Table of Contents
Introduction and Abbreviations
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- Consumer insight
- Key sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Waking up dormant accounts
- The increase in ‘grey’ activity presents an opportunity
- The APR: to lower, or not to lower?
- Is risk-based pricing too risky?
- Happy birthday to you
- Reasons to be a cardholder
Executive Summary
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- Levels of bad debt are on the rise
- Interest rates are on hold for ten consecutive months
- Almost 70 million credit cards were in issue in 2004
- Traditional banks are losing market share
- The Internet functions as an extra distribution channel
- £245 million spent on credit card advertising in 2004/05
- The debit card market is nearing saturation
- Consumers expect providers to prevent debt troubles
- One in five consumers prefer debit cards to cash
- Introducing new revenue streams
Market Drivers
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- Interest rate rises hit home
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- Figure 1: Bank base rate, May 1990-2005
- The property market is losing steam
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- Figure 2: Average house prices, Q1 1999-Q1 2005
- A slowdown in spending
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- Figure 3: PDI and consumer expenditure, at current prices, 1989-2010
- Online opportunities abound
- Fraud losses top £500 million in 2004
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- Figure 4: Summary of plastic card fraud losses, 1999-2004
- Combating fraud
- Chip and PIN
- Bad debt is reportedly on the rise
- Section 75 applicable only within the borders of the UK
Market Size and Trends
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- Credit cards surpass debit cards for second year
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- Figure 5: Number of payment cards in issue, by type, 1999-2004
- Debit card usage rises rapidly
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- Figure 6: Debit cards: number in issue, total annual transaction volumes and value, 1999-2004
- £118 billion spent on credit cards in 2004
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- Figure 7: Credit cards: number in issue, total annual transaction volumes and value, 1999-2004
- Credit card purchases in the UK account for the majority of all credit card transactions
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- Figure 8: Summary of debit and credit card purchases in the UK, annual transaction value and volumes, 2004
- Putting groceries on debit cards
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- Figure 9: Breakdown of debit and credit card transactions, by sector, 2004
- Credit cards are rarely used to withdraw cash
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- Figure 10: Summary of debit and credit card cash acquisitions in the UK, annual transaction value and volumes, 2004
- Debit card usage abroad soars over last five years
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- Figure 11: Summary of credit and debit card transactions outside the UK, annual transaction value and volumes, 2004
- The growing omnipresence of ATMs
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- Figure 12: Number of ATMs and annual volume and value of transactions, 1999-2004
Key Players and the Competitive Environment
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- Debit cards
- 67 million debit cards in circulation
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- Figure 13: Number of debit cards in issue, by scheme, 1999-2004
- Switch card holders are the most active users
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- Figure 14: Debit card schemes: Number in issue, annual transaction value and volumes, 2004
- Debit card market share is a reflection of current account market share
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- Figure 15: Estimated market share of the main debit card issuers, by volume of customers, 2005
- Using debit cards to promote current accounts
- Credit cards
- MasterCard is closing the gap
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- Figure 16: Number of credit cards in issue, by scheme, 1999-2004
- Credit card usage does not vary by scheme
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- Figure 17: Credit card schemes: number of cards in issue, transaction volumes and values, 2004
- Non-bank providers are rapidly gaining share
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- Figure 18: Volume share of the top 20 credit card brands in the UK, April 2005
- New players
- Relationships and acquisitions help to concentrate the market
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- Figure 19: Estimated share of the UK credit card market, by issuer, May 2005
- Competitive measures
- 0% balance transfer rates
- 0% balance transfer with 0% for purchases
- Lowest balance transfer rate for life
- Low standard rate
- Cashback
- Other reward/loyalty schemes
- Other differentiators
Distribution and the Internet
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- Debit card distribution follows that of current accounts
- The benefit of branches
- Asking for the sale
- Online applications are limited to specific consumer segments
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- Figure 20: Demographic analysis of consumers who applied for their last credit card online, April 2005
- Egg cardholders are the most likely to apply for cards online
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- Figure 21: Analysis of card ownership by consumers who applied for their last credit card online, April 2005
Advertising and Promotion
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- £245 million spent on advertising in 2004/05
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- Figure 22: Top 20 credit card advertisers, April 2003-March 2004 and April 2004-March 2005
- Capital One is number one in terms of adspend per percentage point of market share
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- Figure 23: Advertising expenditure, per percentage point of market share, 2004/05
- Two thirds of adspend is allocated to direct mail
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- Figure 24: Top ten credit card advertisers, by outlet type, 2004/05
Consumer Financial Activity
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- Consumers are looking to refresh their finances
- Relationship with the main financial services providers
- Activity levels set to rise in the six months from March 2005
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- Figure 25: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2003-March 2005
- Those aged 30-39 will be most active over the next few months
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- Figure 26: Expected financial activity, by socio-demographic and income groups, March 2005 and average for the last 13 quarters
- Those who plan to repay also plan to borrow
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- Figure 27: Expected financial activity over the next six months, by activity, March 2005
- Consumers looking to build up savings
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- Figure 28: Leading financial activities planned in the next six months, March 2004-March 2005
- Mixed messages on housing activity
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- Figure 29: Intended mortgage and property purchase activity, December 2002-March 2005
- Lloyds TSB increases leading market share position
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- Figure 30: Leading main financial services providers: market shares March 2004-March 2005
- RBS and Nationwide BS should boost their savings business
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- Figure 31: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), March 2005
- Bank of Scotland has the most ‘active’ customers
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- Figure 32: Activity levels of main financial providers’ customer bases, March 2005
The Consumer and Product Ownership
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- Credit card penetration remains fairly stagnant
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- Figure 33: Debit, credit and charge card ownership, 2000-05
- 44% of adults have both a debit and a credit card
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- Figure 34: Penetration of credit and debit cards in the UK, April 2005
- Ownership is related to risk
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- Figure 35: Credit and debit card penetration, by gender, age and socio-economic group, April 2005
- High earners have both a debit and a credit card
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- Figure 36: Debit and credit card ownership, by working status, gross annual household income and tenure, April 2005
- One in four cardholders have a Barclaycard
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- Figure 37: Credit card penetration amongst cardholders, 2004 and 2005
- US card operators gain at the expense of the UK’s top five banks
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- Figure 38: Share of credit card customer base, by provider category, 2004 and 2005
- Credit card ownership is divided by gender
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- Figure 39: Credit card penetration (by category), by gender, age and socio-economic group, April 2005
- Upmarket shoppers appear to have a wider repertoire of credit cards
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- Figure 40: Credit card penetration (by category), by newspaper readership, new technology, commercial TV viewing and supermarkets used, April 2005
- One in four M&S shoppers have an ‘&more’ card
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- Figure 41: Retail credit card ownership, by retailers used, April 2004
- Profiling cardholders: cards issued by banks
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- Figure 42: Credit card holder profiles of the top five banks, May 2005
- Profiling cardholders: other cards
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- Figure 43: Credit card holder profiles of other cards, April 2005
- 27% of all consumers have two or more credit cards
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- Figure 44: Credit card repertoire, April 2005
- The offers come pouring in
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- Figure 45: Credit card repertoire, by gender, age and socio-economic group, April 2005
- 44% of cardholders opened one or more accounts in the last three years
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- Figure 46: Number of new accounts opened in the last three years, April 2005
- Knowing who to target
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- Figure 47: The number of times a new account has been opened in the last three years, by gender, age and socio-economic group, April 2005
- Credit cards to help you renovate your home
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- Figure 48: Number of new accounts opened, by detailed lifestage groups, April 2005
Consumer Attitudes and Targeting Opportunities
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- Plastic versus cash
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- Figure 49: Attitudes towards debit cards, April 2005
- One in five consumers are averse to cash
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- Figure 50: Debit card typologies, April 2005
- Younger consumers reject cash
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- Figure 51: Debit card typologies, by gender, age and socio-economic group, April 2005
- Third age consumers have balanced debit card usage habits
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- Figure 52: Debit card typologues, by detailed lifestage groups, April 2005
- Part-time workers prefer pennies to plastic
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- Figure 53: Debit card typologies, by working status, gross annual household income and tenure, April 2005
- CHAID analysis
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- Figure 54: CHAID analysis, debit card typologies, April 2005
- The Debit Dependent have multiple credit cards
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- Figure 55: Credit card repertoire of the debit typologies, April 2005
- Cardholders acknowledge industry efforts to clarify things
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- Figure 56: Attitudes towards credit cards, April 2005
- Affluent consumers are heavy credit card users
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- Figure 57: Attitudes towards credit cards, by gender, age and socio-economic group, April 2005
- The Cash Crazed may be confused
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- Figure 58: Attitudes towards credit cards, by debit card typologies, April 2005
- M&S cardholders use credit cards frequently
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- Figure 59: Credit card attitudes and usage, by the cardholders of the top ten cards, April 2005
- A slowdown in demand for new cards?
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- Figure 60: Attitudes towards credit cards, April 2005
- Concerned about the cost of debt
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- Figure 61: Attitudes towards credit cards, by gender, age and socio-economic group, April 2005
- Direct providers appeal to rate surfers
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- Figure 62: Attitudes towards credit cards, by category of credit card provider, April 2005
- Egg and Tesco attract ‘rate tarts’
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- Figure 63: Attitudes towards credit cards, by holders of the top ten cards, April 2005
- The Debit Dependent are active credit card users
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- Figure 64: Attitudes towards credit cards, by debit card typologies, April 2005
Industry Views
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- Slowdown in spending: a long-term or short-term trend?
- Regulation
- Meeting and beating challenges
- Staying ahead of the game
- Rate tarts – still a problem?
The Future
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- Borrowing more responsibly…for now
- Profits will be squeezed
- The rise of the non-bank provider
- Watch this space
- A cashless society
Forecast
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- Demand for new credit cards weakens
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- Figure 65: Forecast of the number of payment cards in issue, 2004-10
- Debit card usage will continue to rise
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- Figure 66: Forecast of the debit card market, by the number of cards in issue and annual transaction volumes and values, 2004-10
- Consumers will spend £180 billion on their credit cards in 2010
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- Figure 67: Forecast of the credit card market, by the number of cards in issue and annual transaction volumes and values, 2004-10
- Factors incorporated
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