Credit Cards - Ireland

Introduction and Abbreviations

Executive Summary

Market Drivers

Market Size

The Supply Structure

Distribution

Advertising and Promotion

The Consumer

The Future

Forecast

Appendix: Financial Attitudes

Credit Cards - Ireland - March 2005

Table of Contents

Introduction and Abbreviations

Definitions

Geographical, national and regional definitions

Conversion factors

Population

BMRB Target Group Index sample sizes

Abbreviations

Executive Summary

Prospects are good for the credit card market – over 50% growth in RoI and NI

Ownership of credit cards is higher among NI consumers, who are more likely to have a range of cards in their wallets

Attitudes to debt and finance vary greatly among credit cardholders

Economic climate provides a favourable backdrop for credit card market

Online shopping to be the great white hope for future of the credit card market

Promoting benefits of chip and PIN critical to its acceptance

Intensifying competition demands a different approach from credit card providers

Market Drivers

Health of the economy

Figure 1: Health of the economy, percentage growth, NI and RoI, 2002-05

Spending culture shows no signs of disappearing in RoI

Inflation determines spending power…

…as does income

Unemployment figures steady

Interest rates

Figure 2: Eurozone short-term interest rates, 1999-2003

Figure 3: Bank of England base rates, 1997-2004

Confidence in the economy

Figure 4: Consumer confidence in the economy, monthly indices, RoI, 1996-2004

Online shopping driving usage of credit cards

Figure 5: Number of Internet users who have made an online purchase in the last 3 months, RoI, 1999-2004

Budget 2005 in RoI should signal more intense competition between credit card providers

Pureplays intensify the competition in NI, benefiting the consumer

Competitive pressure from other plastic cards – or synergy between the various cards?

Figure 6: Penetration of credit and alternative (non-credit) plastic cards, RoI and NI, 2000 and 2004

Credit card security: chip and PIN to have an impact?

Debt has become part of everyday life

Market Size

RoI market for credit cards growing and still showing signs of future growth

Figure 7: Number of credit cards in issue, RoI and NI, 1999-2004

NI market driven by multiple card ownership

Consumers North and South continue to spend

Figure 8: Volumes and values of credit card transactions, RoI and NI, 1999-2003

RoI ranks among the top five European countries in terms of credit card issuance, usage and expenditure

Figure 9: Comparative European credit card statistics, 2003

The Supply Structure

Visa

Figure 10: Visa cards in issue, transaction volumes and cardholder expenditure volume, RoI, 2001-04

MasterCard

Figure 11: MasterCards in issue, transaction volumes and gross dollar value, RoI, 2002-04

American Express

Diners Club

Distribution

Abbey

Alliance & Leicester

AIB/First Trust Bank

Bank of Ireland

Bank of Scotland (Ireland)

Barclays

National Irish Bank/Northern Bank

Permanent TSB

Ulster Bank

Supermarket retailers and pureplays

Capital One

Egg

MBNA Europe Bank Limited

Tesco

Advertising and Promotion

The ‘big two’ dominate total advertising expenditure

Figure 12: Total advertising expenditure and proportion spent on credit card products, RoI, 2002 and 2004

Selective media channels favoured by most credit card providers in RoI

Figure 13: Credit card advertising expenditure by media channel, RoI, 2002 and 2004

Top three media channels used remain the same in 2004, but TV has grown as a media channel for credit cards

Figure 14: Credit card market advertisng media trends, RoI, 2002 and 2004

Northern Bank tops overall advertising expenditure in NI in 2004, despite competition from local and mainland GB banks.

Figure 15: Total advertising expenditure of credit car providers, with proportion of spend allocated to credit card products, NI, 2002 and 2004

The Consumer

Ownership

A third of RoI consumers owned a credit/charge card in 2004

Are credit cards losing their appeal with younger RoI consumers?

Figure 16: Ownership of credit/charge cards, by gender, age, socio-economic group, marital and working status, RoI, 2000 and 2004

Link between affluence and card ownership

Credit/charge card ownership more prevalent in NI…

…particularly among NI men: half owned a credit/charge card in 2004

Figure 17: Ownership of credit cards, by gender, age, socio-economic group, marital and working status, NI, 2000 and 2004

Affluence is also strongly linked with credit/charge card ownership in NI – but the less affluent also show signs of embracing credit card culture

Number of cards held

One in two credit/charge cardholders in RoI remains loyal

Figure 18: Number of credit/charge cards held, RoI, 2004

Fighting the war against switching: the need for long-term focus

Figure 19: Number of credit cards held, NI, 2004

NI cardholders are more promiscuous than southern counterparts

Usage

Data indicate that a core group of users are underpinning growth in credit card use

Figure 20: Frequency of usage of credit/charge cards, RoI, 2000 and 2004

One in five NI cardholders used their card more than once a week

Figure 21: Frequency of usage of credit cards, NI, 2000 and 2004

Increasing usage is key to developing credit card business

Alternative forms of credit

Credit cards are most popular form of credit in RoI

Figure 22: Forms of credit obtained in last 12 months for a single item costing more than €300, RoI, 2004

Some 30% of RoI cardholders use their card as a source of credit

Credit card also popular form of credit in NI, as NI consumers show slightly higher appetite for credit overall

Figure 23: Forms of credit obtained in last 12 months for a single item costing more than £200, NI, 2004

Potential for cross-selling additional forms of credit to cardholders

Attitudes towards finance

Figure 24: Agreement with attitudes to spending habits statements, RoI, 2004

The complex consumer: the repayers and the debtors

Customer service and understanding relationship with bank important to cardholders

Figure 25: Agreement with attitudes to personal finance statements, RoI, 2004

Consumers are becoming increasingly aware of personal finance, making switching between credit card providers more likely

NI cardholders echo sentiments of RoI cardholders, with the split between repayers and debtors coming to the fore

Figure 26: Agreement with attitudes to spending habits statements, NI, 2004

NI cardholders more receptive to the advances of grocery retailers

Figure 27: Agreement with attitudes to personal finance statements, NI, 2004

Cardholders are tightening their belts – could online shopping prove to be the saving grace?

Paying off debts, and attitudes of those who intend to

RoI consumers facing up to their responsibilities

Figure 28: Intention to pay off credit card/loans in the next 12 months, RoI and NI, 2002-04

Some consumers are feeling the after-effects of the spend culture – particularly those intending to pay off debts

Figure 29: Responses to lifestyle statements, RoI, 2004

Job security in NI provides opportunity for additional financial products

Figure 30: Responses to lifestyle statements, NI, 2004

Convenience is an important factor for a third of those intending to pay off debts

The Future

Demographics to play an important part in future of credit card market

Figure 31: Trends in RoI population, by age band, 1999-2009

Figure 32: Trends in NI population, by age band, 1999-2009

Differentiation becoming more important than ever

Banking code – what will be the impact?

Internet offers considerable potential

Forecast

Growth in the number of credit cards in RoI will outstrip that in NI in 2008

Figure 33: Forecasted number of credit cards, RoI and NI, 2004-08

Rising penetration at consumer level will underpin the increases in the number of credit cards

Figure 34: Forecasted penetration of credit/charge cards, RoI and NI, 2004-08

Appendix: Financial Attitudes

Attitudes towards finance among RoI consumers

25-34-year-olds are good money managers, due to recent commitments

Figure 35: Agreement with financial statements, by age, RoI, 2004

ABC1s are also good with money

Figure 36: Agreement with financial statements, by socio-economic group, RoI, 2004

Consumers in the F socio-economic group demand a tailored banking service

Attitudes towards finance among NI consumers

25-34-year-olds in NI are more aware of personal finance but need the bank to hold their hand

Prudence more common among the older age groups

Figure 37: Agreement with financial statements, by age, NI, 2004

ABC1s lack the time for personal finance

Figure 38: Agreement with financial statements, by socio-economic group, NI, 2004