UK Plastic Cards 2007

Content

• Overview
• Catalyst
• Summary
• Executive Summary
• Introduction
• Table Of Contents
• Table Of Figures
• Table Of Tables
  • Uk Plastic Card Market In Review And Future Outlook
  • Introduction
  • Forecasting The Uk Payment Card Market
  • Datamonitor's Forecast For The Uk Plastic Card Market
  • Datamonitor Forecasts Annual Growth In The Value Of Payment Card Transactions Of 6.6% To 2011
  • Datamonitor's Forecasting Model Assesses The Relationship Of Macroeconomic Factors With Respect To Consumer Credit Products
  • Datamonitor Bases Its Neutral View On Forecasts Provided By The Treasury
  • Forecasting The Credit Card Market
  • Datamonitor Forecasts Annual Growth In The Credit Card Market Of 3.9% To 2011
  • Under An Optimistic View Of Future Economic Performance, Datamonitor Forecasts An Annual Growth Of 5.5%
  • Under A Pessimistic View Of Future Economic Performance, Datamonitor Forecasts Annual Growth Of -0.7%
  • Forecasting The Charge Card Market
  • Datamonitor Forecasts Annual Growth In The Charge Card Market Of 3.4% To 2010
  • Forecasting The Debit Card Market
  • Datamonitor Forecasts Annual Growth In The Debit Card Market Of 7.6% To 2011
  • Forecasting The Private Label Card Market
  • Datamonitor Forecasts That The Private Label Card Market Will Decline At An Annual Average Rate Of 2.6% To 2011
  • Regulation, Competition And The Threat To Revenues
  • The Uk Card Market Continues To Face Regulatory Intervention At The National Level
  • 2006 Saw Many Issues Wrapped Up
  • The Oft Has Set A Threshold Of 12 For Default Fees
  • Atm Fees Have Been The Subject Of Scrutiny
  • Credit Card Purchase Cover Has Been Extended To Overseas Transactions
  • The Cca 2006 Has Extended Protection Offered To Consumers And Was Enacted In April 2007
  • Datamonitor Cards And Payments Team View
  • The Oft Has Referred Its Report On Payment Protection Insurance To The Competition Commission
  • The Fsa Has Been Investigating The Sale Of Ppi Since 2005, And Has Imposed Penalties On Several Players
  • Datamonitor Cards And Payments Team View
  • The Oft Has Called For Greater Information To Be Provided With Credit Card Cheques
  • The Dti Began A Consultation Following Earlier Discussions By The Tsc And The Task Force On Tackling Over-Indebtedness
  • Following Up On This, The Oft Has Agreed That Further Regulation Is Required To Improve Transparency
  • Datamonitor Cards And Payments Team View
  • The Payment Systems Task Force Was Wound Up In December 2006 And Replaced With A New Strategic Governance Body
  • The Pstf Published A Report Into Access And Governance Of The Link Atm Network
  • The Pstf Did Not Pursue Its Investigation Into The Access And Governance Of Uk Card Schemes
  • Following An Appeal, The Oft's Ruling On Mastercard's Mif Was Overturned. However, It Has Vowed To Continue Its Investigations
  • The Oft's Current Investigation Is Likely To Focus More Closely On The Principle Of Interchange Itself
  • Datamonitor Cards And Payments Team View
  • Background To Interchange And Its Regulation
  • Interchange Is One Of Five Key Revenue Streams For The Industry
  • Merchants Are Behind The Downward Pressure On Interchange
  • The Oft's Current Interest In Domestic Interchange Began When Mastercard Applied For An Exemption From The Uk Competition Act 1998
  • In Its September 2005 Ruling, The Oft Accepted The Need For A Collective Agreement On Interchange, But Objects To What It Sees As 'Extraneous Costs'
  • In Response To This Finding, Mastercard, Backed Up By The Rest Of The Industry, Lodged An Appeal With The Cat
  • Although Reasonably Unlikely, There Remains A Possibility That Domestic Interchange Fees Could Be Reduced To Around 0.7%
  • Domestic Regulators Are Pushing To Make Interchange A More Accurate Reflection Of Costs
  • A Cut In Interchange Would Significantly Reduce Issuer Revenues, Forcing Them To Make Cuts Elsewhere
  • Datamonitor Cards And Payments Team View
  • The Uk Card Market Also Continues To Face Regulatory Intervention At The International Level
  • The European Ccd Promises To Make Further Changes To Regulation In The Uk
  • Timeline Of The Directive
  • The Revised Proposal Has Seen Changes To A Number Of Key Areas, But The Commitment To Maximum Harmonization Remains
  • Other Areas Of The Directive Remain Unchanged From Its Previous Form
  • Despite Being Well Intentioned, There Are Key Problems With The Directive
  • Datamonitor Cards And Payments Team View
  • The European Banking Industry Continues To Work Towards The Creation Of Sepa
  • For A Number Of Years The Ec Has Pushed To Create A Single Payments Area
  • However, Europe's Banks Were Initially Reluctant To Change Their Practices
  • Yet The Threat Of Further Regulation Pushed The Industry To Take Steps To Self-Regulate
  • At The End Of 2004, The Epc Issued A Roadmap To 2010
  • However, There Are Signs That Regulators Are Becoming Frustrated With The Slow Progress Of The Banks With Sepa
  • In March 2006, The Epc Published A Second Version Of Its Cards Framework
  • Datamonitor Cards And Payments Team View
  • Intense Competition In The Market Has Driven Down Interest Margins
  • Intense Price Competition Has Kept A Downward Pressure On Introductory Rates, While The Pressure To Earn Revenue Has Kept Headline Rates Up
  • Aprs Have Risen, Reflecting Recent Rises In The Base Rate And The Pressure To Generate Revenue
  • Introductory Aprs Have Fallen 5.6% Relative To The Base Rate Since January 2001
  • The Introduction Of Balance Transfer Fees Reflects This Shift Away From The Aggressive Acquisition Campaigns Of Recent Years
  • Regulation And Competition Have Cut Into Issuer Revenues. Current Regulatory Moves Will Reduce This Further
  • Datamonitor's Uk Credit Card Industry Revenue Model
  • This Model Estimates Revenue Flows From The Card Issuance Side Of The Business Only
  • A Wide Range Of Data Resources And Qualitative Input Have Been Brought Together To Form This Model
  • Datamonitor Estimates That The Revenue Pool From Issuance In The Uk Credit Card Market Has Shrunk To 9.9 Billion
  • Interest Is The Key Revenue Stream For The Industry
  • Other Sources Make Up The Remaining Revenue Income
  • Interest Is Accounting For A Greater Share Of Revenue As The Base Rate Increases And Income From Other Areas Is Cut
  • The Recent Changes In Regulation And The General Slowdown Of The Uk Card Market Have Cost Issuers Approximately 357m In Revenues. Future Restrictions On The Sale Of Ppi Could Cost Issuers Even More.
  • Issuers Have A Range Of Levers To Pull In Terms Of Revenue Generation
  • Scenario 1: The Fall In Revenue Is Countered By An Increase In The Standard Rate Of Apr Charged By Issuers
  • Scenario 2: The Fall In Revenue Is Countered By The Introduction Of Annual Fees On A Greater Proportion Of Cards
  • Scenario 3: 'Hidden Charges' Can Help Issuers Recover Revenue
  • Datamonitor Cards And Payments Team View
  • Summary
  • Competitor Market Shares And Developments In The Uk Plastic Card Market
  • Introduction
  • Card Scheme Market Shares
  • Visa Remains The Largest Debit Brand In The Uk
  • Solo Is Losing Market Share While Visa Electron Has Maintained Market Share
  • Visa Is Also The Leading Debit Scheme In Terms Of Cards In Issue
  • Visa Is The Leading Credit Card Scheme, But Continues To Lose Ground To Mastercard
  • American Express Is Now The Largest Scheme In The Charge Card Market
  • Card Issuer Market Shares
  • Rbs Remains The Largest Player In The Uk Credit Card Market By Cards In Issue
  • Barclaycard Remains The Biggest Issuing Brand In The Market
  • The Dominance Of The 'Big Five' Banks Is Being Challenged
  • Monolines And Other Issuers Continue To Grow At The Expense Of The Large Retail Banks
  • Co-Branding Continues To Be A Successful Strategy In The Uk
  • Specialist Lenders Have Also Made An Impact On The Market
  • Mbna Has Built Upon Its Position In 2005 To Become The Clear Leader In Terms Of Balances Outstanding
  • Ge Money Continues To Dominate The Private Label Market
  • Card Issuer Developments
  • The Uk Market Continues To Be Relatively Quiet In Terms Of Consolidation
  • The Costs Of Regulatory Compliance And A Downturn In Market Conditions Have Seen The Pace Of Consolidation Slow From 2002 Onwards
  • Strategic Changes Have Also Been Important-Many Issuers Have Sought To Grow Organically Through Co-Brand Partnerships With Non-Financial Entities
  • Entry Into Other Market Segments Is Also Likely To Be A Profitable Diversion For Issuers
  • In The Most Significant Recent Acquisition In The Uk, Citigroup Has Acquired Egg
  • Barclays Sells Off Its Subprime Card Portfolio
  • While Mergers And Acquisitions Have Been Thin On The Ground, There Have Been Many Notable Product Launches In The Uk
  • The Number Of Co-Branding Partnerships Continues To Increase, With Barclaycard Being Particularly Active
  • Prepaid Cards Have Been Introduced By Several Issuers
  • Contactless Payments Have Been Tested And Are Being Rolled Out In The Uk
  • Cards And Payments Team View
  • Issuers Are Responding To The Demand For 'Green' Products
  • Cards & Payments Team View
  • Lloyds Tsb Launches Debit Card Savings Product
  • Cards & Payments Team View
  • Summary
  • Product Design In The Uk - What Can Be Learnt From Abroad?
  • Introduction
  • Markets In The Middle East Lead The Way In Chip-Based Loyalty Programs
  • Chip-Based Loyalty Schemes Offer Several Advantages Over Traditional Schemes
  • Garanti Bank Offers Cardholders A Range Of Options On Its Chip-Based Bonus Program
  • The Chip Allows For Instant Redemption
  • Garanti Also Has Several Non Chip-Based Innovations
  • Moreover, Since The Success Of Bonus Card, Garanti Bank Has Since Launched A New And More Innovative Scheme
  • Mashreqbank's Wow! Card Rewards Repeat Purchases Rather Than Transactional Loyalty
  • The Chip Allows Mashreqbank And Its Partners To Reward Transaction Frequency As Well As Value.
  • Other Data Stored On The Chip Can Help Further The Relationship Between The Program And The Partner
  • The Value Offered To The Retailer Is Considerable
  • Cards & Payments Team View
  • There Have Been A Range Of Innovations In The Us
  • Citibank Has Extended Its Loyalty Scheme To Its Other Banking Products And Has A Loyalty Program That Helps To Pay Off Cardholders' Mortgages
  • Citibank's Home Rebate Card Can Help Cardholders Pay Off Their Mortgage Early
  • Cards & Payments Team View
  • American Express Has A Range Of Interesting Loyalty Propositions In The Us
  • The One Card Encourages Cardholders To Save Money And Results In More Bank Accounts At American Express Bank
  • Cards & Payments Team View
  • American Express Also Issues A Series Of Cards Tailored To Particular Cities
  • Cards And Payments Team View
  • Bank Of America Launches Affinity Banking
  • Cards & Payments Team View
  • Issuers In The Uk Can Also Learn From Their European Counterparts
  • In The Netherlands, Greencard Offsets The Cardholder's Carbon Emissions
  • Cards & Payments Team View
  • Allied Irish Bank's (Aib) 'Be' Credit Card Varies The Apr According To How Much Consumers Spend
  • Aib Uses One Pricing Strategy To Acquire And Then Two Different Pricing Strategies To Retain Customers
  • Cards & Payments Team View
  • Raiffeisen Bank In Hungary Has Introduced A New Card That Functions Both As A Debit And Credit Card
  • Such A Functionality Brings Huge Innovation On The Part Of Raiffeisen Bank To The Market
  • Cards & Payments Team View
  • In Spain, Issuers Have Tried To Make The Most Of Colors And Shapes
  • Card Appearance Has Been A Focus For Innovation
  • Cards & Payments Team View
  • Summary
  • The Threat From Debit To The Uk Credit Card Market
  • Introduction
  • Debit Is Becoming The Payment Tool Of Choice For Uk Consumers, Presenting A Major Challenge To The Credit Card Market
  • Debit Is Rapidly Becoming The Payment Tool Of Choice For Uk Consumers
  • Debit Cards Account For A Far Greater Proportion Of Total Card Transaction Values Than In 2002
  • Indeed, Debit Is Now More Than Ever The 'Top Of The Wallet' Choice For Consumers When It Comes To Spontaneous Purchases
  • This Trend Is Ultimately Driven By The Value Propositions Offered By Debit And Credit
  • At A Time When Credit Card Issuers Are Being Squeezed From All Sides, This Is A Major Challenge
  • Greater Replacement Of Credit With Debit Has Further Hit Interest Income; It Is Not Just Transactors Who Are Turning To Debit
  • Replacement Of Credit With Debit Is Also Unlikely To Have Alleviated The Problem Of Transactors
  • There Are Three Core Strategies Open To Credit Card Issuers To Counter The Threat From Debit
  • Attacking Debit As A Day-To-Day Payment Tool Offers A Clear Route To Revenue Growth
  • Co-Branding Is The Most Obvious Route To Driving Growth In Pos Use, But Is A Developed Segment
  • Issuer-Driven Loyalty Programs Can Achieve The Same Aim, But Have Been Less Successful
  • However, There Are Other Approaches To This Problem That Can Be Learned From Other Markets
  • Repositioning The Product As A Borrowing Tool Will Allow Issuers To Target Other Areas Of Consumer Credit
  • This Is An Area That Uk Issuers Have Already Managed To Exploit Successfully, But More Can Be Done
  • However, The Current Credit Climate Makes This Strategy A Risky One
  • Repositioning The Credit Card To Attack Payments Made By Other Means Provides Another Clear Route To Revenue Growth
  • Payments To Utilities And For Other Bills Are A Huge Potential Market
  • The Person-To-Person Payment Market Is Also One That Holds Significant Potential
  • Contactless Technology Represents A Huge Opportunity In Capturing Low-Value Cash Payments
  • The Threat From Debit Is A Serious One, And There Is No Single Remedy
  • The Threat From Debit Is One Of The Key Challenges Facing The Industry
  • Product Development Holds The Key To Growing Revenues, But There Is No Single Solution
  • Non-Standard Credit Cards In The Uk
  • Introduction
  • The Non-Standard Market Refers To Consumers Who Are Not Considered For Credit By Mainstream Issuers
  • The Non-Standard Market Covers The Sub-Prime Sector
  • The Term 'Non-Standard' Covers A Wide Range Of Perceived Risk
  • Despite The Risks Involved, The Non-Standard Market Has Proved An Attractive Market To Certain Issuers In The Uk
  • Careful Segmentation And Risk Management Is The Key
  • Issuers In The Non-Standard Segment Face Greater Risks But Charge A Higher Interest Rate
  • Issuers In The Non-Standard Space Mitigate Their Risk With Lower Credit Limits
  • Intense Competition Has Led To Decreasing Margins And Profitability In The Mainstream Market
  • Datamonitor Estimates That The Non-Standard Market In The Uk Consists Of Seven Million Adults And 5.6 Million Credit Cards
  • Datamonitor Estimates That There Are Seven Million Adults In The Uk That Fall Into The Non Standard Category.
  • Datamonitor Uses Seven Steps To Size The Uk Non-Standard Population
  • Elimination Of Double Counting
  • Several Factors Can Explain Why The Non-Standard Population Has Been Growing In The Uk
  • The Number Of Registered Ccjs Increased For The Second Year Running
  • Mortgage Repossessions Are Rising, Though Arrears Slowed In 2006
  • Personal Bankruptcies Hit Another Record
  • Payments In Arrears Are At A High
  • Mainstream Issuers Have Been Tightening Their Criteria
  • Datamonitor Estimates That There Are 5.6 Million Credit Cards Issued To Non-Standard Individuals In The Uk
  • Self Employment And Having A Ccj Account For Over Half Of The Non-Standard Cards In Issue
  • Average Cardholding Is Lower In The Non-Standard Segment
  • The Value Of Transactions On Non-Standard Credit Cards Amounted To 7.8 Billion In 2006
  • Datamonitor's Estimation Methodology
  • Datamonitor Estimates That The Value Of Transactions On Non-Standard Cards Reached 7.8 Billion In 2006
  • The Market Is Composed Of Mainstream And Specialist Providers
  • Capital One And Barclaycard Are Still Active In This Market
  • Several Mainstream Players Have Acquired Specialist Lenders In Order To Gain The Expertise Needed To Issue In This Market
  • There Are Several Advantages To This Approach, As Compared To Direct Market Entry
  • Mainstream Players Have Used Different Branding Strategies To Enter This Market
  • Market Entry Through A Subsidiary Allows Mainstream Issuers To Protect Their Prime Brands
  • However, Capital One Has Stayed Faithful To Its Prime Brand
  • Other Specialist Issuers Target The Lower End Of The Non-Standard Spectrum
  • Profile: Sav Credit
  • Profile: Vanquis Bank
  • Non-Standard Specialist Lenders Are Benefiting As A Result Of Mainstream Lenders Tightening Their Issuing Criteria
  • As A Result, Vanquis And Sav Have Continued To Grow Rapidly
  • As A Result, Non-Standard Specialist Providers Are Confident About The Future
  • It Is Likely That Other Firms Will Eventually Enter The Non-Standard Market
  • Datamonitor Forecasts Moderate Growth In The Non-Standard Credit Card Market
  • Datamonitor Forecasts That The Value Of Transactions On Non Standard Cards Will Grow At A Cagr Of 5.4%
  • Datamonitor's Estimation Methodology
  • Datamonitor Forecasts The Value Of Non-Standard Credit Card Transactions To Reach 10 Billion By 2011
  • A Number Of Factors Are Forecast To Drive Growth In The Non-Standard Credit Card Market
  • Growth Will Be Fastest Among Those With Poor Or Limited Credit Histories
  • Summary
• Appendix
  • Supplementary Data
  • Market Statistics And Key Trends
  • Data Table Relating To The Revenue Model
  • Definitions
  • Aagr
• Apacs
  • Average Transaction Value
  • Balances Outstanding
  • Bank Of England Base Rate
  • Cagr
  • Charge Card
  • Credit Card
  • Cvv
  • Debit Card
  • Emv
  • Fraudulent Use Of Card Details (Card-Not-Present Fraud), Also Known As Fraud On Phone, Mail Order Or Internet Transactions
  • Interchange
  • Non-Standard
  • Oft
  • Methodology
  • Primary Research
  • Secondary Research
  • Further Reading
  • Ask The Analyst
  • Datamonitor Consulting
  • Disclaimer