UK Plastic Cards: Outlook to 2012

Introduction

In 2010, economic uncertainty contributed to plummeting consumer confidence and expectations, which in turn made potential borrowers hesitant about using credit cards. Alongside the clear impacts of the recession, the sector has been faced with both the worsening of old problems and the arrival of a new range of issues that were unexpected by many.

Features and benefits

* Includes detailed analysis of macro-economic indicators and how these factors will affect the card market through to 2012.
* Providing the latest data, the report focuses on key metrics such as card transaction values, balances, and card numbers.
* Includes detailed analysis of EU and UK regulatory changes, their impacts on issuers and consumers, and how issuers should adapt.
* By using the latest available market data the report offers in-depth analysis of likely forecast scenarios through to 2012.

Highlights

Stagflation and high unemployment have led to falling consumer confidence. The economy contracted again in Q4 2010, increasing fears of further unemployment making consumers think twice about using credit cards. Historically low interest rates means consumers are taking the opportunity to pay off debt rather than save or spend on credit.
In Q2 2010, the growth in card write-offs peaked at an all-time high of 163.3%; however, with a fall in growth for insolvencies and unemployment, card write-offs are expected to fall. However in a volatile environment write-offs may be prone to future rises and falls.
Current economic circumstances have exacerbated long-term cards trends. Debit transaction values are growing twice as fast as credit, which have remained relatively flat. Whereas debit card transaction values have grown year-on-year, credit cards have alternated between shrinkage and growth.

Your key questions answered

* How is the UK recovering from recession? How has the cards market changed as a result?
* What impact will new regulation have on consumers and issuers?
* What are the key drivers impacting growth through to 2012?
* How have card balances, write-offs, and transaction values changed since the worst of the recession?
* How will the card market perform in 2011 and 2012?

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OVERVIEW
Catalyst
Summary
THE UK ECONOMY: STAGFLATION AND UNCERTAINTY ARE SEVERELY HARMING CONFIDENCE
Stagflation and high unemployment show mixed signs for the future
Consumers have been increasingly less well-off since mid-2008
THE UK CREDIT CARD MARKET: MIXED MESSAGES ARE FAILING TO ALLEVIATE CONSUMER CONCERNS
2010 saw consumer confidence and expectations fall dramatically
Credit card write-offs have been volatile since mid-2009 and show few signs of stabilizing
Write-offs reached an all-time high in Q2 2010
While IVAs have continued to rise, personal insolvencies and bankruptcy orders have shown a steady fall
The cards market is changing shape as transaction values increase while balances fall
Overdraft borrowing continues to fall as consumers pay off their outstanding overdraft balances
Card numbers fell sharply in 2010, although the number of active accounts remained relatively stable
Transaction values were higher than the previous year across every month in 2010–11
Throughout the year, transaction volumes were marginally higher than in 2009
Debit transaction values are growing over twice as fast as credit
DATAMONITOR FORECASTS A 1.9% GROWTH IN THE CREDIT CARD MARKET IN 2011
After the poor performance of 2009, the credit card market is expected to grow to 2012
Consumer credit as a whole will continue to show improvements
From Q1 2011 onwards, credit card lending is expected to grow steadily
The value of credit card transactions will continue to grow to 2012
POS credit card transaction values are expected to rise after dropping significantly in 2009
Following long-term trends, ATM credit card withdrawals will decline through to 2012
Macro-level indicators suggest that 2011–12 will be a period of strong recovery after 2009
Debit cards will remain stable, with transaction value growth of 7.6% and 4.9% across 2011 and 2012
REGULATORY LANDSCAPE: ATTENTION IS FOCUSING ON PROTECTING CONSUMERS
The implementation of the CCD will increase competition and protect consumers
Advertising and APRs
Creditworthiness and adequate explanations
Pre-contractual information and agreements
Right of withdrawal
Changes in rates, early settlement, and termination
Transferring credit and external parties
Five new consumer rights give customers a fairer deal and more control
REBUILDING CONSUMER TRUST AND DEMAND FOR CREDIT IS VITAL FOR ISSUERS
Trust can be regained through legislation
The UK government's consultation addresses many of the concerns of consumers
The CCD increases transparency and means issuers cannot rely on overly complex schemes
With trust restored, consumer interest will be stimulated by competitive rates and offers
More direct competition has led to a price war and very favorable rates for borrowers
APPENDIX
Supplementary data
Definitions
AAGR
APACS
Average transaction value
Balances outstanding
Bank of England base rate
CAGR
Charge card
Credit card
Debit card
Decoupled debit
Methodology
Primary research
Secondary research
Forecast methodology
Further reading
Bibliography
Ask the analyst
Datamonitor consulting
Disclaimer

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