UK Plastic Cards: Outlook to 2010

UK Plastic Cards: Outlook to 2010

Published By: Datamonitor
June 2009
R313-52311
Online Download $2,795.00
Global Site License $6,987.50

Description

Introduction

With the recent dramatic developments in the global economy the UK card market is going to go through a severe shake up in 2009 and 2010. This report offers an insight into what shape these changes will take, and the impact on the cards industry through to 2010. By using the most up to date market indicators this report highlights what will be the key influencers in a challenging environment.

Scope

Part of the UK Plastic Cards series this report provides insight into what impact the recession will have on the cards market
Using the latest figures, the report focuses on the likely impact from the rise in unemployment on write-offs and repayments
Other key indicators covered in this report include rising rates of household debt, and consumer shifts to recessionary behaviour
By using the latest available market data the report offers concrete signs of the early impact of the downturn, and likely future outcomes

Highlights

With rising levels of unemployment the UK cards market is faced with a ticking time bomb. Despite a stagnating economy, the UK credit card market remained buoyant until unemployment began to rise. With unemployment estimated at 2.2m and rising this will impact at all levels of the cards market as balances rise and card write-offs increase.

Levels of household consumer debt have risen to problem levels during recent years, despite an economic boom. Now faced with a worsening climate, many consumers already on the brink of insolvency will be pushed over the edge. Even for non-insolvent cardholders, balances are growing while repayment rates decline to problem levels for issuers.

Consumer behaviour is changing faster than the rate of economic slowdown. Spending levels, and transaction values began to fall before the full impact of the downturn was felt by consumers. Now that consumers are feeling real hardship spending levels will continue to decrease as consumer confidence remains low.

Reasons to Purchase

Understand the dramatic changes affecting the cards industry, with the latest available market data providing real world insight
Learn what are the key factors that will shape the UK cards market through the downturn and the likely shape of the market in the future
Develop strategies for dealing with the impact of the global downturn by having an accurate account of what is happening now

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Table of Contents

Overview: Catalyst; Summary; Table of Contents; Table of figures; Table of tables; The UK credit card market: a ticking time bomb?; The cards market is faced with challenges to revenues and costs; Unemployment is growing and will result in further growth in card write-offs; As insolvencies and unemployment rise, card write-offs will inevitably increase shortly afterwards; Bankruptcy orders and IVAs have increased over time and this trend will continue in 2009 and 2010; Consumers continue to accumulate debt, potentially building up further pain for issuers; Balances on cards are growing, while transaction values fall, causing a double impact on issuer revenues; Repayment rates consistently below 100% support the growth in balances outstanding; Growth in personal debt is not restricted to cards and is a further major area of concern for card issuers; Existing account holders are taking out more cards, spreading their debts more widely; Recessionary consumer behavior also represents a major challenge to issuers; The value of transactions in 2008 fell below 2007 levels; The total number of transactions and average spend per transaction is decreasing; Consumers are also relying more heavily on cash; Sharp falls in consumer confidence are underpinning the slowdown in card activity; Also of concern to issuers is that house prices are not expected to stabilize until 2010; In addition to the immediate threats, the long term challenge from debit shows no signs of letting up; Card usage rates for debit are growing at a cost to credit; Datamonitor forecasts a 6.4% fall in the credit card market in 2009; 2009 will see a 6.4% drop in the credit card market and there will be a further drop of 1.5% in 2010; The volume and value of credit card POS transactions will see a 7% drop over 2009 and 2010; Credit card use at ATMs will drop by 19.8% in 2009 and will not recover; Macro level indicators suggest 2009-2010 will be a difficult period; The range of scenarios show the credit card market declining from an optimistic 1.6% to a pessimistic 10.8%; Debit cards will remain stable with value growth of 4.95% across 2009 and 2010; Debit will grow 9.67% at the POS and drop 2.2% at ATMs by 2010; Issuers must manage risk more carefully yet increase card usage if they are to navigate through the downturn; Managing defaults through identification and opening dialogue can help relieve pressure on the market; Innovations in repayments will help both short term and long term growth; Portfolio optimisation must continue to help limit issuer exposure to risk; Issuers need to find out why consumers are not using cards; Repayment rates can be improved by incentivising consumers; Issuers must improve consumer reluctance to use credit cards for small scale transactions; Rewards and loyalty programs remain a key way to help driver card usage
Appendix: Supplementary data; Datamonitor's forecast for the credit card market under a neutral scenario; Datamonitor's forecast for the credit card market under an optimistic scenario; Datamonitor's forecast for the credit card market under a pessimistic scenario/; Datamonitor's forecast for the debit card market under a neutral scenario; Definitions; AAGR; APACS; Average transaction value; Balances outstanding; Bank of England base rate; CAGR; Charge card; Credit card; Debit card; Methodology; Primary research; Secondary research; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Historic and forecast view of the credit card market under a neutral scenario; Table 2: Across all scenarios the credit card market will see a drop in 2009-2010; Table 3: Historic and forecast view of the credit card market under a neutral scenario; Table 4: Neutral scenario of the historic and forecast credit card market 2006-2010; Table 5: Neutral forecast of the consumer credit market, 2006-2010; Table 6: Optimistic scenario of the historic and forecast credit card market 2006-2010; Table 7: Optimistic forecast of the consumer credit market 2006-2010; Table 8: Pessimistic scenario of the historic and forecast credit card market 2006-2010; Table 9: Pessimistic forecast of the UK consumer credit market, 2006-2010; Table 10: Neutral scenario of the historic and forecast debit card market 2006-2010; Table 11: Current relevant publications, 2008-2009; Table 12: Future relevant publications, 2009
List of Figures: Figure 1: Growth in unemployment points to a sharp increase in write-offs in 2009; Figure 2: Bankruptcy orders and IVAs have increased every quarter since Q4 2007, a trend that is likely to continue; Figure 3: Despite falling transaction values balances outstanding continue to rise, creating potential problems for the future; Figure 4: Repayment rates have not risen above 100% since Q2 07; Figure 5: Following a period of decline, overdraft amounts outstanding are increasing; Figure 6: Card volumes increased in Q1 09, despite a drop in account numbers; Figure 7: Monthly transaction values saw a decline from September 2008 onwards; Figure 8: The average value and number of transactions decreased from September 2008 onwards; Figure 9: ATM withdrawals follow seasonal patterns and saw an increase in Q4 of 2008; Figure 10: The drop in ATM withdrawal values in Q4 08 demonstrates that consumers are moving into recessionary behavior; Figure 11: The Consumer Confidence Index declined in 2008, which explains the drop off in spending and card activity; Figure 12: House prices have declined sine 2007 and will not stabilize until 2010; Figure 13: Debit was growing while credit shrank in Q4 08 and Q1 09; Figure 14: The combined fall of POS and ATM transactions will strongly impact the credit card market; Figure 15: Credit card transactions will decline in both volume and value at the POS in 2009 and 2010; Figure 16: ATM credit card withdrawals will shrink through to 2010; Figure 17: Under all scenarios the credit card market will contract in 2009; Figure 18: Despite the downturn debit will continue to grow through to 2010 and beyond

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PUBLICATION: UK Plastic Cards: Outlook to 2010
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