
Figure 3: Plastic cards account for a growing share of UK retail sales, 1998-07 8
Figure 4: Increased frequency of use has been the key driver of the UK card market, 2003-07 9
Figure 5: Datamonitor forecasts that the value of transactions made on UK-issued payment cards will grow at a CAGR of 6.1% from 2008-12 10
Figure 6: Credit card issuers derive revenue from a range of activities 12
Figure 7: Consumer confidence in the UK has plummeted to new depths, 2004-2008 14
Figure 8: UK property prices have witnessed a sharp correction since the end of 2007 15
Figure 9: After a decade of decline unemployment in the UK appears to be rising again, 2008 16
Figure 10: The number of individual insolvencies in the UK has fallen since mid-2007 17
Figure 11: The value of credit card expenditure has remained broadly constant in 2007 and 2008 18
Figure 12: After two years of decline, credit card lending has started to grow again, 2003-2008 19
Figure 13: The value of credit card debt has remained approximately constant as a proportion of consumer credit, 2003-2007 20
Figure 14: Credit card spending has grown as confidence has fallen away, 2007-2008 21
Figure 15: In 2008, consumers have been reducing their overdrafts quicker than their card debt 23
Figure 16: The value of balances transferred has fallen during 2004-2008 24
Figure 17: Retail sales have been remarkably resilient, 2004-2008 26
Figure 18: Debit cards are the most common type of credit card in the UK 29
Figure 19: Average cardholding in the UK has grown over time, despite a fall in credit card holding since 2005 30
Figure 20: The number of platinum cards has grown at the expense of standard and gold cards, 2003-07 31
Figure 21: The UK private label market continues to struggle, 2003-07 33
Figure 22: More than 75% of all plastic card transactions in the UK were made by debit card in 2007 37
Figure 23: Debit cards are used for more transactions per card than any other type of payment card in the UK, 2003-07 38
Figure 24: Debit cards account for over two-thirds of the value of plastic card transactions, 2003-07 40
Figure 25: The value of the average charge card transaction is close to double that of the market average, 2003-07 42
Figure 26: Charge cards enjoy the highest turnover per card, but spend per adult is greatest on debit cards in the UK, 2007 43
Figure 27: Purchase transactions account for a growing share of total card transaction values in the UK, 2003-07 44
Figure 28: Purchases account for a growing share of debit card transaction values in the UK, 1998-2007 45
Figure 29: More than 80% of credit card transaction values are used for purchases, 1998-2007 46
Figure 30: Purchases account for the majority of transactions abroad, but cash acquisition is growing in importance, 1998-2007 47
Figure 31: Debit cards are increasingly used in transactions abroad, 1998-2007 48
Figure 32: UK online retail spending has grown dramatically, 1998-2007 49
Figure 33: Growth in the UK acceptance network has seen the ratio of population to terminals decline, 2003-07 50
Figure 34: Growth in the number of ATMs in the UK has been driven by the increase in the number of independently owned ATMS, which has reduced the ration of population to ATMs 51
Figure 35: Card fraud began to rise again in 2007 52
Figure 36: Card-not-present fraud accounts for more than half of fraudulent transactions on cards issued in the UK, 2003-2007 53
Figure 37: Card not present fraud also accounts for more than half the value of fraudulent transactions 54
Figure 38: The value of transactions is expected to grow at a compound rate of 5.9% to 2012 56
