UK Plastic Cards 2010

Introduction
The UK consumer credit landscape remains unsettled with the government's proposed cuts package looming heavily over the market recovery. This has led to a flat performance in many lines of consumer credit, with counter-cyclical markets such as motor and retail finance the best performers. As the economy begins to improve, lenders will need to react quickly in order to take full advantage.

Features and benefits
Covers a variety of markets across the industry such as unsecured personal loans, motor finance, retail finance, peer to peer and non-standard lending
Provides three different scenario forecasts for the consumer credit market as a whole as well as forecasts for individual markets.
Includes market share data across some of the different consumer credit sectors.
Provides data from Datamonitor's proprietary Retail Banking Consumer Survey.
Highlights
The different consumer credit products all witnessed deteriorations in performance in 2009 in comparison with 2008. The alteration of conditions under the recessionary environment led to some lines performing quite robustly while others saw a significant contraction.

Although the level of competition remains low among unsecured personal loan providers, market experts did suggest that some players have made tentative steps to boost their aggression in terms of attracting new customers.

The recession has seen the popularity of product lines such as motor and retail finance gaining in popularity as consumers have found it difficult to access funding from banks and building societies.

Your key questions answered
Formulate market share objectives for your company and track progress using our market share and channel size data
Gain an in-depth knowledge of different consumer credit markets, from large established products to the more niche challengers.
Make informed market entry decisions through a greater understanding of the market and how it will perform over the next few years.

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TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
UK Plastic Card Market in Review and Future Outlook 2
Cards grew by a CAGR of 8.5% from 2005 to 2009, but growth will be weaker to 2014 2
Economic indicators remain mixed, with signs that consumer confidence is falling 3
Market Statistics and Key Trends 5
Despite the recession, the UK cards market will continue to grow through to 2014 13
Competitor Shares and Developments in the UK Card Market 17
The competitive landscape has remained surprisingly unchanged over the past 12 months 17
Lloyds Group is still the largest credit card issuer by number of cards 20
Barclaycard has the highest value of balances outstanding 25
The debit card market is led by the major high street retail banks 28
Santander leads the private label card market 30
Prepaid cards have strong growth potential, but the market currently remains flat 31
Contactless, Mobile, Online and Prepaid in the UK 33
Alternative Payments Are Gaining Ground in the UK 33
Contactless Payments Are Coming, But Not Yet 35
Mobile Payments Are Focused on m-commerce and P2P Transactions 38
Online Payments Are Dominated by Debit and Credit 39
Prepaid Cards Are Growing Beyond the Underbanked 41
UK Plastic Card Market in Review and Future Outlook 57
Cards grew by a CAGR of 8.5% from 2005 to 2009, but growth will be weaker to 2014 57
Economic indicators remain mixed, with signs that consumer confidence is falling 58
Consumer confidence is falling again and may lead to a slowdown in spending 59
Unemployment figures are plateauing, but card write-offs remain very high and will limit market growth 60
As balances continue to fall, transaction values are beginning to rise 64
In line with long-term trends, balance transfers are decreasing 69
Market Statistics and Key Trends 72
2009 has been a difficult year for the cards market in many areas 72
The value of all card transactions is rising 72
The total number of cards in issue has fallen, with only debit showing growth 72
The number of credit card holders is falling 75
Despite the recession and the decline in card numbers, transactions increased in 2009 77
Transaction values are increasing as a result of the growth of debit 79
Charge cards hold the highest average transaction value but this began to decline in 2009 81
Purchases account for 64% of all UK card transactions 84
Debit cards showed the highest rate of growth in transaction value by type between 2005 and 2009 85
Credit transactions are dominated by purchases 87
Charge cards are now in decline as business expense usage declines 89
Card scheme market shares have been volatile over the past five years 90
MasterCard now leads the credit card market 91
The charge card market has seen the consolidation of American Express’ historic lead 92
The increase in POS terminals has helped to drive the growth in transaction volumes 93
Bank owned ATMs are now driving growth, as independent ATMs continue to decline 94
The number of fraudulent transactions is falling 95
The successful implementation of chip and PIN led to an increase in card-not-present fraud 96
The value of all fraud fell in every category in 2009 97
Forecasting the UK Payment Cards Market 99
Despite the recession, the UK cards market will continue to grow through to 2014 99
Datamonitor forecasts annual growth of 5.6% in the value of payment card transactions to 2014 99
Datamonitor’s forecasting model assesses the relationship between macroeconomic factors and consumer credit products 102
The credit card market is likely to remain flat through to 2014 104
Datamonitor forecasts annual growth in the credit card market of 3.6% to 2014 under a neutral scenario 104
Under an optimistic scenario Datamonitor forecasts an annual growth of 4.6% 107
Under a pessimistic view of future economic performance, Datamonitor forecasts an annul growth of 2.4% 109
Debit cards will see the most positive levels of growth over the next five years 113
Datamonitor forecasts annual growth of 6.3% in the debit card market to 2014 113
The charge card market will remain flat through to 2014 115
Datamonitor forecasts that the charge card market will see marginal annual growth of 3.0% to 2014 115
Private label cards will decline through to 2014 117
Datamonitor forecasts that the private label card market will see an annual decline of -4.4% to 2014 117
Competitor Shares and Developments in the UK Card Market 119
The competitive landscape has remained surprisingly unchanged over the past 12 months 119
Some brands have exited the market, and more are likely to follow 119
Many issuers are diversifying rather than retrenching their positioning 120
Egg and Citigroup have both launched standard cards with annual fees 126
Incentives for transactions are becoming more critical 127
Incentivizing day to day use is critical to future growth 129
Issuers have little choice but to innovate and adapt in today's market 131
Lloyds Group is still the largest credit card issuer by number of cards 131
Barclaycard branded cards hold a steady 15.3% share of the market 133
Barclaycard has the largest portfolio of ‘primary’ cards 134
Premium branded cards continue to constitute a significant share of the market 137
Usage and primacy rates are driven by card features 138
The number and value of transactions per issuer is broadly in line with market share 140
Barclaycard had the highest value of transactions in 2009 on £15.6 billion 142
Frequency of use is consistent across most card issuers 143
66% of Tesco Bank cards are used all the time 144
Barclaycard has the highest value of balances outstanding 145
Egg holds the highest average balance per card 147
Repayment rates are significantly higher for cards providing incentives for transacting 148
The debit card market is led by the major high street retail banks 150
Santander recently passed Barclays as the largest debit card issuer, with 10.6 million cards in H1 2010 150
POS accounts for the majority of debit transactions by volume 152
£67.8 billion was spent by consumers on Barclays debit cards in 2009 153
Consumers spent an average £52.70 per debit card transaction in 2009 154
Santander leads the private label card market 156
Prepaid cards have strong growth potential, but the market currently remains flat 159
Less than 5% of the population hold a prepaid card 160
There are 3.9 million prepaid cards in issue 161
Contactless, Mobile, Online and Prepaid in the UK 164
Alternative Payments Are Gaining Ground in the UK 164
Contactless Payments Are Coming, But Not Yet 164
Definition of contactless payments 165
Contactless cards offer speed and convenience to consumers 166
The potential opportunity for contactless cards in the UK is up to £97.4 billion 166
Petrol sales provide the most potential for contactless payments in the UK 167
Contactless payments are being driven by Oyster and Barclays in the UK 169
Oyster proves that UK consumers are willing to use contactless ticketing 170
Barclaycard is the driving force behind UK contactless payment cards 172
Mobile Payments Are Focused on m-commerce and P2P Transactions 175
Mobile payments can be divided into P2P, m-commerce, and NFC payments 175
Mobile commerce and P2P applications are growing 176
Card issuers and MNOs in the UK are teaming up for a likely future push into mobile payments 177
Orange and Barclaycard are explicitly planning to launch mobile payments by 2012 177
O2 also has a card up its sleeve 179
Online Payments Are Dominated by Debit and Credit 181
Credit and debit cards account for 85% of online transactions by value 182
The most frequent online shoppers are the most likely to pay by credit card 184
Consumers spend the most on airlines and hotels, but shop more frequently for DVDs and games 186
The top quintile of consumers account for at least half of all online sales in nearly every merchant category 189
Convenience is more important than security when shopping online 190
Prepaid Cards Are Growing Beyond the Underbanked 194
Unlike other payment cards, prepaid cards typically require a program manager 194
Prepaid cards exist in a variety of forms, targeted at specific audiences and needs 195
Revenue streams for prepaid cards are based on fees and float interest 198
The UK prepaid card market is dominated by small- to mid-size players 199
Fraud remains a concern for the UK prepaid market 200
Mid-size banks and building societies are the largest issuers of prepaid cards in the UK 201
Appendix 206
Supplementary data 206
Online payments 206
Definitions 209
Methodology 211
Further reading 212
Ask the analyst 212
Datamonitor consulting 212
Disclaimer 212


TABLE OF FIGURES
Figure 1: Following a CAGR of 8.5% from 2005–09, growth will slow to a CAGR of 5.6% from 2010f–14f 2
Figure 2: Following an improvement throughout most of 2009, consumer confidence is falling 4
Figure 3: The value of all transactions grew by a CAGR of 7.4% between 2005 and 2009 to reach £624.5 billion 5
Figure 4: Debit cards account for over half of the 156.4 million payment cards in issue 6
Figure 5: UK purchases continue to constitute the bulk of all UK card transactions 8
Figure 6: There were 10.7 billion plastic card transactions in 2009 9
Figure 7: Visa holds nearly three quarters of the debit card market 10
Figure 8: The number of POS terminals continues to rise 12
Figure 9: Card fraud is declining across all card types 13
Figure 10: The UK cards market will see 5.6% growth in transaction values through to 2014 14
Figure 11: The credit card market will improve from at least 2011 onwards 17
Figure 12: MBNA has proactively switched all of its Alliance and Leicester branded cards 19
Figure 13: Only two issuers have undergone a decline in the number of card products they offer 20
Figure 14: Lloyds Banking Group leads the market with 12.6 million credit cards in issue 21
Figure 15: Barclaycard has 4.6 million primary cards in the market 23
Figure 16: Two million Tesco Bank cards are considered primary by cardholders 24
Figure 17: On average only 30% of cards are used ‘all the time’ according to cardholders 25
Figure 18: Barclaycard holds the highest value of balances outstanding at £8.9 billion in H1 2010 26
Figure 19: Lloyds holds 23% of the market by balances outstanding 27
Figure 20: The number of debit cards grew to reach 80.6 million cards by H1 2010 29
Figure 21: The top five debit card issuers hold between 11% and 13% of the market 30
Figure 22: Santander has over 6.2 million private label cards in issue 31
Figure 23: 2.9 million consumers hold a prepaid card 33
Figure 24: The addressable market for contactless payments is £97.4 billion 38
Figure 25: The UK is the most advanced market for online shopping in Europe 40
Figure 26: Over 40% of consumers who do not shop online prefer to get their goods the same day 41
Figure 27: Prepaid cards consist of three primary players: program managers, issuers and processors 43
Figure 28: Following a CAGR of 8.5% from 2005–09, growth will slow to a CAGR of 5.6% from 2010f–14f 57
Figure 29: Following an improvement throughout most of 2009, consumer confidence is falling 59
Figure 30: Card write-offs continue to rise, despite a deceleration in unemployment growth 60
Figure 31: Card write-offs hit record highs in 2009 and 2010, reaching £2.1 billion 62
Figure 32: An index of write-offs, insolvencies, and unemployment suggests probable growth in write-offs 63
Figure 33: Balances outstanding have been declining compared to the previous year 65
Figure 34: For the longest sustained period since the onset of the downturn, transaction values are higher than the previous year 66
Figure 35: Balances outstanding have seen a sustained decline since January 2009 67
Figure 36: Overdraft balances are in decline as consumers avoid debt based spending 68
Figure 37: Monthly balance transfers are showing long-term decline in value 70
Figure 38: The value of balance transfers has dropped by 51.2% between Q1 2006 and Q2 2010 71
Figure 39: The value of all transactions grew by a CAGR of 7.4% between 2005 and 2009 to reach £624.5 billion 72
Figure 40: Debit cards account for over half of the 156.4 million payment cards in issue 73
Figure 41: The private label card market has declined by 29% since 2005 74
Figure 42: The gap between debit and credit card holdings has grown since 2005 75
Figure 43: Standard cards account for almost 10% more of the market compared to five years ago 76
Figure 44: There were 10.7 billion plastic card transactions in 2009 78
Figure 45: Debit cards accounted for 71.9% of transactions by value in 2009 79
Figure 46: Debit cards are used an average of 107 times per year 80
Figure 47: The average transaction value on pay later cards fell in 2009 81
Figure 48: Charge card turnover fell to £6,873 per card in 2009 83
Figure 49: Card turnover per adult in the population is strongly led by debit at £9,312 in 2009 84
Figure 50: UK purchases continue to constitute the bulk of all UK card transactions 85
Figure 51: Debit card transaction values grew by a CAGR of 11.8% between 2005 and 2009 86
Figure 52: The credit market remains flat, recording a CAGR of -1.3% from 2005–09 88
Figure 53: Charge card transactions fell by 8.0% in 2009 89
Figure 54: Visa holds nearly three quarters of the debit card market 90
Figure 55: MasterCard has successfully consolidated its credit card positioning to 60.6% of the market 91
Figure 56: American Express accounts for 51.8% of the charge card market 92
Figure 57: The number of POS terminals continues to rise 94
Figure 58: ATM numbers are falling due to a continued drop in the number of independent machines 95
Figure 59: Card fraud is declining across all card types 96
Figure 60: Instances of fraud are declining in almost every category 97
Figure 61: Following a 38.8% increase, the value of card fraud fell by 27.8% in 2009 98
Figure 62: The UK cards market will see 5.6% growth in transaction values through to 2014 99
Figure 63: The credit card market will improve from at least 2011 onwards 103
Figure 64: MBNA has proactively switched all of its Alliance and Leicester branded cards 120
Figure 65: Only two issuers have undergone a decline in the number of card products they offer 122
Figure 66: Lloyds Banking Group has the largest variety of credit cards on offer 123
Figure 67: The number of balance transfer offers has increased over the past 12 months 124
Figure 68: Both MBNA and LBG have increased the number of cards with 0% BT offers 125
Figure 69: Tesco Bank is an increasingly competitive force in the market 128
Figure 70: Barclaycard’s Freedom website includes a directory of participating retailers 130
Figure 71: Lloyds Banking Group leads the market with 12.6 million credit cards in issue 132
Figure 72: Barclaycard is the largest player by brand ahead of both Lloyds TSB, and HBOS 134
Figure 73: Barclaycard has 4.6 million primary cards in the market 136
Figure 74: Two million Tesco Bank cards are considered primary by cardholders 137
Figure 75: 36% of American Express credit cards are platinum branded 138
Figure 76: ATM withdrawals account for 1.8% of credit card transaction volumes 141
Figure 77: Transaction values follow a very similar pattern to transaction numbers, with Barclaycard and Lloyds leading the market in 2009 143
Figure 78: All credit cards are used between 32 and 26 times per year 144
Figure 79: On average only 30% of cards are used ‘all the time’ according to cardholders 145
Figure 80: Barclaycard holds the highest value of balances outstanding at £8.9 billion in H1 2010 146
Figure 81: Lloyds holds 23% of the market by balances outstanding 147
Figure 82: Egg cards hold an average balance of £1,756 148
Figure 83: Reported rates of non-payment were as high as 15% of cards for some issuers in H1 2010 149
Figure 84: The number of debit cards grew to reach 80.6 million cards by H1 2010 151
Figure 85: The top five debit card issuers hold between 11% and 13% of the market 152
Figure 86: Debit cards are used more often at the POS than at ATMs 153
Figure 87: POS accounts for 60% of all debit transactions by value 154
Figure 88: Consumers spent an average £52.70 across all types of debit transactions in 2009 155
Figure 89: Santander has over 6.2 million private label cards in issue 157
Figure 90: Debenhams is the leading brand for private label store cards 158
Figure 91: The private label sector is fragmented, with Debenhams leading with a 15% market share 159
Figure 92: 2.9 million consumers hold a prepaid card 160
Figure 93: There are over 1 million PayPal prepaid cards in issue 161
Figure 94: The prepaid cards sector is dominated by four issuers accounting for 75% of the market 162
Figure 95: The addressable market for contactless payments is £97.4 billion 167
Figure 96: Petrol sales alone have an addressable market for contactless of over £60 billion 168
Figure 97: The top four merchant categories in terms of opportunity could benefit from contactless payments 169
Figure 98: The Barclaycard OnePulse card uses the Oyster logo, and London imagery 172
Figure 99: Barclaycard is heavily marketing contactless to both consumers and merchants 173
Figure 100: Barclaycard and Orange plan to launch a mobile payment service by 2012 178
Figure 101: O2 has launched the most high profile mobile-related payment tool to date 180
Figure 102: The UK is the most advanced market for online shopping in Europe 181
Figure 103: Over 40% of consumers who do not shop online prefer to get their goods the same day 182
Figure 104: Credit and debit account for 85% of online transactions by value in the UK 183
Figure 105: Consumers spent £20 billion on their credit cards online in 2009 184
Figure 106: Consumers who shop online the most use credit cards for 48% of transactions by value 185
Figure 107: The top 20% of online shoppers account for 72% of all transactions by value 186
Figure 108: There were 839 million online transactions by volume in 2009 187
Figure 109: Videos/DVDs/games, music, and food and drink account for 54% of all online transactions 188
Figure 110: Consumers spent £18 billion on airline tickets and hotels online in 2009 189
Figure 111: The top 20% of consumers account for at least half of online sales by value in all categories other than music 190
Figure 112: Higher perceptions of security do not lead to a higher market share 191
Figure 113: High perceptions of convenience lead to a higher market share 192
Figure 114: Prepaid cards consist of three primary players: program managers, issuers and processors 195
Figure 115: Prepaid cards are often targeted at very specific needs 198
Figure 116: With the highest brand awareness, Virgin and PayPal lead the prepaid cards market 201
Figure 117: The prepaid cards sector is dominated by four issuers, accounting for 75% of the market 202


TABLE OF TABLES
Table 1: Forecast UK plastic cards market, 2010f–14f 3
Table 2: Forecast of transaction values for the UK plastic cards market (£m), 2010f–14f 15
Table 3: Datamonitor’s neutral scenario forecast of the total UK cards market, 2010f–14f 15
Table 4: Forecast UK plastic cards market, 2010f–14f 58
Table 5: Forecast of transaction values for the UK plastic cards market (£m), 2010f–14f 100
Table 6: Datamonitor’s neutral scenario forecast of the total UK cards market, 2010f–14f 101
Table 7: Forecast performance of the UK consumer credit market drivers under the neutral scenario, 2010f–14f 104
Table 8: Datamonitor’s five-year forecast of the credit card market under a neutral scenario, 2010f–14f 105
Table 9: Market drivers for the UK credit card market under a neutral scenario, 2005–14f 106
Table 10: Datamonitor’s five-year forecast of the credit card market under an optimistic scenario, 2010f–14f 107
Table 11: Market drivers for the UK credit card market under an optimistic scenario, 2005–14f 108
Table 12: Forecast performance of the UK consumer credit market drivers under an optimistic scenario, 2010f–14f 109
Table 13: Datamonitor’s five-year forecast of the credit card market under a pessimistic scenario, 2010f–14f 110
Table 14: Market drivers for the UK credit card market under a pessimistic scenario, 2005–14f 111
Table 15: Forecast performance of the UK consumer credit market drivers under a pessimistic scenario, 2010f–14f 112
Table 16: Datamonitor's five-year forecast of the debit card market, 2010f–14f 113
Table 17: Market drivers for the UK debit card market under Datamonitor’s forecasting scenario, 2005–14f 114
Table 18: Datamonitor’s five-year forecast of the UK charge card market, 2010f–14f 115
Table 19: Market drivers for the UK charge card market under Datamonitor’s forecasting scenario, 2005–14f 116
Table 20: Datamonitor’s five-year forecast of the UK private label card market, 2010f–14f 117
Table 21: Market drivers for the UK private label card market under Datamonitor’s forecasting scenario, 2005–14f 118
Table 1: Consumer perceptions of the features on their credit card by brand (1 of 2) 139
Table 2: Consumer perceptions of the features on their credit card by brand (2 of 2) 140
Table 3: UK prepaid cards by number of cards in issue by brand and issuing group 163
Table 25: Consumer reasons for using different payment tools 193
Table 26: Number and value of prepaid card transactions, 2008 204
Table 27: UK prepaid cards by number of cards in issue by brand and issuing group 204
Table 28: Value of cash transactions by transaction value band (£m) 206
Table 29: Contactless opportunity by sector (£m and %) 206
Table 30: Proportion of consumers in the EU27 that have shopped online at least once in the last three months, 2008 207
Table 31: Reasons for not shopping online, UK and global average (%) 208
Table 32: Value of online transactions by payment tool and quintile (£m) 208
Table 33: Value of online transactions by merchant category and quintile (£m) 209



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