Table of Contents
Introduction and Abbreviations
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- The economic landscape is changing
- Debit cards achieve historic milestone while credit cards struggle
- Consumer insight
- Key sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Stimulating smaller transactions on debit cards
- Some 38% of credit card holders have more than one credit card
- Targeting the most active, but are they loyal?
- Retirees are the least likely to have opened a credit card account in the last three years
- Plastic Junkies are the balance transfer target market
- Target Cash-loving Credit Card Pragmatists for loyal customers
- Credit card happiness abounds
Executive Summary
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- Debit cards replace cash as king in 2005
- PDI and consumer expenditure – the fundamentals remain good
- Online purchases will sustain credit card activity
- Growth in payment cards in issue slows in 2005
- The NatWest brand has increased its share of the debit card market
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- Figure 1: Estimated market share (by number of customers) of the main debit card issuers (current account providers), by brand, April 2006
- Barclays/Barclaycard remains the key credit card issuer
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- Figure 2: Estimated market share (by number of customers) of the top twenty credit card brands in the UK, April 2006
- Repertoire analysis – competition occurs each time the wallet is opened
- 47% of credit card holders opened one or more new accounts in the last three years
- ABs prefer to use debit cards
- Happiness could lead to a slowdown in take up?
- 25-44-year-olds are most price-sensitive
Market Drivers
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- Debit cards replace cash as king in 2005
- Interest rate rises begin to bite
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- Figure 3: Bank of England base rate, May 1990- May 2006
- The UK property market – flattening out or over-valued?
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- Figure 4: Average house prices, Q1 2000-Q1 2006
- Where next for property prices?
- PDI and consumer expenditure – the fundamentals remain good
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- Figure 5: PDI, savings and consumer expenditure, at current prices, 1989-2011
- A slowdown in spending may hit credit cards but less so debit cards?
- Debt levels are still increasing but so are bad debts
- Fraud reduced in 2005 – why doesn’t the industry shout about it?
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- Figure 6: Summary of plastic card fraud losses, 2000-05
- Chip and PIN roll out is complete
- Measures to combat fraud
- Retailers have flexed their muscles to take a slice of the credit card action
- Legislation could squeeze profits
- Section 75 applicable only within the borders of the UK
- Online purchases will sustain credit card activity
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- Figure 7: Internet penetration in the UK at home/work/place of study or elsewhere, 2001-05
- ABs have the greatest e-purchasing power
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- Figure 8: Internet penetration in the UK at home/work/place of study or elsewhere, by socio-economic category, August 2005
Market Size and Trends
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- Growth in payment cards in issue slows in 2005
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- Figure 9: Number of payment cards in issue, by type, 2000-05
- Debit card market (deposit access)
- The number of debit cards stagnates but activity levels increase
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- Figure 10: Debit cards: number in issue, total annual transaction volumes and value, 2000-05
- Debit card payment schemes – Visa and Maestro
- Visa and Electron
- Maestro and Solo
- Visa Electron has experienced highest growth rate over 5 years
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- Figure 11: Number of debit cards in issue, by scheme, 2000-05
- Maestro card holders are the most active users
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- Figure 12: Debit card schemes: number in issue, annual transaction value and volumes, 2005
- Credit cards market
- MasterCard is closing the gap but overall, growth is subdued
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- Figure 13: Number of credit cards in issue, by scheme, 2000-05
- Credit card usage does not vary by scheme
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- Figure 14: Credit card schemes: number of cards in issue, transaction volumes and values, 2005
- Transaction values have increased by 51% over 2000-05
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- Figure 15: Credit cards: number in issue, total annual transaction volumes and value, 2000-05
- Assessing purchases and cash acquisition in the UK credit and debit card market
- Purchases in the UK
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- Figure 16: Summary of debit and credit card purchases in the UK, annual transaction values and volumes, 2005
- What are customers buying with UK ‘purchase’ transactions?
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- Figure 17: Analysis of debit and credit card purchases, by sector, 2005
- Cash acquisitions in the UK
- Withdrawing cash on both credit and debit cards is becoming more popular
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- Figure 18: Debit and credit card cash acquisitions in the UK, annual transaction values and volumes, 2005
- Debit card usage abroad soars to catch up credit cards
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- Figure 19: Summary of credit and debit card transactions outside the UK, annual transaction value and volumes, 2005
- The omnipresence of ATMs
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- Figure 20: Number of ATMs and annual volume and value of transactions, 2000-05
Key Players and the Competitive Environment
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- The NatWest brand has increased its share of the debit card market
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- Figure 21: Estimated market share (by number of customers) of the main debit card issuers (current account providers), by brand, April 2006
- Using debit cards to promote current accounts
- Barclays/Barclaycard remains the key credit card issuer
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- Figure 22: estimated market share (by number of customers) of the top twenty credit card brands in the UK, April 2006
- Five financial services groups share 63% of the credit card market
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- Figure 23: Estimated market share (by number of customers) of the top eight credit card issuers, by financial services group, April 2006
- Credit card features and product differentiators
- Balance transfer cards – increasing the length of the introductory offer
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- Figure 24: Selection of 0% balance transfer cards, May 2006
- 0% balance transfer with 0% for purchases
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- Figure 25: Selection of cards offering 0% balance transfers with 0% on purchases, May 2006
- Pricing for loyalty
- Low standard rate cards with clever pricing
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- Figure 26: Selection of low standard rate cards, May 2006
- Cashback and other reward schemes
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- Figure 27: Selection of cashback and reward cards, May 2006
- Credit card reward schemes are falling out of favour
- Forget the APR – what does my credit card say about me?
- The Red brand-wagon – a card with a cause
- Image – designer chic on the ‘plastic canvass’
Distribution and the Internet
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- Debit card distribution follows that of current accounts
- Using the branch network to sell credit cards
- Retailers can lever their ‘branch networks’ too?
- Direct marketing and online applications make up 15% of distribution
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- Figure 28: Postal and online applications for credit cards by credit card holders, by gender, age and socio-economic group, April 2006
- Almost two thirds of Egg credit card holders apply online
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- Figure 29: Postal and online applications for credit cards by credit card holders, by credit card provider (brand), April 2006
Advertising and Promotion
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- Spending has decreased by 20% over the past year
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- Figure 30: Yearly advertising spend by brands in the credit card market, 2003/04, 2004/05 and 2005/06
- US-based banks aggressively spend on advertising their credit cards
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- Figure 31: Top twenty brands by advertising spend and by media category, May 2005-April 2006
- Direct mail is the key advertising media
- Advertising budgets are much smaller than they were
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- Figure 32: Total adspend of each key player in the credit card market, 2003/04-2005/06
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- Figure 33: Total adspend of each key player in the credit card market 2003/04, 2004/05 and 2005/06
Consumer Financial Activity
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- Consumers looking to save and invest
- Relationship with the main financial services providers
- Overall activity levels will fall slightly
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- Figure 34: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2004-March 2006
- C2s will display higher than average financial activity levels
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- Figure 35: Expected financial activity, by socio-demographic and income groups, March 2006 and average for the last 17 quarters
- ISA season will be fruitful for providers
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- Figure 36: Leading financial activities planned in the next six months, March 2005-March 2006
- Slower activity ahead for the property market
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- Figure 37: Intended mortgage and property purchase activity, March 2004-March 2006
- Lloyds TSB sees its position weaken slightly
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- Figure 38: Leading main financial services providers: market shares, March 2005-March 2006
- RBS will feature strongly in the savings/deposits sector
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- Figure 39: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), March 2006
- Bank of Scotland and RBS will have the most active customer bases
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- Figure 40: Activity levels of main financial services providers’ customer bases, March 2006
- HSBC and Halifax customers looking to borrow more
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- Figure 41: Activity intentions and current household financial situation, by MFSP, March 2006
The Consumer and Product Ownership
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- Credit card penetration increases since 2000
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- Figure 42: Debit, credit and charge card ownership, 2000-06
- 44% of adults have both a debit and a credit card
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- Figure 43: Penetration of credit and debit cards in the UK, grouped by ownership patterns, April 2006
- Implications
- Ownership is related to socio-economic group
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- Figure 44: Penetration of credit and debit cards in the UK grouped by ownership patterns, by gender, age and socio-economic group, April 2006
- Implications
- Income is a key driver of card take-up
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- Figure 45: Penetration of credit and debit cards in the UK grouped by ownership patterns, by working status, gross annual household income and tenure, April 2006
- ABC1 retirees are a growing population with lower than average card penetration – an opportunity?
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- Figure 46: Penetration of credit and debit cards in the UK, grouped by ownership patterns, by age/socio-economic group, Mintel’s Special Groups and ACORN category, April 2006
- Barclaycard still the dominant credit card player…but for how long?
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- Figure 47: Credit card ownership amongst credit card holders by brand, 2004-06
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- Figure 48: Credit card penetration amongst those with only a credit card (no debit card), 2004-06
- Retailers are key success story
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- Figure 49: Share of credit card customer base, by provider category, 2004-06
- Age is a key factor in credit card ownership
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- Figure 50: Credit card penetration (by provider category), by gender, age and socio-economic group, April 2006
- US operators attract broadsheet-reading Internet-savvy customers
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- Figure 51: Credit card penetration (by provider category), by newspaper readership, new technology, commercial TV viewing and supermarket use, April 2006
- An opportunity at Sainsbury’s?
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- Figure 52: Retail credit card ownership by supermarket use, April 2006
- Profiling cardholders
- Cardholder profiles: the top five banks
- NatWest has the highest proportion of credit card holding ABs
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- Figure 53: Credit card holder profiles of the top five banks, by gender, age and socio-economic group, April 2006
- Lloyds TSB has the highest number of Hard Pressed consumers
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- Figure 54: Credit card holder profiles of the top five banks, by working status, gross annual household income, ACORN category, tenure and newspaper readership, April 2006
- Profiling cardholders: other credit card issuers
- Retailers’ customer bases are older and female-friendly compared with those of US card operators
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- Figure 55: Credit card holder profiles of selected ‘other’ credit card issuers, by gender, age and socio-economic group, April 2006
- Only 3% of Egg credit card customers is retired
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- Figure 56: Credit card holder profiles of selected other credit card issuers, by working status, gross annual household income, ACORN category, tenure and newspaper readership, April 2006
- Repertoire analysis – competition occurs each time the wallet is opened
- Some 38% of credit card holders have more than one credit card
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- Figure 57: Repertoire analysis of credit card holders (number of credit cards owned), April 2006
- 35-44-year-olds and ABs own the greatest number of credit cards
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- Figure 58: Repertoire analysis of credit card holders (number of credit cards owned), by gender, age and socio-economic group, April 2006
- First Direct customers are most likely to hold three or more cards
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- Figure 59: Repertoire analysis of credit card holders (number of credit cards owned), by brand (credit card issuer), April 2006
- 47% of cardholders opened one or more accounts in the last three years
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- Figure 60: Number of new credit card accounts opened in the last three years, April 2006
- Who to target – a loyal customer base or rate-surfers?
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- Figure 61: Number of times a new credit card account has been opened in the last three years, by gender, age and socio-economic group, April 2006
- Implications
- Retirees are the least likely to have opened a credit card account in the last three years
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- Figure 62: The number of times a new account has been opened in the last three years, by working status, lifestage, supermarket use and newspaper readership, April 2006
- Implications
Consumer Attitudes and Targeting Opportunities
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- Debit cards and the cashless society
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- Figure 63: Attitudes towards debit cards, April 2006
- Implications
- Attitudes to debit cards – ABs prefer to use debit cards
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- Figure 64: Attitudes towards debit cards, by gender, age and socio-economic group, April 2006
- Clusters tell the Plastic Junkies from Debt Averse Debit Devotees
- Plastic Junkies
- Implications
- Cash-loving Credit Card Pragmatists
- Implications
- Debt Averse Debit Devotees
- Strictly Cash, No Credit
- DEs stick with cash on fear of debt
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- Figure 65: Cluster groups of cardholders by gender, age and socio-economic group, April 2006
- Plastic Junkies often live as married or are in the family lifestage
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- Figure 66: Cluster groups of card holders by marital status, life-stage, and tenure,, April 2006
- Higher income groups are Plastic Junkies while the retired are the most pragmatic in their use of credit
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- Figure 67: Cardholding cluster groups by working status, gross annual household income, TV region, and ACORN category, April 2006
- Target broadsheet readers for Plastic Junkies and Cash-loving Credit Card Pragmatists
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- Figure 68: Cardholding cluster groups by new technology use, newspaper readership, commercial TV veiwing and supermarket use, April 2006
- CHAID analysis
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- Figure 69: CHAID analysis, debit and credit card typologies, April 2006
- Repertoire analysis shows Plastic Junkies own most credit cards
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- Figure 70: Repertoire analysis on credit card ownership, based on consumer typologies, April 2006
- Attitudes towards credit cards and the ways in which they are used
- Most are using their credit cards rationally and cost-effectively
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- Figure 71: Attitudes towards credit cards, April 2006
- Younger customers may be more profitable
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- Figure 72: Attitudes towards credit cards, by gender, age and socio-economic group, April 2006
- Credit card attitudes and usage are polarised by level of affluence
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- Figure 73: Use of and attitudes towards credit cards, by ACORN group, newspaper readership, new technology use and commercial TV viewing, April 2006
- CHAID analysis reveals credit card usage patterns and potential consumer target groups
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- Figure 74: CHAID analysis of credit card use to identify potential target groups, April 2006
- The customer base of the key providers
- Tesco provides a rewarding offer to their customers while banks lever customer inertia
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- Figure 75: Attitudes towards credit cards, by credit card issuer/brand, April 2006
- Amex has the most active users
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- Figure 76: Use of and attitudes towards credit cards, by credit card issuer, April 2006
- Attitudes towards credit cards – what customers look for and how cards are distributed
- Happiness could lead to a slowdown in take up?
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- Figure 77: Attitudes towards credit cards, April 2006
- Implications
- 25-44-year-olds are most price-sensitive
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- Figure 78: Attitudes towards credit cards, by gender, age and socio-economic group, April 2006
- Implications
- Comfortably Off and Moderate Means categories are most price sensitive
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- Figure 79: Attitudes towards credit cards, by ACORN category, newspaper readership, new technology use, commercial TV viewing and supermarket use, April 2006
- Implications
- The price sensitive are the most security conscious
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- Figure 80: Attitudes towards credit cards, by category of credit card issuer, April 2006
- First Direct customers are most happy, but Mint might need a rethink
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- Figure 81: Attitudes towards credit cards, by credit card brand/issuer, April 2006
Industry Views
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- Consumer spending patterns – slowdown is expected
- Regulation and transparency – consumer protection and European advances
- Security-based developments will improve trust
- Business development challenges – complex products made simple?
- General comments – Internet will ensure card growth
The Future
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- Economic conditions are less likely to sustain plastic card growth
- What to do in the slowdown?
- Red Brand Wagon shows the way for a more tailored approach
- Maintaining simplicity will become more difficult
- Online purchasing and smaller transactions will present further opportunities to grow the market
Forecast
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- The rise and rise of debit card usage
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- Figure 82: Forecast of debit cards: number in issue, total annual transaction volumes and value, 2005-11
- Consumers to cut back on credit card spending
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- Figure 83: Forecast of credit cards: number in issue, total annual transaction volumes and value, 2005-11
- Factors used in the forecast
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