With the market for credit cards dominated by high street banks - Can the specialists and new entrants make a significant impact on the credit cards market?

With a total of £285billion was spent on credit and debit cards last year - What factors have driven the use for credit and debit cards?

Despite the credit card market being established it still remains a dynamic sector of the financial services - What are the future prospects for growth and innovation in the credit and debit cards market?

With the market for credit cards dominated by high street banks - Can the specialists and new entrants make a significant impact on the credit cards market?

With a total of £285billion was spent on credit and debit cards last year - What factors have driven the use for credit and debit cards?

Despite the credit card market being established it still remains a dynamic sector of the financial services - What are the future prospects for growth and innovation in the credit and debit cards market?

It was the US company, Diners Club, which issued the first charge cards in 1950. These soon evolved into the credit card as it is recognised today, and by 1966 Barclays had launched their own card in the UK. They were rapidly followed by a host of fellow banks, and within a matter of years the 'flexible friend' was commonplace.

The market was initially dominated by Barclays, to the extent that for some the phrase 'Barclaycard' was used as a generic term for a credit card. However, by the mid-1990s American companies competing in what had become an extremely competitive market realised the potential for expansion in the UK. This influx of US banks, such as MBNA and Capital One, has revolutionised the market, ensuring that the days of the annual charge and 22.9% APR now look to be over.

It is not only the new entrants who have contributed to the sea change in the UK credit card market. Deregulation has helped increase competition in the banking market as a whole, while a more relaxed attitude towards taking on credit among consumers has meant that rate-cutting banks have found a receptive market. This willingness to spend on credit cards when combined with an increase in multiple card ownership has meant that there are now more credit cards in circulation than there are adults in the UK.

The credit card's close relative, the debit card, has a shorter history. Barclays was again at the vanguard in the UK, and it issued the first Visa Debit card in 1987. Switch cards closely followed in 1988, and the introduction of Visa Electron and Switch Solo cards has enabled electronically authorised transactions since the mid-1990s. While sharing many features with credit cards, the demand for debit cards is derived from that for current and deposit accounts, instead of being led by the card issuers themselves. However, growth in ownership of debit cards was impressive, and by 1995 there were more debit than credit cards in issue.

This report examines the markets for both credit and debit cards, from the factors which have driven the use of these payment cards to the number of cards in issue and the value of transactions. The use to which these cards are put is important for providers and marketers alike and, as such, Mintel has analysed the differing patterns of purchases, cash acquisition and overseas purchases.

While the market for credit cards is still dominated by the high street banks, the specialists and the new entrants have managed to make a significant mark on the market. This does not seem to be the case for debit cards, and in the Products and Providers section of this report Mintel provides market share estimates for both types of card, alongside an examination of the differing rates charged and marketing strategies employed by the major providers. This examination is continued in the Advertising and Promotion section, which details adspend and the media chosen by card issuers in this highly promoted sector of the financial services market.

In order to better understand the consumer's point of view as regards credit cards, Mintel commissioned exclusive consumer research among a representative sample of 2,089 adults. They were questioned on a variety of credit and debit card related topics, including product ownership, how they use their plastic cards, the level of debt held on their cards, and what would induce them to use their plastic cards more often. Finally, Mintel examines the future prospects of the market, including the potential effects of smart cards and the continuing changes associated with new entrants and the intense level of competition in this market.

Other Mintel reports of relevance include:

- Pricing and Competition in the Financial Sector, Finance Intelligence - UK Concept Report, June 2002

- POP Finance, Finance Intelligence - UK Report, April 2002

- Personal Loans, Finance Intelligence - UK Report, January 2002

- Interactive Money Transmission and Banking, Finance Intelligence - UK Report, November 2001

- Sub-prime Lending, Finance Intelligence - UK Report, October 2001

- Affinity and Loyalty Cards, Finance Intelligence - UK Report, September 2001

- Smart Cards, Finance Intelligence - UK Report, June 2001

and the forthcoming:

- Current Accounts, Finance Intelligence - UK Report, December 2002.