Financial Cards and Payments in UK

Financial Cards and Payments in the United Kingdom
Euromonitor International March 2011
Financial Cards and Payments
United Kingdom
List of Contents and Tables

FINANCIAL CARDS AND PAYMENTS IN THE UNITED KINGDOM - INDUSTRY OVERVIEW ............................................................................................................................................. 2
Executive Summary ................................................................................................................................................ 2 British Economy Recovers But Consumers Remain Cautious ................................................................................... 2 Debit Transactions Overtakes Cash for the First Time ............................................................................................. 2 Barclays Group Plc Leads Financial Cards and Payments in 2009 ......................................................................... 2 Mobile Commerce Will Continue Growing in the UK............................................................................................... 2 Economic Recovery Expected To Dominate the Forecast Period ............................................................................. 2 Key Trends and Developments .............................................................................................................................. 2 the Recovery of the UK Economy Remains Uncertain .............................................................................................. 2 the British Banking Landscape Changes As A Result of the Recession ..................................................................... 3 Mobile Commerce Continues Growing in the UK..................................................................................................... 4 New Regulations for Issuers of Credit Cards and Store Cards ................................................................................. 5 Contactless Cards Slowly Become More Popular in the UK .................................................................................... 6 Market Indicators ................................................................................................................................................... 7 Table 1 Number of POS Terminals 2005-2010 .............................................................................. 8 Table 2 Number of ATMs 2005-2010 ............................................................................................ 8 Table 3 Value Lost to Fraud 2005-2010 ......................................................................................... 8 Table 4 Card Expenditure by Location 2010 .................................................................................. 8 Table 5 Card Expenditure by Category 2010 ................................................................................. 8 Table 6 Financial Cards in Circulation by Type: % Number of Cards 2005-2010 ......................... 9 Table 7 Domestic versus Foreign Spend 2010 ............................................................................... 9 Market Data ............................................................................................................................................................ 9 Table 8 Consumer Payments: Value 2005-2010............................................................................. 9 Table 9 Consumer Payments: Number of Transactions 2005-2010...............................................10 Table 10 Financial Cards: Number of Cards in Circulation 2005-2010 ..........................................10 Table 11 Financial Cards Transactions: Value 2005-2010 ..............................................................10 Table 12 Financial Cards: Number of Transactions 2005-2010 ......................................................10 Table 13 Financial Cards: Number of Accounts 2005-2010............................................................11 Table 14 Financial Cards: Number of Cards by Issuer 2005-2009 ..................................................11 Table 15 Financial Cards: Number of Cards by Operator 2005-2009 .............................................12 Table 16 Financial Cards: Card Payment Transaction Value by Operator 2005-2009 ....................12 Table 17 Financial Cards: Card Payment Transaction Value by Issuer 2005-2009 .........................12 Table 18 Consumer Payments Forecast: Value 2010-2015 .............................................................13 Table 19 Consumer Payments Forecast: Number of Transactions 2010-2015 ................................13 Table 20 Financial Cards Forecast: Number of Cards in Circulation 2010-2015 ............................14 Table 21 Financial Cards Forecast: Value 2010-2015 .....................................................................14 Table 22 Financial Cards Forecast: Number of Transactions 2010-2015 ........................................14 Table 23 Financial Cards Forecast: Number of Accounts 2010-2015 .............................................15 Definitions ...............................................................................................................................................................15 Atm Function............................................................................................................................................................15 Debit Function .........................................................................................................................................................15 Credit Function ........................................................................................................................................................15 Commercial Credit Cards ........................................................................................................................................16 Charge Card Function 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Commercial Charge Cards ......................................................................................................................................16 Open Loop Pre-paid Function .................................................................................................................................16 Closed Loop Pre-paid Function ...............................................................................................................................16 Store Cards ..............................................................................................................................................................16 Pre-paid ...................................................................................................................................................................16 Contact Smart Card .................................................................................................................................................18 Contactless Smart Card ...........................................................................................................................................18 Card Expenditure by Location .................................................................................................................................18 Card Expenditure by Sector .....................................................................................................................................18 Domestic Versus Foreign .........................................................................................................................................19 Value Lost To Fraud ................................................................................................................................................19 Summary 1 Research Sources ..............................................................................................................20
FINANCIAL CARDS AND PAYMENTS IN THE UNITED KINGDOM - COMPANY PROFILES ........21
Lloyds Tsb Group Plc - Consumer Finance - United Kingdom .........................................................................21 Strategic Direction ...................................................................................................................................................21 Key Facts .................................................................................................................................................................21 Summary 2 Lloyds TSB Group Plc: Key Facts ...................................................................................21 Summary 3 Lloyds TSB Group Plc: Operational Indicators ................................................................21 Company Background ..............................................................................................................................................21 Competitive Positioning ...........................................................................................................................................22 Summary 4 Lloyds TSB Group Plc: Competitive Position 2009 .........................................................22 National Grid Plc - Consumer Finance - United Kingdom .................................................................................23 Strategic Direction ...................................................................................................................................................23 Key Facts .................................................................................................................................................................23 Summary 5 National Grid Plc: Key Facts ............................................................................................23 Summary 6 National Grid Plc: Operational Indicators ........................................................................23 Company Background ..............................................................................................................................................23 Competitive Positioning ...........................................................................................................................................24 Summary 7 National Grid Plc: Competitive Position 2009 .................................................................24 Newcastle Building Society - Consumer Finance - United Kingdom .................................................................25 Strategic Direction ...................................................................................................................................................25 Key Facts .................................................................................................................................................................25 Summary 8 Newcastle Building Society: Key Facts............................................................................25 Summary 9 Newcastle Building Society: Operational Indicators ........................................................25 Company Background ..............................................................................................................................................25 Competitive Positioning ...........................................................................................................................................26 Summary 10 Newcastle Building Society: Competitive Position 2009 .................................................26 Santander UK Plc - Consumer Finance - United Kingdom ................................................................................27 Strategic Direction ...................................................................................................................................................27 Key Facts .................................................................................................................................................................27 Summary 11 Santander UK Plc: Key Facts ...........................................................................................27 Summary 12 Santander UK Plc: Operational Indicators ........................................................................27 Company Background ..............................................................................................................................................27 Competitive Positioning ...........................................................................................................................................28 Summary 13 Santander UK Plc: Competitive Position 2009 .................................................................28 Transport for London - Consumer Finance - United Kingdom .........................................................................28 Strategic Direction ...................................................................................................................................................28 Key Facts .................................................................................................................................................................29
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Summary 14 Transport for London: Key Facts .....................................................................................29 Company Background ..............................................................................................................................................29 Competitive Positioning ...........................................................................................................................................29 Summary 15 Transport for London: Competitive Position 2009 ...........................................................30
ATM CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ................................................31

Headlines ................................................................................................................................................................31 Trends .....................................................................................................................................................................31 Competitive Landscape .........................................................................................................................................32 Prospects .................................................................................................................................................................32 Category Data ........................................................................................................................................................33 Table 24 ATM Cards Category Performance: 2005-2010 ...............................................................33 Table 25 ATM Cards Category Performance: Number of Cards in Circulation 20052010 ..................................................................................................................................33 Table 26 ATM Cards Category Performance: % Growth 2005-2010..............................................33 Table 27 ATM Cards in Circulation Category Performance: % Growth 2005-2010 .......................33 Table 28 ATM Cards Forecast Category Performance: 2010-2015.................................................33 Table 29 ATM Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015.........................................................................................................................34 Table 30 ATM Cards Forecast Category Performance: % Growth 2010-2015 ...............................34 Table 31 ATM Cards in Circulation Forecast Category Performance: % Growth 20102015 ..................................................................................................................................34
CHARGE CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ........................................35

Headlines ................................................................................................................................................................35 Trends .....................................................................................................................................................................35 Competitive Landscape .........................................................................................................................................35 Category Data ........................................................................................................................................................36 Table 32 Charge Cards Category Performance: 2005-2010 ............................................................36 Table 33 Charge Cards Category Performance: Number of Cards in Circulation 20052010 ..................................................................................................................................37 Table 34 Charge Cards Category Performance: % Growth 2005-2010 ...........................................37 Table 35 Charge Cards in Circulation Category Performance: % Growth 2005-2010 ....................37 Table 36 Personal Charge Cards Category Performance: 2005-2010 ..............................................37 Table 37 Personal Charge Cards Category Performance: Number of Cards in Circulation 2005-2010 ......................................................................................................37 Table 38 Personal Charge Cards Category Performance: % Growth 2005-2010 ............................37 Table 39 Personal Charge Cards in Circulation Category Performance: % Growth 2005-2010.........................................................................................................................38 Table 40 Commercial Charge Cards Category Performance: 2005-2010 ........................................38 Table 41 Commercial Charge Cards Category Performance: Number of Cards in Circulation 2005-2010 ......................................................................................................38 Table 42 Commercial Charge Cards Category Performance: % Growth 2005-2010 ......................38 Table 43 Commercial Charge Cards in Circulation Category Performance: % Growth 2005-2010.........................................................................................................................38 Table 44 Charge Cards: Number of Cards by Issuer 2005-2009 .....................................................39 Table 45 Charge Cards: Number of Cards by Operator 2005-2009.................................................39 Table 46 Charge Cards Payment Transaction Value by Issuer 2005-2009 ......................................39
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Table 47 Table 48 Table 49 Table 50 Table 51 Table 52 Table 53 Table 54 Table 55 Table 56 Table 57 Table 58 Table 59 Table 60 Table 61 Table 62 Table 63 Table 64 Table 65 Table 66 Table 67
Charge Cards Payment Transaction Value by Operator 2005-2009 .................................39 Personal Charge Cards: Number of Cards by Issuer 2005-2009.......................................40 Personal Charge Cards: Number of Cards by Operator 2005-2009 ..................................40 Personal Charge Cards Transaction Value by Issuer 2005-2009 ......................................40 Personal Charge Cards Transaction Value by Operator 2005-2009 .................................40 Commercial Charge Cards: Number of Cards by Issuer 2005-2009 .................................40 Commercial Charge Cards: Number of Cards by Operator 2005-2009 ............................41 Commercial Charge Cards Payment Transaction Value by Issuer 2005-2009 .................41 Commercial Charge Cards Payment Transaction Value by Operator 20052009 ..................................................................................................................................41 Charge Cards Forecast Category Performance: 2010-2015 ..............................................42 Charge Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015 ......................................................................................................42 Charge Cards Forecast Category Performance: % Growth 2010-2015.............................42 Charge Cards in Circulation Forecast Category Performance: % Growth 2010-2015.........................................................................................................................42 Personal Charge Cards Forecast Category Performance: 2010-2015 ...............................42 Personal Charge Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015 ......................................................................................................42 Personal Charge Cards Forecast Category Performance: % Growth 20102015 ..................................................................................................................................43 Personal Charge Cards in Circulation Forecast Category Performance: % Growth 2010-2015............................................................................................................43 Commercial Charge Cards Forecast Category Performance: 2010-2015 .........................43 Commercial Charge Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015........................................................................................43 Commercial Charge Cards Forecast Category Performance: % Growth 20102015 ..................................................................................................................................43 Commercial Charge Cards in Circulation Forecast Category Performance: % Growth 2010-2015............................................................................................................44
CREDIT CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ..........................................45

Headlines ................................................................................................................................................................45 Trends .....................................................................................................................................................................45 Competitive Landscape .........................................................................................................................................46 Prospects .................................................................................................................................................................46 Category Data ........................................................................................................................................................47 Table 68 Credit Cards Category Performance: 2005-2010 ..............................................................47 Table 69 Credit Cards Category Performance: Number of Cards in Circulation 20052010 ..................................................................................................................................47 Table 70 Credit Cards Category Performance: % Growth 2005-2010.............................................47 Table 71 Credit Cards in Circulation Category Performance: % Growth 2005-2010 ......................47 Table 72 Personal Credit Cards Category Performance: 2005-2010 ...............................................48 Table 73 Personal Credit Cards Category Performance: Number of Cards in Circulation 2005-2010 ......................................................................................................48 Table 74 Personal Credit Cards Category Performance: % Growth 2005-2010 ..............................48 Table 75 Personal Credit Cards in Circulation Category Performance: % Growth 2005-2010.........................................................................................................................48 Table 76 Commercial Credit Cards Category Performance: 2005-2010 .........................................48 Table 77 Commercial Credit Cards Category Performance: Number of Cards in Circulation 2005-2010 ......................................................................................................48
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Table 78 Table 79 Table 80 Table 81 Table 82 Table 83 Table 84 Table 85 Table 86 Table 87 Table 88 Table 89 Table 90 Table 91 Table 92 Table 93 Table 94 Table 95 Table 96 Table 97 Table 98 Table 99 Table 100 Table 101 Table 102 Table 103
Commercial Credit Cards Category Performance: % Growth 2005-2010 ........................49 Commercial Credit Cards in Circulation Category Performance: % Growth 2005-2010.........................................................................................................................49 Credit Cards: Number of Cards by Issuer 2005-2009 .......................................................49 Credit Cards: Number of Cards by Operator 2005-2009 ..................................................49 Credit Cards Payment Transaction Value by Issuer 2005-2009 .......................................50 Credit Cards Payment Transaction Value by Operator 2005-2009 ...................................50 Personal Credit Cards: Number of Cards by Issuer 2005-2009 ........................................50 Personal Credit Cards: Number of Cards by Operator 2005-2009 ...................................51 Personal Credit Cards Payment Transaction Value by Issuer 2005-2009 .........................51 Personal Credit Cards Payment Transaction Value by Operator 2005-2009 ....................52 Commercial Credit Cards: Number of Cards by Issuer 2005-2009 ..................................52 Commercial Credit Cards: Number of Cards by Operator 2005-2009..............................52 Commercial Credit Cards Payment Transaction Value by Issuer 2005-2009 ...................53 Commercial Credit Cards Payment Transaction Value by Operator 20052009 ..................................................................................................................................53 Credit Cards Forecast Category Performance: 2010-2015 ...............................................53 Credit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015 ......................................................................................................53 Credit Cards Forecast Category Performance: % Growth 2010-2015 ..............................54 Credit Cards in Circulation Forecast Category Performance: % Growth 20102015 ..................................................................................................................................54 Personal Credit Cards Forecast Category Performance: 2010-2015 .................................54 Personal Credit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015 ......................................................................................................54 Personal Credit Cards Forecast Category Performance: % Growth 2010-2015................54 Personal Credit Cards in Circulation Forecast Category Performance: % Growth 2010-2015............................................................................................................55 Commercial Credit Cards Forecast Category Performance: 2010-2015 ...........................55 Commercial Credit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015 ..................................................................................................55 Commercial Credit Cards Forecast Category Performance: % Growth 20102015 ..................................................................................................................................55 Commercial Credit Cards in Circulation Forecast Category Performance: % Growth 2010-2015............................................................................................................55
DEBIT CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS .............................................56

Headlines ................................................................................................................................................................56 Trends .....................................................................................................................................................................56 Competitive Landscape .........................................................................................................................................57 Prospects .................................................................................................................................................................57 Category Data ........................................................................................................................................................58 Table 104 Debit Cards Category Performance: 2005-2010 ...............................................................58 Table 105 Debit Cards Category Performance: Number of Cards in Circulation 20052010 ..................................................................................................................................58 Table 106 Debit Cards Category Performance: % Growth 2005-2010..............................................58 Table 107 Debit Cards in Circulation Category Performance: % Growth 2005-2010 .......................59 Table 108 Debit Cards: Number of Cards by Issuer 2005-2009 ........................................................59 Table 109 Debit Cards: Number of Cards by Operator 2005-2009 ...................................................59 Table 110 Debit Cards Payment Transaction Value by Issuer 2005-2009 ........................................59 Table 111 Debit Cards Payment Transaction Value by Operator 2005-2009 ....................................60
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Table 112 Table 113 Table 114 Table 115
Debit Cards Forecast Category Performance: 2010-2015.................................................60 Debit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015.........................................................................................................................60 Debit Cards Forecast Category Performance: % Growth 2010-2015 ...............................60 Debit Cards in Circulation Forecast Category Performance: % Growth 20102015 ..................................................................................................................................60
PRE-PAID CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ......................................62

Headlines ................................................................................................................................................................62 Trends .....................................................................................................................................................................62 Competitive Landscape .........................................................................................................................................63 Prospects .................................................................................................................................................................64 Category Data ........................................................................................................................................................65 Table 116 Pre-paid Cards Category Performance: 2005-2010 ..........................................................65 Table 117 Open Loop Pre-paid Cards Category Performance: 2005-2010 .......................................65 Table 118 Closed Loop Pre-paid Cards Category Performance: 2005-2010 .....................................65 Table 119 Pre-paid Cards Category Performance: Number of Cards in Circulation 2005-2010.........................................................................................................................65 Table 120 Pre-paid Cards Category Performance: % Growth 2005-2010 .........................................65 Table 121 Open Loop Pre-paid Cards Category Performance: % Growth 2005-2010 ......................66 Table 122 Closed Loop Pre-paid Cards Category Performance: % Growth 2005-2010 ....................66 Table 124 Pre-paid Cards: Number of Cards by Issuer 2005-2009 ...................................................66 Table 125 Pre-paid Cards: Number of Cards by Operator 2005-2009...............................................66 Table 126 Pre-paid Cards Transaction Value by Issuer 2005-2009 ...................................................67 Table 127 Pre-paid Cards Transaction Value by Operator 2005-2009 ..............................................67 Table 128 Open Loop Pre-paid Cards: Number of Cards by Issuer 2005-2009 ................................67 Table 129 Open Loop Pre-paid Cards: Number of Cards by Operator 2005-2009 ............................67 Table 130 Open Loop Pre-paid Cards Transaction Value by Issuer 2005-2009 ................................68 Table 131 Open Loop Pre-paid Cards Transaction Value by Operator 2005-2009 ...........................68 Table 132 Closed Loop Pre-paid Cards: Number of Cards by Issuer 2005-2009 ..............................68 Table 133 Closed Loop Pre-paid Cards: Number of Cards by Operator 2005-2009 .........................68 Table 134 Closed Loop Pre-paid Cards Transaction Value by Issuer 2005-2009 .............................69 Table 135 Closed Loop Pre-paid Cards Transaction Value by Operator 2005-2009 .........................69 Table 136 Pre-paid Cards Forecast Category Performance: 2010-2015 ............................................69 Table 137 Open Loop Pre-paid Cards Forecast Category Performance: 2010-2015 .........................69 Table 138 Closed Loop Pre-paid Cards Forecast Category Performance: 2010-2015 .......................69 Table 139 Pre-paid Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015 ......................................................................................................70 Table 140 Pre-paid Cards Forecast Category Performance: % Growth 2010-2015...........................70 Table 141 Open Loop Pre-paid Cards Forecast Category Performance: % Growth 20102015 ..................................................................................................................................70 Table 142 Closed Loop Pre-paid Cards Forecast Category Performance: % Growth 2010-2015.........................................................................................................................70 Table 143 Pre-paid Cards in Circulation Forecast Category Performance: % Growth 2010-2015.........................................................................................................................70
STORE CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ...........................................72

Headlines ................................................................................................................................................................72 Trends .....................................................................................................................................................................72
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Competitive Landscape .........................................................................................................................................72 Prospects .................................................................................................................................................................73 Category Data ........................................................................................................................................................73 Table 144 Store Cards Category Performance: 2005-2010 ...............................................................73 Table 145 Store Cards Category Performance: Number of Cards in Circulation 20052010 ..................................................................................................................................74 Table 146 Store Cards Category Performance: % Growth 2005-2010 ..............................................74 Table 147 Store Cards in Circulation Category Performance: % Growth 2005-2010 .......................74 Table 148 Store Cards: Number of Cards by Issuer 2005-2009 ........................................................74 Table 149 Store Cards: Payment Transaction Value by Issuer 2005-2009 ........................................74 Table 150 Store Cards Forecast Category Performance: 2010-2015 .................................................75 Table 151 Store Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015.........................................................................................................................75 Table 152 Store Cards Forecast Category Performance: % Growth 2010-2015 ................................75 Table 153 Store Cards in Circulation Forecast Category Performance: % Growth 20102015 ..................................................................................................................................75
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FINANCIAL CARDS AND PAYMENTS IN THE UNITED KINGDOM - INDUSTRY OVERVIEW

EXECUTIVE SUMMARY
British Economy Recovers But Consumers Remain Cautious
Although the British economy showed a recovery over the first part of 2010, Britons continued with their austere spending habits which they developed during the economic recession. Many consumers continued to face redundancy and unemployment and lower levels of discretionary income whilst still having the burden of debts to repay. As British consumers were still looking for financial restructuring, they continue to think twice about the purchase of non-essential items. Amidst this scenario, growth in financial cards and payments was positive, albeit at a much slower pace than during the years preceding the onset of the recession.
Debit Transactions Overtakes Cash for the First Time

2010 was the first year during which debit payments overtook cash as a method of payment in the UK. As British consumers abandoned their credit cards during the recession, the use of debit experienced a rapid increase. At the same time, the use of debit cards for micropayments helped to increase the number of debit transactions as many consumers find debit transactions more convenient than paying with cash.
Barclays Group Plc Leads Financial Cards and Payments in 2009

Barclays Group Plc led financial cards and payments in the UK during 2009 thanks to its dominant position in credit cards and strength in debit cards. Leading British banks continued to benefit from their strong profiles and large customer bases. The other main players in financial cards in 2009 were also all leading banks, namely Royal Bank of Scotland Group, Lloyds TSB Group Plc and HSBC Bank Plc.
Mobile Commerce Will Continue Growing in the UK

As the penetration of smart phones in the UK keeps growing, mobile commerce is also expected to increase significantly over the forecast period. The high popularity enjoyed by web enabled mobile phones such as the Apples iPhone and the new generation of smartphones with android technology are helping to the intensify the expansion of these devices. With an increasing number of retailers offering websites specifically design to be browsed by mobile devices, British consumers will become more comfortable using these websites. At the same time, online purchases through web-enabled mobile phones are expected to develop from the focus on ringtones which marked the review period to more expensive items during the forecast period.
Economic Recovery Expected To Dominate the Forecast Period

Governmental efforts to help lending institutions out of trouble are expected to have a positive impact on consumer lending in the UK over the forecast period. Banks and other lending institutions have been asked by the government to start lending again to consumers, although a more cautious approach will be likely to avoid lending to high-risk individuals.
KEY TRENDS AND DEVELOPMENTS

the Recovery of the UK Economy Remains Uncertain
After 2009 saw the UK going through its worst recession since World War II, the UK went to the polls to elect a new parliament in May 2010. The result was a change in the political landscape with the Labour party leaving government after 12 years in power. The new coalition government formed by the Conservative and Liberal Democrats faced the task of bringing the UK back on track for economic recovery.
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The main target of the coalition government was to tackle the financial deficit by implementing spending cuts and tax rises. VAT was increased from 17.5% to 20.0% in January 2011. At the same time, unemployment continued to be an issue in 2010 as the unemployment rate remained at 7.9% of the active population at the end of the year, according to official statistics. Within this scenario, consumer confidence reached a historic low in December 2010 according to the Nationwide Consumer Confidence Index, standing at 53 points, well below its long-run average of 81. Current Impact UK consumers remained very cautious in 2010 with regards to the money they were spending. Overall Consumer Finance Transactions value increased by less than 2%, reaching 35.7 billion, the lowest figure in the last ten years, according to Euromonitor International research. As Britons attempted to maintain control over their finances, credit cards was the most affected financial cards category. After the fall in value experienced in 2009, credit cards reported only a 2% increased in transaction value in 2010. The main beneficiary of this new and more austere financial cards environment was debit cards. As British consumers preferred to maintain full control over the amount of money they were spending and avoid the higher fees and interest rates on offer from credit cards, debit cards transactions value increased by 10%. Store cards were the other main casualty in 2010, which was due mainly their high interest rates and limitations in terms of being useful in only one outlet. Store cards reported a 17% fall in transactions value. This negative performance was accentuated by the fact that and increasing number of British retailers are abandoning store cards in favour of co-branded credit cards. On the other hand, pre-paid cards recorded positive growth in 2010 as closed loop gift cards are becoming increasingly popular among British consumers. The popularity of the Oyster card as a payment method for the London transportation network also boosted the positive performance of closed loop cards in 2010 as transactions value increased by 15%. Outlook The British economy is expected to see a slow recovery with a double dip recession remaining a possibility in 2011. Euromonitor International expects GDP growth in the UK during 2010 to have been 1.7%. The new VAT rate, together with increasing inflation and unemployment, are likely to put extra pressure on British consumers and they will react by being more cautious about when, where and how they spend their money over the forecast period. Future Impact The trend towards a high degree of caution in consumer spending will remain a key feature of the British economy over the forecast period. Britons will continue paying extra attention to the way in which they spend their money, especially now that the VAT rate has been set at a higher rate of 20.0% since January 2011. Store cards will continue performing poorly over the forecast period as the trend for retailers to shift from store cards to co-branded credit cards will continue. Store cards is set to fall in constant value at a CAGR of -13% over the forecast period. On the other hand, debit cards will benefit from the ongoing uncertainty in the economic situation over the forecast period. The fact that funds are debited directly from the card user account instantaneously will play a key role in the positive growth of debit cards over the forecast period as this will allow consumers to feel more fully in control of their finances. Debit cards is set to increase in constant value at a CAGR of 7% over the forecast period.
the British Banking Landscape Changes As A Result of the Recession

The global financial crisis brought about significant changes in the competitive landscape in the UK banking system. If the landscape was dominated by traditional banks and financial brokers before the advent of the financial crisis, by 2010 the situation had changed significantly due to a flurry of mergers, acquisitions, government bail-outs, nationalisations and new entries.
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Current Impact The acquisition of Halifax Bank of Scotland Group (HBOS Group) by Lloyds Banking Group Plc helped Lloyds become the leading financial cards issuer in the UK by value. Lloyds Banking Group Plcs share of financial cards in circulation increased to more than 9% in 2009 while the banks share of transactions value increased to 23%. Banco Santander SA also saw its share of the number of financial cards in circulation and transactions value increase during the second half of the review period. In 2008, Santander integrated Alliance and Leicester into its British division and in 2009 it was the acquisition of GE Capital Bank Ltd and its store cards division which helped the Spain-based bank to increase its presence in the highly competitive financial services sector in the UK. At Global Brand Owner level, Santanders share of financial cards in circulation increased to 4% in 2009 while the banks value share of total transactions increased to 6%. On the other hand, Citigroup Inc put its asset Egg Banking plc up for sale in 2010. The sale was part of the USbased banks restructuring in the wake of the financial crisis and formed a key part of its plan to sell off its unwanted assets. Among the possible candidates for the acquisition of the worlds largest internet bank was Barclays Group Plc. Nevertheless, the sale of Egg Banking was not finalised as 2010 drew to a close as Barclays was reportedly willing to pay only half of what Citigroup paid when acquiring Egg Banking in 2007. At the same time, several new players decided to enter the financial services in the UK during 2010. Metro Bank became the first new high street bank in the UK in over 100 years. Although Metro Bank started its operations initially only with four branches, all of them within the London area, the bank has since positioned itself as an alternative to traditional retail banks by offering new services such as opening seven days a week with earlier and late openings what the bank refers to as its stores rather than branches. Outlook As the British economy remained weak at the end of 2010, consolidation among smaller players is likely to continue over the forecast period. In a move towards consolidation, a high number of small local building societies are expected to join forces in order to be able to compete in the new tougher financial environment that appeared in the UK after the economic crisis. The entrance of new players into financial cards and payments is also likely over the forecast period. However, it will be difficult for these new players to achieve the considerable size of any of the current major players, although one route remaining open for these wishing to achieve a certain degree of size would be through a takeover of one of the existing main players. Future Impact The government is planning to sell the nationalised Northern Rock at some point in 2011. Northern Rocks buyer will inherit the banks not inconsiderable share of financial cards and payments. The performances of non-traditional players such as retailers Tesco and John Lewis are likely to improve over the forecast period as British consumers have become increasingly reluctant to deal with high street banks. Virgin Money is also likely to see an improvement in its performance over the forecast period, especially after its acquisition of Church House Trust, a small regional bank. Virgin Money, like Tesco, will also benefit from being a highly recognisable brand among UK consumers and from its putatively alternative ways of conducting business, something which many British people are likely to find very appealing following the collapse of the traditional banking model in the UK.
Mobile Commerce Continues Growing in the UK

The concept of mobile commerceor m-commerceis still quite new in the UK. Nevertheless, it is becoming more popular as the number of 3G-enabled smart phones continues rising in the country. 56% of all mobile phones sold in the UK in 2009 were already 3G enabled. British consumers are moving towards smartphones in their droves and are becoming increasingly comfortable with all of the advanced features offered by smartphones. Britons are not only downloading ringtones and games, but are now moving towards other kinds
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of applications which are compatible with smartphones. However, the actual payment for products and services through mobile phone remains less common. Current Impact Mobile commerce is growing significantly in the UK, exceeding 1 billion in 2009. The proliferation of smartphones with 3G capability was rapid over the second half of the review period, especially following the launch of Apples iPhone. Britons are purchasing and downloading a plethora of applications and ringtones on their smartphones. There are an array of applications or apps on offer which confer benefits on consumers such as the possibility of booking airline tickets and checking in online, reserving hotel rooms and purchasing concert tickets directly using their mobile phones. Nevertheless, the use of mobile phones as payment devices presents a challenge as financial cards and cash and cheque payment have a much longer history and tradition in the UK and neither of these were subject to any major changes cash during the review period in the UK, although cheques have been declining at a rapid rate and will be entirely phased out over the forecast period. British consumers now feel comfortable purchasing items with their mobile phones, although encouraging British consumers to make payments through their mobile phones is proving more challenging. One of the main reasons for the reluctance of British consumers to make payments using their mobile phones is that the majority of mobile phones do not yet have the necessary technology to allow payments to be made, despite their internet connectivity. What has proved to be more successful is paying for goods and services by entering mobile phone numbers and then having the amount charged added to the customers monthly mobile phone bill. This is popular amongst the unbanked and underbanked population. In the UK, this mainly applies to teenagers and migrant workers. Many British retailers such as Marks & Spencer and Tesco are already offering versions of their websites especially designed to be accessed from mobile phones. These mobile sites offer better usability when accessing through a mobile device and allow for easier viewing and payment. Outlook The number of 3-G mobile phones in the UK is likely to increase substantially over the forecast period. Mobile phone manufacturers will gradually introduce devices with the necessary technology to allow payments to be made. British consumers are expected to become more comfortable using their mobile phones as a form of payment and Apples iPhone 5 is expected to incorporate the necessary technology to make this possible. Nevertheless, in absence of the proper awareness and education programmes coming from card issuers, mobile phone operators and handset manufacturers, British consumers are likely remain hesitant to use their mobile phones for online payment. On top of this, Britons are likely to become more concerned about security issues, which often happens when new technologies are introduced. Future Impact Mobile commerce is expected to grow very rapidly in the UK over the forecast period. The penetration of mobile phones, particularly 3G and now 4G phones, is increasing in the UK. Furthermore, the number of companies which support the purchase of goods through mobile phones is expanding. Though paying via mobile phone bill is popular in many Asian countries, mainstream usage is still quite slow in Europe and North America. As mobile payments and other alternative payment methods grow, it will be at the expense of traditional payment methods such as cash and credit and debit cards. This will remain a threat to traditional consumer payments in the future.
New Regulations for Issuers of Credit Cards and Store Cards

The British Government was very active during the first half of 2010, designing new measures to bring a new, more responsible culture of credit card lending and borrowing to the UK. In the lead up to the general election which was held in the UK during May 2010, the Department for Business, Innovation and Skills published the governments response to a consultation paper published on the regulation of credit and store cards in March 2010. At the end of March 2010, the Office of Fair Trading also published its Irresponsible Lending Guidance. On top of this, the Consumer Credit Directive, adopted by the European Council in 2008, will also come into
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force in early 2011. With these three measures, the Government intends to restore consumers and taxpayers trust in financial services. Current Impact From January 2011, British credit and store card holders will have five new rights. These have been summarised as the right to repay, control, reject, and compare credit agreements as well as the right to information. These measures are designed to protect consumers against practices they feel to be unfair and misleading. As the card companies agreed voluntarily to follow these new guidelines, British consumers will not have to wait for legislation to be passed to benefit from them. Cardholders will be allowed to pay off their debts faster if they want or need to. Cardholders will also have more control over their credit limits and will now be able to tell card issuing companies not to increase limits automatically. The guidelines also make it compulsory for card issuing companies to run credit checks on customers to whom they seek to offer higher credit limits. The timeframe within which consumers are able to reject changes in their cards interest rates has been increased from 30 to 60 days. Credit card companies will have also a duty to offer clear advice on the consequences of cardholders meeting only minimal repayment schedules. Last but not least, new repayment options will be introduced. Currently, card holders are offered only two possibilities when setting up automatic repayments: the minimum possible amount or the whole outstanding balance. From January 2011, consumers will be able to set up automatic payments to regularly pay a fixed amount, although this will still need to at least meet minimum repayment requirements. Outlook British public opinion is expected to be welcoming to these new rights as many see banks as being responsible for the financial crisis the UK has been going through since late 2008. British banks have been accused of using legal jargon to mislead consumers regarding the high interest rates which are levied on those cardholders who choose not to repay their credit card bills in full or those who make late repayments. As such, all of new measures are expected to be welcome by British financial cardholders. Although financial card companies have agreed voluntarily to follow the new guidelines, legislation is likely to be passed if the new Government feels the companies are not fully implementing the measures. Future Impact These new lending conditions will be more positive for consumers, although they will in reality be less favourable for the banks and lenders. British consumers are expected to make full use of their new rights and become more active in maximising the scope of the new regulations. This is likely to mean that many British cardholders will cancel their cards if the issuing banks decide to increase interest rates on store cards and credit cards. On the other hand, British banks are also likely to become more selective when approving potential borrowers. They are likely to cut credit lines to consumers and not only to those who represent a risk for the bank but also to those who do not use their cards sufficiently for the bank to make a profit. Banks are also expected to charge higher APRs in order to compensate for the subsequent loss of income. Tighter lending criteria applied to those applying for credit cards are likely to come into place as it happened in the US after the introduction of the Credit Card Accountability Responsibility and Disclosure Act (CARD) in May 2009. However, one negative aspect of the imposition of these new guidelines and regulations is that free banking, one of the most remarkable characteristics of the British banking systems, is likely to come to an end. Store card and credit card companies are expected to start charging annual fees per card in order to increase their revenues from British consumers.
Contactless Cards Slowly Become More Popular in the UK

Contactless cards are based on the concept of near field communication (NFC), a wireless technology which can be used within four metres of the relevant terminal. The first contactless cards were introduced into the UK in 2003 when Transport for Londons Oyster card was launched. The Oyster is used across the London transportation network, especially on buses and the London Underground. By 2009, almost seven million Oyster
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cards were in circulation in London, suggesting that a significant proportion of British consumers were familiar with this new technology. Contactless cards only need to be tapped in proximity to the card reader, allowing a quicker transaction for the consumer and the merchant. Traditional cards with a magnetic strip have to be swiped and contactless cards with chip and pin technology still need to be inserted into a reader. As both consumers and merchants are looking for quicker ways to process micropayments, contactless cards are becoming increasingly accepted an increasing number of merchants, especially in London. Current Impact British consumers, especially those travelling around London on public transport are becoming increasingly aware of the way in which NFC cards work thanks to the ubiquity of the Oyster card which is used to gain access to the capitals public transportation network. The number of contactless cards in circulation in the UK in 2010 was 18 million. This was the result of a 30% increase from 2009, which was made possible by mainstream banks issuing contactless cards to their customers en masse. In late 2007, Barclays was the first mainstream bank to launch a contactless debit card in the UK, the Barclaycard One Pulse. Lloyds Banking Group has also issued around 650,000 contactless debit cards under the Halifax and Bank of Scotland brands. Barclaycard set up a partnership with mobile phone provider Orange and MasterCard as operator and launched the Orange Credit Card. This new card also includes contactless payment technology that allows contactless payments for amounts up to 15. Contactless payment is accepted mainly by fast food outlets such as Yo Sushi, Prt A Manger and Eat, where customers tend to spend only minimal amounts of money per transaction. Outlook Other forms of contactless payments which are not directly related to financial cards are likely to be introduced in the UK over the forecast period. Some manufacturers of mobile phone handsets will include contactless payment in new devices which are set to be launched over the forecast period. The new iPhone 5, which is rumoured to be launched during summer 2011, is expected to have contactless payment technology in-built. Other mobile phones manufacturers will likely follow Apples lead and also include contactless payment technology in their new handsets over the forecast period. Contactless payment stickers could also become popular in the UK over the forecast period. These have embedded chips which allow them to be attached to a wide range of devices from mobile phones to identity cards. Future Impact Lloyds Banking Group is planning to launch contactless cards under its LTSB brand in 2011. The same path is expected to be followed by players such as Nationwide Building Society, Co-operative Bank and HSBC. These banks are likely to issue contactless cards for their customers over the forecast period. Discover Financial Services Inc, the global brand owner of Diners Club charge cards, is expected to introduce in the UK its new contactless sticker at one point during the forecast period. This sticker will feature its new Zip application and can be attached to mobile phones or other devices. The Zip application, enables consumers to make payments as they would with any tap and go card, where Zip payments will be accepted. Regarding retailers accepting contactless payments, the largest grocery retailer in the UK, Tesco, is launching a contactless payment pilot scheme at some of its outlets. If successful, it could be expanded cross country, substantially increasing the number of contactless transactions in the UK.
MARKET INDICATORS
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Table 1 '000 Units
Number of POS Terminals 2005-2010
2005 No of POS terminals

Source:
2006 1,023.2
2007 1,050.8
2008 1,095.0
2009 1,128.7
2010 1,154.6
974.0
Euromonitor International from official statistics, trade associations, trade press, company research, trade interviews, trade sources
Table 2 '000 Units
Number of ATMs 2005-2010
2005 No of ATMs
Source:
2006 60.5
2007 63.5
2008 63.9
2009 62.2
2010 63.1
58.3
Table 3 million
Value Lost to Fraud 2005-2010
2005 Counterfeit Cards Card Stolen or Lost Card not Present Card Lost or Stolen in the Post ID Fraud Others Value Lost to Fraud
Source:
2006 98.6 68.5 212.6 15.4 31.9 427.0
2007 144.3 56.2 290.5 10.2 34.1 535.3
2008 169.7 54.1 328.4 10.3 47.5 610.0
2009 183.6 51.7 369.0 9.5 53.3 667.1
2010 196.8 50.4 409.2 8.8 59.8 725.0
96.8 89.0 183.2 40.0 30.5 439.5
Table 4 % value analysis
Card Expenditure by Location 2010
Card holder present Charge Card Transactions Credit Card Transactions Debit Transactions Open Loop Pre-Paid Card Transactions
Source:
Card holder not present 19.6 21.6 9.1 24.1
Total
80.4 78.3 90.9 75.8
100.0 100.0 100.0 100.0
Card Expenditure by Category 2010
Clothing and footwear
Food, beverages, tobacco
Household goods and services 10.3
Leisure and recreation
Operation of personal transport
Transport
Charge Card Transactions
4.7
13.4
9.9
17.3
15.4
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Credit Card Transactions Debit Transactions Open Loop Pre-Paid Card Transactions
4.9 4.1 5.8
16.3 21.8 25.2
12.1 5.6 6.6
12.9 6.4 6.9
8.8 6.9 15.6
18.1 10.1 5.6
Other Charge Card Transactions Credit Card Transactions Debit Transactions Open Loop Pre-Paid Card Transactions
Source:
Total 100.0 100.0 100.0 100.0
29.0 27.0 45.2 34.3
Table 6
Financial Cards in Circulation by Type: % Number of Cards 2005-2010
% number of cards 2005 Contact Smart Cards Contactless Smart Cards Other Cards Total
Source:
2006 72.4 1.8 25.7 100.0
2007 78.3 2.4 19.3 100.0
2008 80.8 2.6 16.5 100.0
2009 81.2 6.2 12.6 100.0
2010 83.6 7.9 8.5 100.0
57.3 1.1 41.6 100.0
Domestic versus Foreign Spend 2010
Domestic - Charge Card Transactions - Credit Card Transactions - Debit Transactions -- Open Loop Pre-Paid Card Transactions
Source:
Foreign 5.1 9.6 1.8 4.6
Total 100.0 100.0 100.0 100.0
94.9 90.3 98.2 95.4
MARKET DATA
Table 8 bn 2005 Card Payment Transactions (Excl Commercial) Electronic Direct/ACH Transactions Paper Payment Transactions - Cash Transactions - Other Paper Payment Types Consumer Payment Transactions 292.4 2006 318.0 2007 351.6 2008 377.9 2009 387.4 2010 417.2 Consumer Payments: Value 2005-2010
74.6 325.3 261.0 64.3 692.3
80.5 322.5 264.0 58.5 721.0
86.6 317.5 265.0 52.5 755.8
94.3 307.5 267.1 40.4 779.7
95.3 301.6 266.2 35.4 784.3
93.7 282.1 252.3 29.9 793.0
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Source:
Table 9
Consumer Payments: Number of Transactions 2005-2010
Million transactions 2005 Card Payment Transactions (Excl Commercial) Electronic Direct/ACH Transactions Paper Payment Transactions - Cash Transactions - Other Paper Payment Types Consumer Payment Transactions
Source:
2006 6,354.2
2007 6,836.3
2008 7,454.6
2009 8,072.5
2010 8,668.3
5,997.9
3,034.0 25,199.0 23,968.0 1,231.0 34,230.9
3,177.0 24,179.0 23,069.0 1,110.0 33,710.2
3,319.0 23,394.0 22,408.0 986.0 33,549.3
3,443.0 23,331.5 22,569.0 762.5 34,229.0
3,497.7 21,898.4 21,243.4 655.0 33,468.7
3,513.8 20,376.7 19,849.9 526.9 32,558.9
Table 10 '000 cards
Financial Cards: Number of Cards in Circulation 2005-2010
2005 ATM Function Charge Card Function Credit Function Debit Function Pre-Paid Function Store Cards Financial Cards in Circulation
Source:
2006 164,718.7 4,957.2 69,437.8 68,348.0 16,454.0 15,934.0 199,504.4
2007 165,151.0 5,544.2 67,231.1 71,624.0 26,990.0 15,637.0 207,817.6
2008 168,365.2 6,220.6 66,014.0 76,271.0 38,908.3 14,800.5 221,084.6
2009 162,539.7 5,760.3 58,303.7 80,313.9 50,942.0 12,947.5 228,490.9
2010 159,987.9 5,428.8 55,894.3 83,871.8 62,210.8 10,799.5 235,094.3
164,987.7 4,845.6 69,927.4 66,991.0 8,600.0 17,875.0 191,579.1
Table 11 bn
Financial Cards Transactions: Value 2005-2010
2005 ATM Transactions Card Payment Transactions - Charge Card Transactions - Credit Card Transactions - Debit Transactions - Pre-Paid Transactions - Store Card Transactions Total Cards Transactions
Source:
2006 179.9 344.8 30.2 105.0 202.3 3.9 3.4 524.7
2007 186.9 380.9 33.3 109.7 228.8 6.0 3.0 567.8
2008 192.2 407.4 33.4 113.6 249.8 7.8 2.9 599.7
2009 192.8 413.1 28.7 107.8 264.2 10.0 2.5 605.9
2010 202.4 442.5 28.1 110.1 290.6 11.6 2.1 644.9
172.2 316.1 26.4 106.9 176.5 2.5 3.8 488.2
Table 12
Financial Cards: Number of Transactions 2005-2010
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Million transactions 2005 ATM Transactions - Charge Card Transactions - Credit Card Transactions - Debit Transactions - Pre-Paid Transactions - Store Card Transactions Total Cards Transactions
Source:
2006 2,758.7 268.8 1,669.2 4,518.9 66.2 67.9 9,349.7
2007 2,824.7 279.5 1,681.2 4,938.5 119.8 61.1 9,904.8
2008 2,876.0 294.3 1,810.5 5,384.6 170.1 55.6 10,591.0
2009 2,921.8 298.0 1,866.4 5,893.1 233.9 46.1 11,259.3
2010 2,910.1 301.4 1,937.3 6,354.2 308.2 36.2 11,847.4
2,687.5 247.3 1,675.2 4,178.9 32.8 83.4 8,905.1
Table 13 '000 accounts
Financial Cards: Number of Accounts 2005-2010
2005 Charge Card Function Credit Function Debit Function Store Cards Financial Cards in Circulation
Source:
2006 3,550.0 31,400.0 41,000.0 13,400.0 89,350.0
2007 4,180.0 30,800.0 41,700.0 13,200.0 89,880.0
2008 4,243.0 30,202.5 42,100.0 12,650.0 89,195.5
2009 4,120.3 30,350.5 43,102.0 11,391.3 88,964.0
2010 3,960.8 30,742.0 44,961.8 9,377.3 89,041.9
3,390.0 31,600.0 40,800.0 16,400.0 92,190.0
Table 14 '000 cards Company
Financial Cards: Number of Cards by Issuer 2005-2009
2005 24,871.1 26,149.8 18,363.2 13,367.1 13,727.4 6,469.4 3,641.0 6,830.9 4,089.1 4,355.8 3,210.4 4,104.4 2,059.3 2,518.9 2,110.4 1,955.5 1,557.7 1,714.2 982.0 -
2006 24,331.4 24,957.1 18,363.4 13,801.3 14,299.1 6,600.9 4,954.0 6,017.2 4,831.3 5,144.4 3,418.3 3,882.4 2,138.4 2,285.4 2,269.0 2,081.4 2,050.4 1,872.3 968.2 1,068.0
2007 23,810.4 23,456.4 19,567.3 14,961.1 14,344.9 6,664.6 5,841.0 6,624.9 5,039.5 5,062.9 3,669.4 3,554.8 2,565.2 2,388.7 2,350.9 2,815.0 1,959.8 2,090.0 2,076.2 861.9 1,125.0
2008 23,843.1 23,891.8 20,176.7 16,370.9 14,690.4 7,001.3 6,515.0 6,552.5 5,255.8 4,907.0 3,904.5 3,513.0 2,858.4 2,456.3 2,472.8 2,593.0 2,124.7 2,181.4 2,018.6 881.7 1,031.6
2009 23,959.8 22,866.9 19,844.5 15,731.3 15,031.5 7,349.3 6,683.0 6,163.0 5,362.3 5,211.4 4,570.1 4,102.0 3,364.7 2,921.0 2,540.5 2,497.0 2,324.1 2,264.5 2,256.8 1,841.6 867.3 861.0
Barclays Group Plc Royal Bank of Scotland Group Lloyds TSB Group Plc Bank of Scotland plc HSBC Bank Plc Abbey National Plc Transport for London MBNA America Bank NA (MBNA) Nationwide Building Society Santander UK plc Marks & Spencer Financial Services Plc Clydesdale Bank Plc Capital One Bank (Europe) Plc American Express Co Co-operative Bank, The Tesco Personal Finance Plc LaSer UK First Direct Alliance & Leicester Plc Citigroup Inc J Sainsbury Plc Home Retail Group
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Ikano Financial Services Ltd John Lewis Partnership Plc National Grid plc Diners Club UK Ltd GE Capital Bank Ltd Creation Financial Services Ltd GUS plc Transco Metering Services Ltd Others Total
Source:
755.6 1,030.4 600.0 307.7 7,548.3 3,068.7 1,044.0 35,147.0 191,579.1
673.5 918.4 630.0 331.9 6,591.3 2,735.5 42,289.8 199,504.4
696.0 883.5 620.0 401.2 6,455.8 47,931.0 207,817.6
674.9 845.1 605.0 541.0 6,016.4 57,161.7 221,084.6
783.3 757.4 595.0 564.8 67,176.7 228,490.9
Financial Cards: Number of Cards by Operator 2005-2009
2005 85,345.3 54,380.7 3,641.0 2,230.3 600.0 307.7 45,074.1 191,579.1
2006 82,378.9 58,925.1 4,954.0 2,307.0 630.0 331.9 49,977.5 199,504.4
2007 78,311.3 65,288.3 5,841.0 2,898.5 645.0 401.2 54,432.3 207,817.6
2008 78,285.3 69,653.9 6,515.0 3,499.0 605.0 421.2 62,105.2 221,084.6
2009 77,361.2 67,686.5 6,683.0 3,713.4 595.0 395.4 72,056.3 228,490.9
Visa Europe MasterCard International Inc Transport for London American Express Co National Grid plc Diners Club UK Ltd Transco Metering Services Ltd Others Total
Source:
Table 16 million Company
Financial Cards: Card Payment Transaction Value by Operator 2005-2009
2005 177,523.0 122,039.9 9,368.6 1,250.0 1,170.2 624.0 4,093.0 316,068.7
2006 190,211.1 134,955.8 11,576.8 1,650.0 1,456.2 671.0 4,236.3 344,757.2
2007 207,067.3 150,909.0 13,975.9 1,866.0 1,643.7 675.8 4,742.0 380,879.8
2008 224,517.3 157,582.6 15,376.8 2,086.0 1,708.6 671.5 5,479.0 407,421.8
2009 231,609.2 158,520.5 11,997.8 2,485.8 1,507.9 634.1 6,335.6 413,091.0
Visa Europe MasterCard International Inc American Express Co Transport for London Diners Club UK Ltd National Grid plc Transco Metering Services Ltd Others Total
Source:
Financial Cards: Card Payment Transaction Value by Issuer 2005-2009
2005 53,961.2
2006 59,169.0
2007 59,580.0
2008 60,696.0
2009 60,439.8
Royal Bank of Scotland
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Group Lloyds TSB Group Plc Barclays Group Plc HSBC Bank Plc Bank of Scotland plc Abbey National Plc Nationwide Building Society American Express Co Clydesdale Bank Plc MBNA America Bank NA (MBNA) Tesco Personal Finance Plc First Direct Co-operative Bank, The Alliance & Leicester Plc Capital One Bank (Europe) Plc Citigroup Inc Marks & Spencer Financial Services Plc Transport for London Newcastle Building Society Diners Club UK Ltd J Sainsbury Plc Santander UK plc National Grid plc LaSer UK John Lewis Partnership Plc GE Capital Bank Ltd Creation Financial Services Ltd Transco Metering Services Ltd Others Total
Source:
44,707.4 38,694.4 27,686.0 32,324.4 12,394.4 9,575.2 9,368.6 6,738.4 10,450.1 4,551.5 4,972.5 3,531.7 4,112.0 6,264.5 4,587.0 3,719.9 1,250.0 253.0 1,275.2 1,711.7 624.0 293.7 1,475.9 571.2 30,974.9 316,068.7
48,995.4 41,881.0 33,188.7 33,592.5 14,543.0 11,286.1 11,576.8 7,725.7 9,115.4 5,252.4 5,206.6 4,101.2 4,633.3 5,858.5 4,910.0 4,775.6 1,650.0 555.2 1,544.5 1,668.2 671.0 262.5 1,292.5 510.6 30,791.2 344,757.2
53,744.9 44,863.8 36,169.2 37,099.2 16,364.7 13,091.0 13,975.9 8,447.6 10,825.3 6,725.7 5,738.2 4,349.3 5,056.2 5,797.6 5,529.9 5,643.4 1,866.0 1,267.0 1,800.0 1,621.6 675.8 486.7 234.2 1,165.1 38,761.3 380,879.8
56,781.6 49,900.9 38,108.2 39,356.7 18,182.2 14,201.7 15,376.8 9,396.0 10,467.6 7,945.3 6,717.9 5,206.7 5,445.0 6,034.5 5,544.5 5,078.4 2,086.0 1,727.3 1,812.0 1,746.0 671.5 455.2 211.9 1,090.8 43,180.9 407,421.8
56,411.2 52,685.1 40,395.1 37,673.7 18,426.5 14,270.5 11,997.8 10,023.3 9,152.0 7,379.5 7,215.0 6,145.7 6,103.1 5,656.0 5,063.0 4,388.2 2,485.8 1,948.6 1,888.2 1,640.7 937.0 634.1 403.2 191.6 49,536.3 413,091.0
Table 18 bn
Consumer Payments Forecast: Value 2010-2015
2010 Card Payment Transactions (Excl Commercial) Electronic Direct/ACH Transactions Paper Payment Transactions - Cash Transactions - Other Paper Payment Types Consumer Payment Transactions
Source:
2011 442.1
2012 476.0
2013 507.7
2014 536.3
2015 553.7
417.2
93.7 282.1 252.3 29.9 793.0
93.1 260.0 235.9 24.2 795.3
97.8 238.1 221.0 17.2 811.9
106.1 221.6 210.2 11.4 835.4
117.1 210.9 204.3 6.6 864.2
133.1 202.9 200.0 3.0 889.8
Table 19
Consumer Payments Forecast: Number of Transactions 2010-2015
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Million transactions 2010 Card Payment Transactions (Excl Commercial) Electronic Direct/ACH Transactions Paper Payment Transactions - Cash Transactions - Other Paper Payment Types Consumer Payment Transactions
Source:
2011 9,194.6
2012 9,845.7
2013 10,348.3
2014 10,750.6
2015 11,022.0
8,668.3
3,513.8 20,376.7 19,849.9 526.9 32,558.9
3,579.5 19,068.8 18,662.8 406.0 31,842.9
3,696.2 18,059.1 17,774.5 284.6 31,601.0
3,898.4 17,320.4 17,138.2 182.3 31,567.2
4,131.2 16,893.8 16,790.2 103.6 31,775.6
4,421.6 16,574.4 16,528.3 46.1 32,017.9
Table 20 '000 cards
Financial Cards Forecast: Number of Cards in Circulation 2010-2015
2010 ATM Function Charge Card Function Credit Function Debit Function Pre-Paid Function Store Cards Financial Cards in Circulation
Source:
2011 160,675.8 5,345.0 54,182.6 88,593.8 74,446.0 9,262.7 246,872.5
2012 162,909.2 5,374.3 53,126.8 94,458.7 84,666.3 8,272.5 261,117.0
2013 166,884.2 5,450.4 53,419.3 98,444.8 93,005.4 7,652.1 274,486.2
2014 173,592.9 5,534.9 54,311.9 101,585.2 99,603.1 7,237.4 286,646.0
2015 182,671.9 5,623.5 55,714.0 103,647.4 103,429.8 7,084.7 296,649.9
159,987.9 5,428.8 55,894.3 83,871.8 62,210.8 10,799.5 235,094.3
Table 21 bn
Financial Cards Forecast: Value 2010-2015
2010 ATM Transactions Card Payment Transactions - Charge Card Transactions - Credit Card Transactions - Debit Transactions - Pre-Paid Transactions - Store Card Transactions Total Cards Transactions
Source:
2011 208.6 468.5 29.1 112.2 312.6 12.8 1.7 677.1
2012 210.7 504.1 30.9 115.9 342.3 13.5 1.5 714.8
2013 210.6 538.9 34.1 117.8 371.5 14.2 1.3 749.5
2014 209.1 570.3 36.8 121.4 395.9 15.1 1.2 779.3
2015 208.3 589.9 38.9 122.4 411.8 15.7 1.0 798.2
202.4 442.5 28.1 110.1 290.6 11.6 2.1 644.9
Table 22
Financial Cards Forecast: Number of Transactions 2010-2015
Million transactions 2010 ATM Transactions - Charge Card 2,910.1 301.4 2011 2,870.8 307.6 2012 2,795.3 317.0 2013 2,696.9 332.0 2014 2,584.8 344.5 2015 2,504.4 354.9
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Transactions - Credit Card Transactions - Debit Transactions - Pre-Paid Transactions - Store Card Transactions Total Cards Transactions
Source:
1,937.3 6,354.2 308.2 36.2 11,847.4
2,024.7 6,711.9 396.0 29.2 12,340.1
2,132.6 7,156.2 499.6 24.5 12,925.2
2,228.3 7,458.2 607.4 20.9 13,343.7
2,301.5 7,696.1 700.9 18.1 13,645.8
2,339.0 7,852.4 780.5 15.8 13,846.8
Table 23 '000 accounts
Financial Cards Forecast: Number of Accounts 2010-2015
2010 Charge Card Function Credit Function Debit Function Store Cards Financial Cards in Circulation
Source:
2011 3,958.4 31,366.1 47,452.7 8,228.6 91,005.7
2012 4,064.5 31,788.1 49,616.5 7,442.0 92,911.0
2013 4,251.4 32,597.6 51,129.8 6,955.3 94,934.1
2014 4,490.9 33,344.1 52,162.6 6,615.1 96,612.7
2015 4,808.0 33,714.2 52,585.1 6,483.5 97,590.9
3,960.8 30,742.0 44,961.8 9,377.3 89,041.9
DEFINITIONS
This report analyses the market for Financial Cards and Payments in the UK. For the purposes of the study, the market has been defined as follows: ATM Cards Debit Cards Credit Cards Charge Cards Pre-paid Cards Store Cards
Atm Function
An ATM card (also called a cash card, cash dispenser card or cash machine card) enables access to an ATM machine in order to receive cash or monitor account activity. Functionality is limited to withdrawals and services available via an ATM machine.
Debit Function
Debit cards merge the functionality of both an ATM card and direct payment from a bank account (a check substitute in some markets). A debit card allows the cardholder to receive cash and monitor account activity at an ATM machine, as well as pay for goods and services. A debit card transaction involves the automatic withdrawal of funds from the cardholders demand deposit bank account (checking or giro). Since the funds are removed from a bank account, no interest is charged on payments.
Credit Function
Credit cards allow for purchases against a preapproved line of credit. The account holder has the choice of whether to pay off the entire balance or opt for monthly installments with the balance serving as revolving credit. Credit cards can include affinity cards, reward cards and types of co-branded cards. Co-branded retailer
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cardsissued by retailers acting as financial institutions and without usage restrictionsare included in this category. Cards issued by a retailer with usage limited to a specific store within a predefined retail group fall under the store cards definition. Debit cards with an overdraft function are not counted as cards with a credit function.
Commercial Credit Cards

A commercial card is issued to a business for use in paying expenses such as travel and entertainment and supplies. Commercial credit cards provide companies with a revolving line of credit. Commercial cards allow employers to closely monitor how employees allocate company funds. The card statements also provide companies with a record-keeping benefit. Types of commercial credit cards may include small business, corporate, fleet and purchasing.
Charge Card Function

A charge card shares the pay later component with credit cards. However, charge card balances normally have to be paid off in full monthly and do not attract interest charges. Charge cards do not offer a revolving credit facility.
Commercial Charge Cards

A commercial card is issued to a business for use in paying expenses such as travel and entertainment and supplies. Commercial cards allow employers to closely monitor how employees allocate company funds. The card statements also provide companies with a record-keeping benefit. Types of commercial charge cards may include small business, corporate, fleet and purchasing.
Open Loop Pre-paid Function

The open loop pre-paid card/function category contains General-Purpose Reloadable (including electronic purses), Payroll, Travel, Remittance, Network Branded Gift, Insurance, Government Benefits, Healthcare, and Employee Benefits cards. Open loop pre-paid cards are network-branded cards or national e-purse chips and do not possess any acceptance point restrictions other than those of the network or e-purse brand.
Closed Loop Pre-paid Function

The closed loop pre-paid card/ function category includes Merchant Issued Gift, Transportation, Parking and Toll. Usage of these types of cards is restricted to a closed network of pre-defined acceptance points and locations. Note: This category does not include phone cards.
Store Cards
A store card (also known as a retailer or private label card) contains a pay later component similar to credit cards. However, store cards must contain usage limited to purchases at specific stores within a predefined retail group. Credit cards issued by retailers acting as financial institutions and without usage restrictions fall into the credit card category.
Pre-paid
General-Purpose Reloadable Sometimes known as e-purses or e-wallets, general purpose reloadable prepaid cards serve as a general cash substitute for consumers and are not intended for a specific purpose such as a gift. They can be loaded and reloaded with funds and used to make purchases at a POS terminal; some, but not all general purpose reloadable cards can be used to withdraw funds at an ATM. They can be either network-branded cards or a chip that is attached to another type of card (typically debit). Several markets have national chip-based e-purse or e-wallet schemes, including Germanys Geldkarte and Frances Moneo.
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Payroll cards Payroll cards serve as a substitute to a check or direct deposit and provide employees with access to their salary or wages via ATM withdrawals and purchases. Payroll cards are most often used for the unbanked, itinerant and short-term hire/contract staff and expense payments, one-off and final salary payments, staff relocation cards and staff allowance cards. Travel cards Travel cards serve as an alternative to travelling with cash or travellers cheques. These cards are not linked to a bank account, but the loaded value can be accessed via ATMs. These cards offer a similar level of security to travellers cheques in that they can be easily replaced if lost or stolen. They should not be confused with charge cards which may be referred to as travel and entertainment cards. Remittance payment cards Money transfer cards used for sending funds primarily cross-border. Highest usage of these cards occurs in populations such as migrant workers looking to send money back to their families. Network Branded Gift cards Similar to merchant issued gift cards, network branded open loop gift cards (Visa, MasterCard or American Express) allow the cardholder to purchase goods and services up to the value of the card. Unlike retail merchantissued gift cards, these cards offer an open loop provision which provides access to an operator's merchant network. They are marketed to be intended as gifts and their design characteristics often focus on occasions, such as birthdays or weddings. Government benefit cards Government benefit cards include any public welfare benefits such as Social Security or child benefit payments. Insurance claim cards Insurers issue these cards to claimants as a means to help replace lost, damaged and stolen goods. Exclusions may apply including the type of stores available for use and the type of merchandise available for purchase. Healthcare cards This card provides cardholders access to their health insurance accounts without the need to fill out claim forms for reimbursement of expenses. The card is limited to payment to medical providers, prescriptions and approved over-the-counter items. Despite these restrictions on purchasing, these cards are cataloged as open loop due to the presence of the network branding and ability to purchase from a somewhat limited variety of merchants. Employee benefits cards Employee benefits cards function as part of an employees compensation and cover areas such as food and fuel. These are not to be confused with corporate gift cards which serve as part of an employee incentive or reward programs. Cards intended to acknowledge employee achievement or act as an incentive are counted as gift cards. Merchant Issued Gift cards A closed loop prepaid card issued by a retail outlet that allows the cardholder to purchase goods and services up to the value of the card. These gift cards are only redeemable at a specific retail outlet or limited to a specific retail group. Transportation cards Transportation cards are foremost e-tickets that allow access to public transportation. These cards serve as
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substitutes for bus tokens and train tickets. Funding occurs through a link to a credit or debit account or through vending machines/kiosks typically located on-site at the bus or train stations. Innovative players have expanded the functionality to include use as a substitute for small ticket items usually reserved for cash transactions. As such, multipurpose cards such as Oyster and Octopus, which serve primarily as a means to gain access to public transportation, are considered transportation cards. Parking and toll collection cards Parking and toll collection cards afford drivers convenience and speed in not having to locate coins and small paper denominations. Parking cards typically fund electronic meters, while radio frequency identification (RFID) enabled cards allow drivers to pass quickly through tolls. These cards are funded either by a preset credit or debit account or using machines located at terminals or other varied locations (e.g., supermarket). If toll payment happens via a contactless plastic device attached to the cars windshield instead of via a plastic card, as long as the transaction runs over a card payment network, it can still be considered a prepaid card and its transactions can be considered prepaid card transactions.
Contact Smart Card

A smart card contains an integrated circuiteither a memory or microprocessorused for identification, data storage and processing. While a card reader is required to transfer data to and from a central computer, smart cards offer enhanced security by carrying the information on the card itself instead of accessing a remote database. Magnetic stripe cards are vulnerable to tampering and identity theft through equipment readily accessible to fraudsters. Smart cards are also referred to as chip cards. Contact smart cards typically possess a gold plated contact plate on the surface which must come into contact with a smart card reader in order to facilitate communication of data and commands.
Contactless Smart Card

Both the contactless card and the reader employ antennae to transmit data back and forth via radio frequencies. This allows the contactless card to function within a range of the reader (typically inches) instead of requiring contact between the two devices. Alternate payment instrument forms such as key fobs, mini cards attached to key chains and toll payment devices are included in this category.
Card Expenditure by Location

Card holder Present Transactions accompanied by the cardholder or card at the point-of-sale. Card holder not present Transactions which occur without the card or cardholder present at the point-of-sale. Examples include orders over the Internet, by mail, telephone or fax.
Card Expenditure by Sector

Food, Beverages, Tobacco Expenditure on food, non-alcoholic and alcoholic beverages and tobacco brought into the home. Operation of personal transport Consumer expenditure on operation of personal transport equipment consists of consumer expenditure on spare parts and accessories for personal transport equipment, fuels and lubricants for personal transport equipment, maintenance and repair of personal transport equipment and other services in respect of personal transport equipment. Household goods and services
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Expenditure on furniture and furnishings, carpets and other floor coverings, household textiles, household appliances, glassware, tableware and household utensils, hardware and DIY goods, household and domestic services. Transport Expenditure on: purchase of cars, motorcycles and other vehicles, operation of personal transport equipment and transport services. Purchases of transport services are generally classified by mode of transport: rail travel, buses, coaches and taxis, air travel and other travel. Costs of meals, snacks, drinks, refreshments or accommodation services have to be included if covered by the fare and not separately priced. If separately priced, these costs have to be classified in consumer expenditure on catering. School transport services are included, but ambulance services are excluded (consumer expenditure on outpatient services). Clothing and footwear Expenditure on clothing and footwear. Leisure and recreation Expenditure on audio-visual, photographic and information processing equipment, other major durables for recreation and culture, other recreational items and equipment, gardens and pets, recreational and cultural services, newspapers, magazines, books and stationery and package holidays.
Domestic Versus Foreign

Domestic spend Any purchase made in the country where the card has been issued Foreign spend Any purchase made outside the country of issuance
Value Lost To Fraud

Counterfeit cards Counterfeit cards include the following: a dummy or fake card that has been printed, embossed or encoded so as to appear to be a legitimate card; a card that has been validly issued but subsequently altered or re-encoded; a card which has been subsequently embossed or encoded without the authority of the issuer. Counterfeit cards are also referred to as cloned or skimmed cards. Card stolen or lost in the post Any card that is stolen in the post and used without the authority of the issuer. Card not present Unauthorized transactions that occur without the merchant having access to the physical card (e.g. mail order and telephone order). Examples include phishing and any other method whereby the fraudster uses the card information without ever taking possession of the card. Card lost or stolen Any card that is stolen or lost and used without the authority of the issuer. ID fraud
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The unauthorized use of an individuals information in order to obtain financial cards in their name and saddle them with the debt obligation. ID fraud must involve the opening of a new card account with a stolen ID, not the unauthorized use of an existing account or card. Any fraud that occurs with an existing account or card does not belong in this category. Explanations of words and/or terminology used in this report are as follows: Enter local word/terminology and explanation
Sources used during research include the following:

Summary 1 Official Sources Research Sources Bank of England Competition Commission European Payments Committee European Payments Council Monopolies & Mergers Commision National Statistics Offices Office of Fair Trading Transport For London Trade Associations APACS British Bankers' Association British Retail Federation Council of Mortgage Lenders SplashPlastic Trade Press Card World Convenience Store News European Card Review Financial Times Guardian Unlimited Marketing
Source: Euromonitor International
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FINANCIAL CARDS AND PAYMENTS IN THE UNITED KINGDOM - COMPANY PROFILES

LLOYDS TSB GROUP PLC - CONSUMER FINANCE - UNITED KINGDOM
Strategic Direction
Lloyds TSB Group Plc was one of the British banks worst affected by the credit crisis which first hit the UK in 2008. The effects of the crisis forced a change in the banks strategy and its lending is now decidedly more conservative than before. The companys focus remains on consolidating its positions in the financial markets in which it is involved, a position which has been strengthened in the long term by its recent acquisition of HBOS. Lloyds TSBs recent strategy has focused on the reorganisation of its branch network as well as bringing down costs by eradicating any duplication of roles. This followed the enlargement of the banks parent group in a bid to offset the high number of bad debts and mortgage writedowns the bank faced during 2008 and 2009. However, the ownership structure of Lloyds Banking Group, a significant proportion is now owned by the UK Government following its bailout of the bank, may affect the operational flexibility of Lloyds TSB during the forecast period, a situation made even more likely by the undertakings which were associated with the state aid obtained as part of the bailout.
Key Facts
Summary 2 Lloyds TSB Group Plc: Key Facts Lloyds TSB Group PLC 25 Gresham Street, London, EC2V 7HN +44 20 7626 1500 www.lloydstsb.com Internet and telephone banking, personal finance including current accounts, savings accounts, credit cards, personal loans and mortgages; insurance and investment banking, wholesale banking and corporate finance
Euromonitor International from company reports, trade press
Full name of company: Address: Tel: www: Activities:
Source:
Summary 3
Lloyds TSB Group Plc: Operational Indicators 2007 2008 8.2 billion Operating profit 2009 45.3 billion 4.1 billion 70,000
Net sales
18.3 billion
0.8 billion
Source:
1.0 billion
Trade press, company research
Number of employees
Company Background
Lloyds TSB Group Plc is a wholly owned retail banking subsidiary of Lloyds Banking Group PLC, which is listed on the London Stock Exchange. Following its recent government bailout, Lloyds Banking Group PLC is now 41.3% owned by the UK government.
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Lloyds TSB Bank is a multifaceted retail bank which offers a wide range of financial products including mortgages, loans, current accounts, savings and credit cards. Lloyds TSB is at present a nationwide business with branches across the UK. However, following its recent acquisition of HBOS, Lloyds Banking Group was directed by competition authorities and the UK Government to divest itself of its Scottish branch network, a move which was undertaken as 318 branches were sold to Santander UK Plc. Following Lloyds TSBs acquisition of HBOS in January 2009, Lloyds TSB become part of the largest banking and financial institution in the UK. HBOS comprised two prominent retail banking brands, Bank of Scotland and Halifax. The newly created Lloyds Banking Group Plc, comprising Lloyds TSB, Halifax, Bank of Scotland and Scottish Widows, is the number one current account provider in the UK with 22 million customers, as well as the number one mortgage provider. However, EU and UK competition authorities are attempting to curb the market dominance of Lloyds Banking Group and have ordered the company to divest some of its Scottish assets, its Cheltenham & Gloucester mortgage arm and its Intelligent Finance Internet bank. In a bid to streamline its operations, Lloyds TSB Group has undertaken a role reduction programme which led to 15,000 redundancies between 2008 and 2010. Lloyds TSB is currently in talks with the British government to negotiate the government divesting itself of its stake in the bank. Asian sovereign wealth funds are being mooted as a potential source of investment capital to fund the buyout. However, it is unlikely that there will be any sale of shares before the Independent Commission on Banking publishes its report in September 2011, as the report is likely to contain recommendations for changes in the banking sector, affecting the valuation of Lloyds TSB group.
Competitive Positioning
Lloyds TSB was the UKs largest issuer of debit cards in 2010, accounting for 18% of debit cards in circulation. Lloyds TSB also claimed the largest share of debit transactions in the UK in 2010 with an 18% vale share, equal to 47.4 billion. In credit cards Lloyds TSB was the fifth largest issuer in 2009, accounting for 9% of credit cards in circulation. Lloyds TSBs share of financial cards issued declined marginally in 2010. This was due to the increased preference for debit cards over credit cards, which was itself the result of consumer suspicion and fear of the consequences of holding credit cards and was exacerbated by the effects of the economic downturn. Overall, the total number of financial cards issued by Lloyds TSB Group fell from 20.1 million in 2009 to 19.8 million in 2010. Lloyds TSB is a leader in consumer finance in the UK and constantly innovates in terms of the financial cards and other financial products and services it offers. Lloyds is among the few consumer finance companies in the UK to offer air miles as a reward for card purchases. Lloyds TSB Group has also introduced its new Visa contactless debit card as well as maintaining its internet banking and financial services. Lloyds TSB has a very diverse portfolio of financial cards which are tailored to various different types of consumers. The bank offers credit cards aimed at students, middle income earners and so-called platinum cards for high earners. Lloyds TSB competes for business from all segments of British society ranging from the very wealthy to the very poor. The company is also the UKs leading provider of social current accounts for the lowest earners. The companys debit card offerings are, however, far more standardised. Lloyds TSB has maintained its advantageous position in the wake of the economic recession and is ideally positioned to exploit the current move away from credit cards towards debit cards which has been brought on by the economic recession. The companys commanding position in debit cards represents a strong starting base from which to leverage full value from the move towards debit cards. The governments interest in the bank has been stipulated to be purely as a shareholder, although there is some danger that if the interests of the government differ from that of the bank, the influence that government maintains could restrict Lloyds options for future development. On top of this, the obligations attached to the provision of state aid will further affect the flexibility of the bank in the future. Lloyds is therefore in a good position to benefit from the current conditions and trends in financial cards and payments in the UK, although the effect of the government intervention in the bank remains to be seen.
Lloyds TSB Group Plc: Competitive Position 2009
Summary 4
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Product type Card payment transactions Debit transactions Credit card transactions
Source:
Value share 13.7% 17.9% 8.3%
Rank 2 1 5
Euromonitor International, Trade press, Company research, Trade interviews. Euromonitor International estimates
NATIONAL GRID PLC - CONSUMER FINANCE - UNITED KINGDOM

Strategic Direction
National Grid plc is in the privileged position of being able to exercise its monopoly of the UKs energy networks. This has allowed National Grid to focus its consumer strategy on debt reduction and medium term sustainability. The company raised 3.2billion in 2010 as part of a 5-year plan to invest 22billion in the UKs gas and electricity supply network. This focus on the medium term has meant there has been little drive to push its pre-paid cards activities, with changes to the number of cards sold being down to market forces rather than any explicit strategic direction from National Grid itself. However, a relatively small rise in the number of National Grids pre-paid cards is likely over the forecast period due to current economic conditions. This is because pre-paid energy cards tend to be used more by consumers who are experiencing economic difficulties.
Key Facts
Summary 5 National Grid Plc: Key Facts National Grid Plc National Grid Share Register, Capita Registrars, Northern House, Woodsome Park, Fenay Bridge, Huddersfield, HD8 0LA +44 20 7098 1198 www.Nationalgrid.com Ownership and maintenance of the high-voltage electricity transmission network and the high pressure gas transmission system; within financial cards, National Grid Plc is the issuer and operator of pre-paid closed loop cards
Euromonitor International from company reports, Trade press
Full name of company: Address:
Tel: www: Activities:
Source:
Summary 6
National Grid Plc: Operational Indicators 2008 2009 5.3 billion 1.9 billion 10,296 2010 5.6 billion 2.2 billion 10,269
Total sales Operating profit Number of employees

Source:
4.8 billion 1.8 billion N/A
Trade press, Company research
Company Background
National Grid Plc is a publicly listed multinational company which is listed on the London stock exchange. The company has ongoing operations in the UK and the US.
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National Grid is the owner and operator of the high voltage electricity transmission network and high pressure gas transmission system in England and Wales as well as operating the energy supply system across the UK. The company also owns a number of related businesses in liquefied natural gas importation and storage, land remediation and metering. National Grids pre-paid cards operations are part of the companys metering division. National Grid has a low risk profile and its monopoly position in terms of ownership of the energy supply networks in England and Wales has allowed its strategy to focus on medium term goals with the emphasis very much on efficiency, sustainability, reliability and safety. National Grid is also attempting to drive down operating costs for increased efficiency across its networks. The recent increases in energy prices in the UK have had little effect on National Grid in 2010 as these costs have been passed onto consumers. The lack of alternate energy sources and suppliers in the country has meant that there has been little change in overall demand for the companys core products and services. National Grid is currently implementing a 5-year 22 billion investment plan for the national electricity network with work taking place between May 2010 and May 2014.
National Grid is the second largest provider of closed loop pre-paid cards in the UK, accounting for 1% of total pre-paid cards in circulation in 2009. National Grids share of pre-paid cards declined continuously over the review period, although this was mainly due to the high increase registered in other kind of closed loop pre-paid cards. The pre-paid card system for household energy supply is largely regarded as a solution for consumer debt problems as consumers can top up their energy cards whenever they can afford to without having to worry about being cut off from the energy supply system. According to Sustainability First, the proliferation of pre-pay energy customers has coincided with a massive reduction in energy disconnections. The majority of users of the pre-paid household energy system are therefore low income consumers with 52% of users coming from the two lowest socio-economic bands in the UK and 30% of single-parent families making use of the system. Even with National Grid Plc benefiting from its monopoly position, adverse economic factors have affected pre-paid cards, in which it operates. The customers for National Grids closed loop pre-paid cards tend to be lower income consumers and unbanked consumers as well as those who are for any reason unwilling to commit to debit transactions for the payment of their bills. The expansion of the European Union in 2004 brought many new immigrants to the UK from Central and Eastern Europe. This contributed to a reduction of the UK banked population as the Central and Eastern European immigrant population tends to be characterised by a lower income, younger demographic. Since 2006, there has been a consistent year-onyear decline in the percentage of the UK population that is banked, which has contributed to an increase in the market for pre-paid cards for the purchase of household energy credit. Furthermore, the economic recession has reduced the UK average wage, which puts people more at risk of missing payments for their energy bills. This most obvious solution to this problem is provided by pre-paid cards for household energy credit. National Grid holds a complete monopoly over the supply of energy in the UK and faces no competition. However, National Grid has a very small remit in financial cards and payments as its primary focus is energy development and its options for growth in financial cards and payments remains very limited. Therefore, any increases in the number of pre-paid cards which the company issues will be down to market forces rather than any concerted effort by National Grid Plc to increase its customer base. National Grid Plcs position in closed loop pre-paid cards is relatively stable. Furthermore, heavy investment in its energy networks is likely to maintain the companys sustainability during the forecast period and further into the future. Although the company holds a large debt obligation of 19 billion, according to the National Grid the size of its debt is on the decrease. Moreover, the companys investment in sustainable and renewable energies in order to meet national targets for 2020 demonstrates its commitments to its long term future.
National Grid Plc: Competitive Position 2009 Value share Rank
Summary 7 Product type
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Pre-paid Cards Closed loop Pre-paid Cards

Source:
1.2% 1.3% 2
Trade press, Company research, Trade interviews, Euromonitor International estimates
NEWCASTLE BUILDING SOCIETY - CONSUMER FINANCE - UNITED KINGDOM

Strategic Direction
The economic recession has proven to be both a blessing and a curse for Newcastle Building Society. On the positive side, the building society is expected to continue benefiting from the shift away from credit cards to more sustainable and manageable cashless card spending such as debit cards. Newcastle Building Society has continued to engage in product innovation in its most dynamic product category, pre-paid cards. This is leading to the building society garnering Europe-wide recognition for its pre-paid card activities. However, on the negative side, the recession has hit the core of Newcastle Building societys business, which is consumer lending. The building societys lending activities are flagging due to the decline registered in consumer lending as a result of low consumer confidence and increasing risk aversion by the building society. On top of this, the building society cut 126 jobs and closed four branches in 2010 due to what it has deemed to be the challenging climate.
Key Facts
Summary 8 Newcastle Building Society: Key Facts Newcastle Building Society Portland House, New Bridge Street, Newcastle upon Tyne, NE1 8AL +44 (191) 244 2000 www.newcastle.co.uk Pre-paid cards, savings, mortgages and consumer lending

Source:
Summary 9
Newcastle Building Society: Operational Indicators 2007 2008 n/a 15.8 million 1,400 2009 n/a 0.1 million n/a
Net sales Net profit Number of employees

Source:
285.8 million 12.1 million 1,200

Trade press, company research
Company Background
Newcastle Building Society is a mutual society wholly owned by its members. Newcastle Building Society traces its origins back to 1861, although the building societys current form is the result of a merger between the Grainger and Newcastle Permanent Building Societies in 1980. Newcastle Building Society has a significant slice of the consumer lending business in northeastern England. The company specialises in mortgages/housing loans, savings and small personal loans. The card
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solutions department of Newcastle Building Society was established in 2005 and has grown rapidly to become one of the key and elements of the business, winning awards at national level. The economic downturn which hit the UK in 2008 caused Newcastle Building Society to reappraise its business strategy. The Society is continuing its efficiency drive by decreasing the Societys cost base. The Societys very successful card solutions department has seen its growth stymied by the effects of the recession and the Society has been forced to scale back its staff numbers and other resources in card lending as the company returns to its core businesses of savings and housing loans. In common with many other banks and building societies, Newcastle Building Society is reducing its level of lending in line with a reduction in the risk it is willing to take on. However, Newcastle Building Society has made it clear that it will maintain its regional focus and has no plans for mergers with larger banks or competitors. Newcastle Building Society is very much a regional operator, with its strength lying in northeastern England. Of the companys 35 branches, the vast majority are located within one hours drive of Newcastle upon Tyne. However, the companys services are available nationwide through its website. Newcastle Building Societys card solutions department was extremely innovative over the review period in launching over 100 different pre-paid card schemes including its Escape Card, which allows for cheap phone calls abroad and charge-free transfers to overseas accounts. Newcastle Building Society has consistently garnered industry praise for its card solutions division and was shortlisted for numerous awards at the Cards and Payments Awards between 2008 and 2010.
Newcastle Building Society is the UKs second largest issuer of pre-paid cards, accounting for 5% of all pre-paid cards issued in 2009, 2.6 million cards. Newcastle Building Society was also the second-largest pre-paid card company in terms of transactions value, with a 20% share in 2009, worth 1.9 billion. Newcastle Building Societys share of total card payment transactions increased steadily over the review period as pre-paid cards began to become established in the UK. The downturn in the economy which took hold in 2008 also helped the company as consumers moved away from credit cards and debt spending and became more attracted to sustainable financial products. Newcastle Building Societys share of pre-paid cards issued declined by five percentage points in 2009, although this decline was attributed to the expansion experienced in pre-paid cards as the number of pre-paid cards issued by Newcastle Building Society increased by 16% in actual terms during 2009. Newcastle Building Society is the leader in open loop pre-paid cards in terms of cards issued, with 62% of total cards in circulation in 2009. This goes hand-in-hand with the slew of industry awards that the building society the company has won recently as well as the 100 different pre-paid card products the Society has launched since its card solutions department was created in 2005. Newcastle Building Society has focused its energies on pre-paid cards as this segment is still relatively new and immature in the UK. Newcastle Building Society offers both credit and debit cards with its current accounts, although the features for both its credit cards and the debit cards are very much standard. Newcastle Building Society is well positioned as the second-largest issuer of pre-paid cards in a category which is also the fastest growing in consumer finance in the UK. Open loop pre-paid cards, in which Newcastle Building Society is very active, is a very dynamic consumer finance category in the UK. Open loop pre-paid cards increased at a CAGR of 59% over the review period, which is especially impressive when compared with the growth recorded in more traditional financial cards categories such as debit cards, which increased at a CAGR of 5% over the review period. However, Newcastle Building Society was forced to cut 126 jobs and close four branches in 2010 due to the fallout from its previous exposure to the Icelandic banking crisis, which precipitated the UK banking crisis in 2008. Therefore, the position of the building society remains fragile at the start of the forecast period. Newcastle Building Societys relatively small size, both in terms of assets under management and branches has not been an impediment for the success of the company in open loop pre-paid cards. The success of Newcastle Building Society is built on constant innovation and this is evident in both pre-paid cards, the Societys managed savings arm as well as its innovative online services.
Newcastle Building Society: Competitive Position 2009
Summary 10
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Product type Card payment transactions Pre-paid card transactions Open Loop Pre-Paid cards
Source:
Value share 0.5% 19.5% 64.5%
Rank 19 2 1
SANTANDER UK PLC - CONSUMER FINANCE - UNITED KINGDOM

Strategic Direction
In 2008 Santander UK Plc successfully acquired the retail branches and savings account division of Bradford and Bingley as well as Alliance and Leicester, adding to its 2004 acquisition of Abbey National. Santander UK Plc is also in the process of acquiring another 318 retail branches from Royal Bank of Scotland and seven branches from NatWest, which according to the Royal Bank of Scotland will be completed by the end of 2011. Due to Santanders lack of exposure to the subprime mortgage crisis, the company is in a strong position to continue with its expansion strategy. The company has confirmed plans to float up to a quarter of its British subsidiary on the London stock exchange in 2011 as yet more evidence emerges of likely further acquisitions in the forecast period.
Key Facts
Summary 11 Santander UK Plc: Key Facts Santander UK PLC 100 Ludgate Hill, London, EC4M 7NJ 0845 765 4321 general sales enquiries www.Santander.co.uk Retail banking, wholesale banking, asset management, insurance

Source:
Summary 12
Santander UK Plc: Operational Indicators 2009
Gross income Net profit Number of employees

Source: Trade press, Company research
n/a 1.5 billion 22,99
Company Background
Santander UK Plc is the British subsidiary of Spain-based Banco de Santander SA. During the past seven years, Santander has acquired four major participants in the UK financial sector: Abbey National Plc, Alliance and Leicester Plc, Bradford and Bingley Plc and GE Capital Bank Ltds UK credit card arm. These acquisitions have led to Santander becoming one of the largest retail banks in the UK. Along with the consolidation and integration of the companys numerous acquisitions, Santander has been actively increasing its levels of consumer lending. According to Santanders annual report for 2010, there was a 6% increase in consumer borrowing during the first half of 2010 compared to the same period in
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2009, with residential mortgages up by 6% for the same period. Santander UK is therefore cementing its position in British retail banking. Thanks to the acquisitions carried out by Santander over the review period, Santander UK Plc now has national coverage with 1,322 branches across the UK. This represents one of the largest branch networks in retail banking in the UK. Santander UK Plc finds itself in a strong position in the UK at the beginning of 2011. The integration and rebranding of Alliance and Leicester Plc and Abbey National Plc was completed on the back of strong profit growth of 11% in 2010, according the banks own reports. Furthermore, Santander has confirmed plans to float 20-25% of its equity on the London Stock exchange during the second half of 2011. The likely reasoning behind this is to obtain funding for further acquisitions in the UK and to allow it to deal with the costs that previous acquisition processes have resulted in.
Thanks to the flurry of recent acquisitions which Santander UK has undertaken, its share in all core categories in financial cards and payments in the UK increased significantly. Santander has had little exposure to the toxic asset problems which numerous other large UK banks have been forced to deal with in the wake of the economic crisis as well as seeing increases in its consumer lending activities. However, the current adverse economic situation is having a negative effect on the number of new customers Santander is able to acquire as well as the banks willingness to undertake any significant level of risk. Despite these potentially negative factors, the bank recorded positive operational profits of EUR1.3 billion in 2009. According to Santanders results for the first quarter 2010, the bank is currently dealing with fewer repossessions than the current industry average. Much of this is due to the assistance that the bank provides to those experiencing what it deems affordability problems. This is in addition to the numerous other concessions to customers such as its award winning Zero credit current account, which eliminates commissions for customers who also have a mortgage or investment product with Santander. This innovation has put the bank in a strong position to benefit from the shift away from credit cards into debit cards. However, the closure of the pre-paid cards arm of Alliance and Leicester in 2009 and the lack of alternative options may mean Santander will miss out on one of the most dynamic emerging segments in retail banking the UK during the forecast period. Santander UK Plc is the British subsidiary of Banco Santander, the largest bank within the Eurozone by market value and the seventh largest banking group in the world. Thanks to its large capital base, Santander has been able to pursue a very aggressive acquisition strategy which has enabled it to rapidly obtain a large share of UK financial cards and payments with a large and varied customer base. The company is therefore able to provide opportunities for consumers which smaller banks are unable to due to its size advantage. Santander UK has had little exposure to subprime and toxic assets and growth in prime loans and the banks plans to float the company in 2011 means that its current position is likely to be sustainable over the forecast period. With the planned floatation, it looks likely that during the forecast period Santander will further expand into the UK, although nothing firm has been discussed as of yet.
Santander UK Plc: Competitive Position 2009 Value share 0.2% 37.6% Rank 22 1
Summary 13 Product type
Card payment transactions Store cards

Source:
TRANSPORT FOR LONDON - CONSUMER FINANCE - UNITED KINGDOM

Strategic Direction
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Transport for London (TfL) is in a privileged position as the monopoly provider of public transport in London. TfL is in a unique position in that it is able to manipulate the success of its pre-paid Oyster card. Furthermore, public transport is among the few truly recession-proof expenditure items. However, TfL is less interested in leveraging and monetising its pre-paid card system, and it is expected that this institutional lack of interest will continue into the forecast period.
Key Facts
Summary 14 Transport for London: Key Facts Transport for London 4th Floor, Zone Y4, 14 Pier Walk, North Greenwich, London, SE10 0ES +44 20 7222 5600 +44 20 3054 5307 www.oyster.tfl.gov.uk Pre-paid transport cards, public transportation
Full name of company: Address: Tel: Fax: www: Activities:

Source:
Company Background
Transport for London is a government-run public transportation company for London, which reports to the Mayor of London. Transport for London (TfL) is responsible for roads, buses, trains, cycle lanes, cycle hire and all other transport-related issues in London. In 2003, TfL quickly established itself as a major player in financial cards and payments in the UK through the introduction of its Oyster pre-paid card/ticket scheme. Oyster was envisaged as a means of doing away with paper tickets and simplifying and integrating the fares on all London transport. Since its introduction, the Oyster card scheme has gained 80% penetration among transport users in London. Recent additions to the Oyster scheme include the One Pulse credit/debit Oyster card from Barclaycard and Visa, which allows for chip and pin as well as tap-and-pay functionality for purchases under 10 via the Visa PayWave system. TfLs overall strategy for its Oyster card system is to ensure that the card allows smooth and integrated transport payment throughout London. Adjuncts to the current Oyster system such as the One Pulse card are non-core and receive no funding from TfL. As such, the success of these schemes is contingent on private investment and support. TfLs Oyster card is currently London-specific and only work with dedicated Oyster card readers found on the entry and exit gates in London Underground, buses and other modes of transport offered as part of the vast and comprehensive TfL public transport network.
TfL is the UKs largest issuer of pre-paid cards with a 13% share of all cards issued in 2009, equating to 6.7 million cards. TfL is also the number one pre-paid cards issuer by transaction value, with a 25% value in 2009. In closed loop pre-paid cards TfL, was again the largest issuer of cards with a 14% volume share as well as the leader in value terms, responsible for 36% of transactions value. TfLs share of both cards issued and transactions both increased incrementally over the review period. Oyster card penetration in London is high, reaching 80% of all London residents, but there is still significant room for growth. The added functionality of the Oyster One Pulse card has also slowly started to increase transaction spend. TfL is not, by its own remit, an innovative leader in pre-paid cards in the UK. TfL introduced the Oyster scheme to London after observing the effect of similarly successful schemes such as the Octopus card in Hong Kong. Much of the innovation for the Oyster card has been outsourced to private enterprises such as Barclaycard, which signed an exclusive 3-year contract in 2007 to develop additional financial services for
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the Oyster system. Mobile telecoms provider O2 is also trialling a mobile device with Oyster built-in. The lack of innovation from TfL means Oyster is presently limited as a pre-paid system. TfL is currently sitting on a massive, totally captive and potentially very lucrative group of consumers for its pre-paid cards system. The high penetration of the Oyster card coupled with its high frequency of use and its necessity to all London residents make it a prime candidate for the expansion of its currently narrow usage to make purchases. However, the constraints on government budgets mean that, for the moment, the private sector will have to provide the innovation necessary to make this expansion effective.
Transport for London: Competitive Position 2009 Value share 24.9% 35.7% Rank 1 1
Summary 15 Product type Pre-paid Cards
Closed loop pre-paid Cards

Source:
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ATM CARDS IN THE UNITED KINGDOM CATEGORY ANALYSIS

HEADLINES
ATM transaction value increases by 5% to 192.8 billion in 2010 while transaction volume remains static on 2.9 billion The number of ATM cards decreases by 2% to 160 million in 2010 as a result of the economic downturn The number of ATMs continues increasing in the UK, rising to 63,000 in 2010 The UKs largest banks and building societies are the main issuers of ATM cards ATM cards will rise in constant value at a CAGR of 1% over forecast period while transaction volume is set to fall by 3% and the number of cards will rise by 3%
TRENDS
The number of ATM cards in circulation in the UK decreased by 2% in 2010, falling to 160 million. In the UK, the majority cards with ATM function share other features such as debit, credit or pre-paid functions. Therefore, the 4% decrease registered in the number of credit cards had a highly negative impact on the total volume of cards with ATM function in 2010. Not even the 4% increase in the number of debit cards in circulation managed to result in positive growth. Euromonitor Internationals research tracks the number of cards with ATM function rather than just the number of cards with ATM function only. Euromonitor data includes all cards with ATM function regardless of other functionalities such as debit, credit and even pre-paid cards. Nevertheless, the number of cards with solely ATM functionality continued decreasing in the UK during 2010 as consumers prefer the convenience of having access to their cash through ATMs together with debit and/or credit functions. This represented a continuation of prevailing trends from the review period and these trends are likely to continue over the forecast period. Although the number of ATM-only cards is falling in the UK, some banks are now issuing these instead of passbook for saving accounts. This is the case with several savings accounts such as the Santander Individual Saving Accounts (ISA), on which the interest earned is tax free, and the Barclays More For More savings account, holders of which receive a cash card as proof of holding. The average ATM transaction value in the UK amounted to 70 in 2010. This figure increased steadily over the review period. The rise in consumer prices over the review period increased the average amount that Britons withdrew from ATMs. The popularity of online ticket sales through booking websites hindered the development of ticket booking services offered through ATM terminals in the UK. This service is quite popular in continental European countries. However, the most a British card holder can currently do at an ATM terminal, apart from withdrawing cash, is top up their mobile phone or donate money to charity. The number of ATM terminals in the UK increased by 1% to 63,000 in 2010. The British banking system allows the majority of its customers to withdraw money from ATMs free of charge. According to the Payments Council, around 97% of cash withdrawn in 2008, the latest year from which data is available, was from free-to-use cash machines. Fee-charging ATMs are usually situated in locations where there are no other options available. Machines located within small grocery retailers outlets usually charge a fee, while those within bank premises are invariably free of charge for all users. Although not widely used by the majority of British consumers, the cash-back services offered by retailers are affecting the performance of ATM transactions in both volume and value terms. Many people feel it is safer and more convenient asking for cash back when purchasing goods from a supermarket rather than
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withdrawing money from an ATM. Retailers usually offer up to 50 in cash back when paying with a debit card.
COMPETITIVE LANDSCAPE
ATM cards in the UK are issued by banks and building societies. Although Euromonitor International does not research volume shares for ATM operators, it can be stated accurately that the largest banks are the leaders in terms of ATM providers, with card volume share driven by banks volume shares of accounts held. Therefore, large banks such as Lloyds TSB Group Plc, HSBC Bank plc, Royal Bank of Scotland Group and Barclays Group Plc ranked among the main issuers in 20010. Banks and building societies are also the leading companies with regards to ATM ownership, as the majority of ATMS in the UK are located within their branches. The majority of ATMs in the UK operate within several different networks, meaning that they can accept cards issued by several banks and building societies. As one of the distinctive features of the British banking system is the absence of fees charged for most services, customers can use ATMs free of charge, regardless of whether they belong to the bank that issued their card or not. Banks such as Santander UK plc, which changed its name from Abbey National plc in early 2010, started issuing cash cards over the review period for saving account holders instead of the more traditional savings passbooks. These cards can be used by customers to withdraw funds either at bank counters or at ATMs and have no other functionality apart from proving the identity of the account holder.
PROSPECTS
As almost all debit and credit cards in the UK offer an ATM function, ATM cards is quite mature with little room for further growth expected over the forecast period. Nevertheless, the total number of cards with ATM function is expected to increase at a CAGR of 3% over the forecast period, rising to 183 million in 2015 due to the increasing popularity of open loop pre-paid cards which also integrate ATM function. ATM transactions is expected to increase in constant value at a CAGR of 1% over the forecast period 208.3 billion in 2015. This growth will be commensurate with the 1% constant value CAGR recorded over the review period. Growth in ATM transactions volume is expected to fall at a CAGR of -3% to 2.5 billion. Due to the ongoing effects of the financial crisis, UK consumers are likely to change their consumptions patterns. UK cardholders are likely to continue using their ATM cards and the average amount of each withdrawal will be higher, increasing from 70 in 2010 to 52 by 2015. ATM card issuers are likely to introduce new services for their ATM cards following the success which already been noted in other Western European countries for additional services through ATM machines. Apart from topping-up mobile phones, other options such as purchasing tickets for concerts, movies and sporting events are likely to become standard features for ATMs during the forecast period. In places such as London, options such as topping up Oyster cards, the closed loop card used to access public transport in the city could be an interesting option for ATM operators. The increasing popularity of the cash back services which are offered by retailers will also hamper the growth of ATM transaction volume and value over the forecast period. The convenience of the cash back service for customers will mean more cash is obtained when purchasing goods rather than through ATMs. The number of ATM terminals in the UK is expected to continue growing over the forecast period. This increase will come partially as a result of ATM terminals which charge a withdrawal fee to those using them. This will also help increase both the number of withdrawals and the amount of cash withdrawn as those who have to pay a fee for using ATM terminals tend to withdraw larger amounts. The number of ATM-only cards could potentially grow over the forecast period if more banks decide to replace savings account passbooks with cash cards. Although these cards could be presented as being safer and more secure than passbook, many consumers still prefer having a passbook in which they can see all of their previous transactions recorded.
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The recently elected coalition government started negotiations in late 2010 with ATM providers to make it easier for British consumers to make charity donations at cash machines. The idea is that ATM machines across the UK will automatically offer the option of making a donation to charity.
CATEGORY DATA
Table 24 ATM Cards Category Performance: 2005-2010 2005 Number of transactions (mn) Transaction value ( mn)
Source:
2006 2,758.7 179,945.6
2007 2,824.7 186,881.1
2008 2,876.0 192,244.6
2009 2,921.8 192,814.5
2010 2,910.1 202,435.9
2,687.5 172,174.0
Table 25 '000 cards
ATM Cards Category Performance: Number of Cards in Circulation 2005-2010
2005 ATM Function

Source:
2006 164,718.7
2007 165,151.0
2008 168,365.2
2009 162,539.7
2010 159,987.9
164,987.7
Table 26 % growth
ATM Cards Category Performance: % Growth 2005-2010
2009/10 Number of transactions Transaction value

Source:
2005-10 CAGR 1.6 3.3
2005/10 TOTAL 8.3 17.6
-0.4 5.0
Table 27 % cards growth
ATM Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 ATM Function

Source:
2005-10 CAGR -0.6
2005/10 TOTAL -3.0
-1.6
Table 28
ATM Cards Forecast Category Performance: 2010-2015 2010 2011 2,870.8 208,609.3 2012 2,795.3 210,697.0 2013 2,696.9 210,573.1 2014 2,584.8 209,066.0 2015 2,504.4 208,339.2
Number of transactions (mn) Transaction value ( mn)

Source:
2,910.1 202,435.9
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Table 29 '000 cards
ATM Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
2010 ATM Function

Source:
2011 160,675.8
2012 162,909.2
2013 166,884.2
2014 173,592.9
2015 182,671.9
159,987.9
Table 30 % growth
ATM Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR -3.0 0.6
2010/15 TOTAL -13.9 2.9
-3.1 -0.3
ATM Cards in Circulation Forecast Category Performance: % Growth 2010-2015
2010-15 CAGR ATM Function

Source:
2010/15 TOTAL 14.2
2.7
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CHARGE CARDS IN THE UNITED KINGDOM CATEGORY ANALYSIS

HEADLINES
Charge card transactions value decreases by 2% in 2010 to 28.1 billion; transactions volume increases by 1% to 301 million The economic recession continues impacting charge cards in 2010 as companies cut expenditure Average spend per card increases by 4% in 2010 to 5,200 American Express Co remains the undisputed leader in charge cards with 53% of charge cards in circulation in 2009 Charge card transactions value is set to increase at a CAGR of 7% over the forecast period while volume is set to rise at a CAGR of 3%
TRENDS
The similarities between the features of charge cards and credit cards had a negative impact on charge cards during 2010. Many British consumers decided to stop using charge cards and many banks stopped issuing them. Against this background, the number of charge cards in circulation in the UK during 2010 decreased by 6% to 5.4 million. Charge cards transactions volume increased by 1% to 301 million, while transactions value fell by 2% to 28.1 billion. The fall in the number of charge cards in circulation was driven by the poor performance of commercial charge cards, which fell by 9% in volume during 2010. Charge cards are not as popular in the UK as in other Western European countries. While the average number of charge cards per person in Western Europe is 0.25, in the UK it is only 0.09. This is mainly due to the fact that credit cards are widely available and much easier to obtain than in other Western European countries. Another peculiarity of financial cards in the UK as opposed to elsewhere in Western Europe is that the charges levied on commercial charge cards are greater than the charges levied on personal charge cards. Some 57% of total charge cards in circulation in 2010 were commercial charge cards, whereas in countries such as Germany commercial charge cards represent just 5% of total charge cards. This is due to the fact that many British businesses see charge cards as a way of gaining access to short term credit lines as charge card bills must be repaid in full on a monthly basis. This allows cardholders access to credit which remains unavailable with debit cards. The proportion of charge card in the UK which are commercial charge cards fell by two percentage points during 2010 as banks continued to tighten their lending criteria to businesses during the economic downturn. Commercial charge cards were subject to higher positive growth in transactions value than personal charge cards as personal charge cards transactions value declined in 2010. This was due to many Britons reducing the amount of money spent on their personal charge cards amidst the effects of the economic recession. As in many other countries, charge cards in the UK are targeted towards the more affluent segments of society. For some of the most premium cards such as the Harrods American Express charge card, the card is issued on an invitation-only basis. This exclusivity is reflected in benefits such as no pre-set spending limit. Reward programmes are another standard feature of charge cards, with the Harrods American Express offering up to five Harrods Rewards point for every 1 spent in the world famous London department store. The Harrods American Express card also offers the possibility of having the first six supplementary cards provided free of charge.
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American Express Co retained its leading position as the major issuer and operator of charge cards in the UK during 2009, accounting for 53% of charge cards in circulation. Nevertheless, American Express Cos volume share in charge cards slipped by two percentage points in 2009 due to the more positive performances of its rivals, especially Visa Europe and MasterCard International Inc within operators segment and Royal Bank of Scotland Group within issuers. Royal Bank of Scotland Group (RBS) and Barclays Group Plc ranked in second and third positions respectively in terms of charge cards in circulation during 2009. RBS saw its value share increase by one percentage point to 14% in 2009, while Barclays held steady on 12%. Charge cards operators in the UK is highly concentrated and there are only four companies present. American Express Co, the undisputed leader with 53% of cards in circulation, lost ground during 2009 to the benefit of its three rival operators MasterCard International Inc, Visa Europe and Diners Club UK Ltd. The fourth placed charge cards operatorDiners Club International Ltdremained the smallest player in 2009, accounting for a 7% share of cards in circulation. American Express Co persisted with its successful Preferred Seating marketing programme in 2010. This programme offers American Express cardholders exclusive access to a wide range of different events in the UK ranging from concerts to sports events. During 2010, American Express also entered into a partnership with Irish airline Aer Lingus. Customers buying airline tickets with Aer Lingus in the UK can now use their American Express cards to pay for the transaction.
Prospects The number of charge cards in circulation is expected to increase at a CAGR of 1% over the forecast period to 5.6 million in 2015. Transactions volume is set to rise at a CAGR of 3% while constant value will increase at a CAGR of 7%. The number of charge cards transactions is expected to reach 355 million in 2015, while constant value sales are set to rise to 38.9 billion. Charge cards is likely to remain a niche financial cards category in the UK during the forecast period, mainly due to the premium positioning of charge cards. This positioning is expected to play a negative role in the popularity of charge cards over the forecast period as the economic downturn will continue to have a negative effect on both businesses and private consumers who use charge cards as a short-term line of credit. Nevertheless, the future development of charge cards in the UK is directly linked to the performance of the main player, American Express, which will have to work hard to maintain its leading position. This will be especially true in terms of American Express Cos position as the leading issuer of charge cards as more banks will be inclined to launch their own charge cards in order to attract more consumers once the economic recovery begins in earnest. Competition to charge cards over the forecast period is expected to come mainly from credit cards as credit cards offer lower fees than charge cards and are easier to obtain. Both of these advantages are expected to come to the fore over the forecast period and are likely to be decisive for consumers when deciding whether to acquire a credit card or charge card over the course of the forecast period. Personal charge cards are expected to record stronger growth than commercial charge cards in terms of the number of cards in circulation during the forecast period, although commercial charge cards will retain the upper hand in terms of transactions volume and value. British consumers are likely to be attracted to charge cards due to the fact that charge cards require the bill to be paid in full at the end of each month and therefore they will be seen as a lower risk option in comparison with credit cards.
CATEGORY DATA
Table 32 Charge Cards Category Performance: 2005-2010 2005 Number of transactions 247.3 2006 268.8 2007 279.5 2008 294.3 2009 298.0 2010 301.4
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(mn) Transaction value ( mn)

Source:
26,398.4
30,225.8
33,321.2
33,400.0
28,651.1
28,120.4
Table 33 '000 cards
Charge Cards Category Performance: Number of Cards in Circulation 2005-2010
2005 Charge Card Function

Source:
2006 4,957.2
2007 5,544.2
2008 6,220.6
2009 5,760.3
2010 5,428.8
4,845.6
Table 34 % growth
Charge Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 4.0 1.3
2005/10 TOTAL 21.9 6.5
1.1 -1.9
Charge Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Charge Card Function

Source:
2005-10 CAGR 2.3
2005/10 TOTAL 12.0
-5.8
Table 36
Personal Charge Cards Category Performance: 2005-2010 2005 2006 39.3 4,136.8 2007 44.6 4,959.0 2008 43.8 4,846.5 2009 43.1 3,805.9 2010 42.6 3,729.5

Source:
34.3 3,357.0
Table 37
Personal Charge Cards Category Performance: Number of Cards in Circulation 20052010
'000 cards 2005 Personal Charge Cards

Source:
2006 1,632.4
2007 2,031.5
2008 2,402.4
2009 2,366.0
2010 2,336.9
1,609.6
Table 38
Personal Charge Cards Category Performance: % Growth 2005-2010
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% growth 2009/10 Number of transactions Transaction value

Source:
2005-10 CAGR 4.4 2.1
2005/10 TOTAL 24.1 11.1
-1.1 -2.0
Personal Charge Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Personal Charge Cards

Source:
2005-10 CAGR 7.7
2005/10 TOTAL 45.2
-1.2
Table 40
Commercial Charge Cards Category Performance: 2005-2010 2005 2006 229.5 26,089.0 2007 234.9 28,362.1 2008 250.5 28,553.6 2009 255.0 24,845.3 2010 258.8 24,390.9

Source:
212.9 23,041.4
Table 41
Commercial Charge Cards Category Performance: Number of Cards in Circulation 20052010
'000 cards 2005 Commercial Charge Cards

Source:
2006 3,324.8
2007 3,512.7
2008 3,818.2
2009 3,394.3
2010 3,091.9
3,236.0
Table 42 % growth
Commercial Charge Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 4.0 1.1
2005/10 TOTAL 21.5 5.9
1.5 -1.8
Commercial Charge Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Commercial Charge Cards

Source:
2005-10 CAGR -0.9
2005/10 TOTAL -4.5
-8.9
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Charge Cards: Number of Cards by Issuer 2005-2009
2005 2,180.9 893.5 790.2 307.7 258.2 206.6 113.6 94.9 4,845.6
2006 2,249.4 900.7 783.2 331.9 260.3 208.2 113.6 109.9 4,957.2
2007 2,818.4 827.5 791.5 401.2 264.2 211.4 114.0 116.0 5,544.2
2008 3,399.8 820.4 770.8 450.6 287.1 218.7 146.9 126.3 6,220.6
2009 3,054.8 780.7 698.7 442.0 277.3 200.5 147.0 159.3 5,760.3
American Express Co Royal Bank of Scotland Group Barclays Group Plc Diners Club UK Ltd HSBC Bank Plc Bank of Scotland plc Citigroup Inc Others Total
Source:
Charge Cards: Number of Cards by Operator 2005-2009
2005 2,180.9 1,230.0 1,127.0 307.7 0.0 4,845.6
2006 2,249.4 1,242.0 1,134.0 331.9 0.0 4,957.2
2007 2,818.4 1,215.9 1,108.7 401.2 0.0 5,544.2
2008 3,399.8 1,320.4 1,079.3 421.2 0.0 6,220.6
2009 3,054.8 1,260.1 1,050.0 395.4 0.0 5,760.3
American Express Co MasterCard International Inc Visa Europe Diners Club UK Ltd Others Total
Source:
Charge Cards Payment Transaction Value by Issuer 2005-2009
2005 9,183.0 3,986.8 3,971.5 1,275.2 1,329.6 1,068.4 1,086.7 4,497.2 26,398.4
2006 11,324.6 4,359.9 4,302.4 1,544.5 1,472.9 1,203.3 1,215.5 4,802.8 30,225.8
2007 13,647.4 4,454.5 4,554.6 1,800.0 1,479.2 1,243.5 1,214.7 4,927.4 33,321.2
2008 14,920.3 3,883.1 3,904.2 1,812.0 1,458.6 1,343.6 991.8 5,086.4 33,400.0
2009 11,526.0 3,800.3 3,771.5 1,888.2 1,385.7 1,135.5 905.7 4,238.1 28,651.1
American Express Co Royal Bank of Scotland Group Barclays Group Plc Diners Club UK Ltd HSBC Bank Plc Citigroup Inc Bank of Scotland plc Others Total
Source:
Charge Cards Payment Transaction Value by Operator 2005-2009
2005 9,183.0 7,876.9 8,168.4
2006 11,324.6 8,602.3 8,842.8
2007 13,647.4 8,642.0 9,388.1
2008 14,920.3 8,268.0 8,503.2
2009 11,526.0 7,871.2 7,746.0
American Express Co Visa Europe MasterCard International Inc
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Diners Club UK Ltd Others Total

Source:
1,170.2 26,398.4
1,456.2 0.0 30,225.8
1,643.7 0.0 33,321.2
1,708.6 0.0 33,400.0
1,507.9 0.0 28,651.1
Personal Charge Cards: Number of Cards by Issuer 2005-2009
2005 1,395.9 213.7 0.0 1,609.6
2006 1,402.1 230.3 0.0 1,632.4
2007 1,752.3 279.2 0.0 2,031.5
2008 2,117.5 284.9 2,402.4
2009 2,097.9 268.1 0.0 2,366.0
American Express Co Diners Club UK Ltd Others Total

Source:
Personal Charge Cards: Number of Cards by Operator 2005-2009
2005 1,395.9 213.7 0.0 1,609.6
2006 1,402.1 230.3 0.0 1,632.4
2007 1,752.3 279.2 0.0 2,031.5
2008 2,117.5 284.9 0.0 2,402.4
2009 2,097.9 268.2 0.0 2,366.0

Source:
Personal Charge Cards Transaction Value by Issuer 2005-2009
2005 2,911.3 445.7 0.0 3,357.0
2006 3,586.8 550.0 0.0 4,136.8
2007 4,353.8 605.2 0.0 4,959.0
2008 4,324.3 522.1 0.0 4,846.5
2009 3,348.2 457.6 0.0 3,805.9

Source:
Personal Charge Cards Transaction Value by Operator 2005-2009
2005 2,911.3 445.7 0.0 3,357.0
2006 3,586.8 550.0 0.0 4,136.8
2007 4,353.8 605.2 0.0 4,959.0
2008 4,324.3 522.1 0.0 4,846.5
2009 3,348.2 457.6 0.0 3,805.9

Source:
Table 52 '000 cards
Commercial Charge Cards: Number of Cards by Issuer 2005-2009
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Company American Express Co Royal Bank of Scotland Group Barclays Group Plc HSBC Bank Plc Bank of Scotland plc Diners Club UK Ltd Citigroup Inc Others Total
Source:
2005 785.0 893.5 790.2 258.2 206.6 94.0 113.6 94.9 3,236.0
2006 847.2 900.7 783.2 260.3 208.3 101.5 113.6 109.9 3,324.8
2007 1,066.1 827.5 791.5 264.2 211.4 122.0 114.0 116.0 3,512.7
2008 1,282.2 820.4 770.8 287.1 218.7 165.7 146.9 126.3 3,818.2
2009 956.9 780.7 698.7 277.3 200.5 173.9 147.0 159.3 3,394.3
Commercial Charge Cards: Number of Cards by Operator 2005-2009
2005 1,230.0 1,127.0 785.0 94.0 0.0 3,236.0
2006 1,242.0 1,134.0 847.2 101.6 0.0 3,324.8
2007 1,215.9 1,108.7 1,066.1 122.0 0.0 3,512.7
2008 1,320.4 1,079.3 1,282.2 136.3 0.0 3,818.2
2009 1,260.1 1,050.0 956.9 127.3 0.0 3,394.3
MasterCard International Inc Visa Europe American Express Co Diners Club UK Ltd Others Total
Source:
Commercial Charge Cards Payment Transaction Value by Issuer 2005-2009
2005 6,271.6 3,986.8 3,971.5 829.5 1,329.6 1,068.4 1,086.7 4,497.2 23,041.4
2006 7,737.8 4,359.9 4,302.4 994.5 1,472.9 1,203.3 1,215.5 4,802.8 26,089.0
2007 9,293.5 4,454.5 4,554.6 1,194.8 1,479.2 1,243.5 1,214.7 4,927.4 28,362.1
2008 10,595.9 3,883.1 3,904.2 1,289.9 1,458.6 1,343.6 991.8 5,086.4 28,553.6
2009 8,177.8 3,800.3 3,771.5 1,430.5 1,385.7 1,135.5 905.7 4,238.1 24,845.3
American Express Co Royal Bank of Scotland Group Barclays Group Plc Diners Club UK Ltd HSBC Bank Plc Citigroup Inc Bank of Scotland plc Others Total
Source:
Commercial Charge Cards Payment Transaction Value by Operator 2005-2009
2005 6,271.6 7,876.9 8,168.4 724.5 0.0 23,041.4
2006 7,737.8 8,602.3 8,842.8 906.2 0.0 26,089.0
2007 9,293.5 8,642.0 9,388.1 1,038.6 0.0 28,362.1
2008 10,595.9 8,268.0 8,503.2 1,186.5 0.0 28,553.6
2009 8,177.8 7,871.3 7,746.0 1,050.3 0.0 24,845.3
American Express Co Visa Europe MasterCard International Inc Diners Club UK Ltd Others Total
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Source:
Table 56
Charge Cards Forecast Category Performance: 2010-2015 2010 2011 307.6 29,145.8 2012 317.0 30,859.9 2013 332.0 34,111.6 2014 344.5 36,772.2 2015 354.9 38,863.3

Source:
301.4 28,120.4
Table 57
Charge Cards Forecast Category Performance: Number of Cards in Circulation 20102015
'000 cards 2010 Charge Card Function

Source:
2011 5,345.0
2012 5,374.3
2013 5,450.4
2014 5,534.9
2015 5,623.5
5,428.8
Table 58 % growth
Charge Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 3.3 6.7
2010/15 TOTAL 17.7 38.2
3.0 5.7
Charge Cards in Circulation Forecast Category Performance: % Growth 2010-2015
2010-15 CAGR Charge Card Function

Source:
2010/15 TOTAL 3.6
0.7
Table 60
Personal Charge Cards Forecast Category Performance: 2010-2015 2010 2011 43.2 3,680.5 2012 43.6 3,698.2 2013 44.9 3,820.8 2014 46.0 3,760.8 2015 46.6 3,667.9

Source:
42.6 3,729.5
Table 61
Personal Charge Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
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'000 cards 2010 Personal Charge Cards

Source:
2011 2,346.5
2012 2,369.5
2013 2,406.0
2014 2,432.9
2015 2,443.6
2,336.9
Table 62 % growth
Personal Charge Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 1.8 -0.3
2010/15 TOTAL 9.5 -1.7
1.3 -2.5
Table 63
Personal Charge Cards in Circulation Forecast Category Performance: % Growth 20102015
% cards growth 2010-15 CAGR Personal Charge Cards

Source:
2010/15 TOTAL 4.6
0.9
Table 64
Commercial Charge Cards Forecast Category Performance: 2010-2015 2010 2011 264.3 25,465.3 2012 273.4 27,161.7 2013 287.0 30,290.8 2014 298.5 33,011.4 2015 308.2 35,195.4

Source:
258.8 24,390.9
Table 65
Commercial Charge Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
'000 cards 2010 Commercial Charge Cards

Source:
2011 2,998.5
2012 3,004.8
2013 3,044.5
2014 3,102.0
2015 3,179.9
3,091.9
Table 66 % growth
Commercial Charge Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 3.6 7.6
2010/15 TOTAL 19.1 44.3
3.3 6.6
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Table 67
Commercial Charge Cards in Circulation Forecast Category Performance: % Growth 2010-2015
% cards growth 2010-15 CAGR Commercial Charge Cards

Source:
2010/15 TOTAL 2.8
0.6
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CREDIT CARDS IN THE UNITED KINGDOM CATEGORY ANALYSIS

HEADLINES
Credit card transactions increases in value by 2% in 2010 to 110.1 billion; transaction volume increases by 4% to 1.9 billion As the recession ends, credit card posts a positive performance in 2010 Average spend per credit transaction decreases by 2% in 2010 to 57 Royal Bank of Scotland Group leads credit cards in 2009 with a 14% value share Credit cards is set to increase in constant value at a CAGR of 2% over the forecast period while volume is set to rise at a CAGR of 4%
TRENDS
The main function of credit cards for British consumers is to pay for retail purchases. The higher rates charged for those withdrawing money from cash machines using credit cards means that the majority of British consumers rarely use this option unless it is absolutely necessary. Card issuers such as high street bank HSBC charge between 16.9 and 19.9% APR for purchases, rising to 23.9% and 24.7% APR for cash withdrawals. In 2010, British consumers continued cancelling their credit cards, a trend which was a constant over the review period. The total number of credit cards in circulation fell by 4% to 56 million. However, transactions value increased, meaning that spend per card increased by 7% in 2010, together with the number of transactions per card, which saw an 8% increase. As Britons are increasingly using their cards for micropayments, spend per transaction fell by 2% to 57. Although the strategy of cutting down on the number of credit cards proved beneficial for some, many consumers discovered that they were unable to repay their monthly credit card bills as the levels of nonperforming card lending increased to almost 5% in 2010. The economic downturn helped to boost the performance of debit cards, but had a negative effect on credit cards. For many Britons, a credit card is seen as a way of obtaining access to quick and easy credit. However, as already mentioned, many Britons opted to move away from credit cards towards debit cards in 2010 as a way of avoiding the risk of falling into more debt. The partial recovery of the British economy meant many of those who had previously decided to keep their credit cards decided to use them more often. British consumers have the opportunity to use their credit cards within a wide range of retail outlets as even small merchants, particularly independent small grocers, offer this payment option. Many retailers require a minimum spend of just 1 for customers to be able to use their financial cards for payment, while in many continental Europe countries the minimum spend is 6. This has had the effect of boosting the popularity of using credit cards for micropayments and has helped bring down the average spend per transaction by more than 8 since 2007. Unlike in many other Western European countries, consumer banking in the UK is provided almost entirely free of charge and consumers do not have to pay annual fees for the majority of their cards. The possibility of obtaining a free credit card resulted in the number of credit cards per person in the UK standing at 0.9 in 2010. Although this figure declined over the latter part of the review period, it remains the second highest in Western Europe. During the review period, commercial credit cards experienced the highest growth, rising in number at a CAGR of 6% CAGR. Commercial credit cards benefited from the easy access which companies had to credit cards until 2008. Nevertheless, over the review period, commercial credit cards accounted for only a marginal share of all credit cards issued in the UK. This very low proportion is mainly due to the much
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greater popularity of commercial charge cards within the British business community. In 2010, commercial credit card transaction value increased by 2% in current value terms as the British economy experienced a recovery. The line dividing personal and commercial credit cards is somewhat blurred, however, as many small companies and self-employed entrepreneurs use personal credit cards for business purposes.
Royal Bank of Scotland Group (RBS) led credit cards in the UK in 2009, accounting for 14% of total value sales. In second position was Barclays Group Plc with a value share of 13%. These banks combined account for more than a quarter of total value spent on credit cards in the UK during 2009 and also led in terms of the number of cards in circulation. RBS issued credit cards accounted for 13% of the total number of credit cards in circulation in the UK during 2009, while Barclays held a 17% volume share. Within credit card operators, MasterCard reinforced its leadership in 2009, increasing its share in both volume of cards and value spent. MasterCard accounted for 55% of total value spent on credit cards in the UK during 2009 and 62% of credit cards in circulation. Visa, MasterCards main competitor in the UK, lost ground to MasterCard over the review period. Much of MasterCards success can be attributed to the growth in so-called affinity cards. Co-branded cards have proven especially successful, with retailers such as John Lewis and Marks & Spencer opting for MasterCard as the operator of their co-branded cards. Another important factor in MasterCards success in credit cards during the review period was the changes which took place in partnerships within issuers. For example, Capital One has started offering cards with MasterCard in addition to the Capital One Classic which it offers through Visa. Although the main players in credit cards in the UK continue to be high street banks, it is interesting to note that retailers such as Marks & Spencer and Tesco issue their own credit cards. Tesco, for example, has partnered with MasterCard for its co-branded credit card. It runs exclusive offers and also gives cardholders the opportunity to obtain popular Tesco Clubcard loyalty points when using the card for purchases, both in Tesco stores and elsewhere. In order to lure consumers to their credit cards, many issuers focused on marketing credit cards which offer good value for money when used abroad. For example, Halifax, part of Lloyds TSB Group Plc, offers the possibility of withdrawing cash worldwide without a conversion charge through its Clarity credit card. This card does not impose a fee for cash withdrawals at overseas ATMs either. However, as happens with the majority of credit cards, cash withdrawals are subject to a charge even if the full balance is paid promptly at the end of the month. Nevertheless, thanks to its lower than average interest rate of 12.9% APR, the Clarity card is one of the cheapest ways to obtain cash when travelling abroad. Similar terms were offered through the Saga credit card launched by Allied Irish Banks Plc. Saga holders who pay their bill in full at the end of the month incur no interest on cash withdrawals abroad, although a 2% withdrawal fee is charged. Santander UK plc, which changed its name from Abbey National plc in early 2010, also offers no charges on withdrawals or conversion with its Zero credit card. American Express was very active in promoting the benefits of its Platinum Cashback Credit Card during 2010. The company claimed to be a leader in credit cards by offering a cashback rate of 5% on items purchased with the card, up to 100 cashback during the first three months and as much as 1.25% afterwards and no upper limit on how much cash the cardholder can withdraw. Nevertheless, the main condition on the Platinum Cashback Credit Card is that the minimum payment has to be received by the due date and, unlike with more mainstream cards, the Platinum Cashback Credit Card has a minimum payment of 10% of the total amount owing or 50, whichever is higher. During August 2010, Royal Bank of Scotland (RBS) announced the sale of its credit card payment processing business. The buyers, Advent International and Bain Capital, are two private equity investors and were prepared to pay up to 2billion. This resulted in a profit for RBS of 900m. The bank is 84% owned by the British government and this sale was seen as the first move towards recovering the taxpayer investment required to bail out the bank at the height of the global economic crisis.
PROSPECTS
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Over the forecast period, credit cards in the UK is expected to post a better performance than over the review period. A slight decline is expected in the volume of cards in circulation. Slightly negative CAGR growth is expected to remain in the number of cards in circulation, while transactions volume is expected to increase at a CAGR of 4%. Constant value sales are expected to perform positively over the forecast period, increasing at a CAGR of 2%. Card issuers, mainly high street banks, will remain reluctant to encourage a mass credit card spending spree such as the one seen during the early stages of the review period. Access to credit cards in the UK is likely to become more restricted, with credit checks much tougher on new applicants. Credit limits are also expected to decrease, and not only for risky applicants, in order to reduce risk. Furthermore, banks will reduce the amount of money Britons are able to access with their credit cards both on purchases and cash withdrawals. Another factor likely to impact upon credit cards in the UK during the forecast period will be the possible introduction of set fees for cardholders. With the financial problems British banks faced in 2008 and 2009, many of them need to raise funds, and one the options is following the continental model of charging fees merely for the privilege of holding a credit card.
CATEGORY DATA
Table 68 Credit Cards Category Performance: 2005-2010 2005 Number of transactions (mn) Transaction value ( mn)
Source:
2006 1,669.2 104,963.2
2007 1,681.2 109,733.4
2008 1,810.5 113,563.7
2009 1,866.4 107,762.5
2010 1,937.3 110,101.3
1,675.2 106,947.5
Table 69 '000 cards
Credit Cards Category Performance: Number of Cards in Circulation 2005-2010
2005 Credit Function

Source:
2006 69,437.8
2007 67,231.1
2008 66,014.0
2009 58,303.7
2010 55,894.3
69,927.4
Table 70 % growth
Credit Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 2.9 0.6
2005/10 TOTAL 15.6 2.9
3.8 2.2
Credit Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Credit Function

Source:
2005-10 CAGR -4.4
2005/10 TOTAL -20.1
-4.1
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Table 72
Personal Credit Cards Category Performance: 2005-2010 2005 2006 1,661.9 104,261.1 2007 1,672.3 108,838.1 2008 1,800.6 112,644.3 2009 1,856.4 106,910.7 2010 1,927.2 109,230.7

Source:
1,668.5 106,314.6
Table 73 '000 cards
Personal Credit Cards Category Performance: Number of Cards in Circulation 2005-2010
2005 Personal Credit Cards

Source:
2006 69,271.5
2007 67,034.7
2008 65,797.0
2009 58,098.8
2010 55,699.3
69,781.3
Table 74 % growth
Personal Credit Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 2.9 0.5
2005/10 TOTAL 15.5 2.7
3.8 2.2
Personal Credit Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Personal Credit Cards

Source:
2005-10 CAGR -4.4
2005/10 TOTAL -20.2
-4.1
Table 76
Commercial Credit Cards Category Performance: 2005-2010 2005 2006 7.2 702.1 2007 8.8 895.3 2008 9.9 919.4 2009 10.0 851.8 2010 10.1 870.6

Source:
6.8 632.9
Table 77
Commercial Credit Cards Category Performance: Number of Cards in Circulation 20052010
'000 cards 2005 2006 2007 2008 2009 2010
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Commercial Credit Cards

Source:
146.1
166.3
196.4
217.0
205.0
195.0
Table 78 % growth
Commercial Credit Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 8.4 6.6
2005/10 TOTAL 49.9 37.6
2.0 2.2
Commercial Credit Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Commercial Credit Cards

Source:
2005-10 CAGR 5.9
2005/10 TOTAL 33.5
-4.9
Credit Cards: Number of Cards by Issuer 2005-2009
2005 12,786.1 9,958.7 6,669.1 6,830.9 6,527.3 6,672.2 4,104.4 1,951.6 2,110.4 2,459.6 1,600.6 1,201.2 1,060.7 1,367.6 1,297.9 982.0 49.4 2,297.7 69,927.4
2006 12,612.5 9,529.1 6,933.8 6,017.2 6,060.7 6,074.8 3,882.4 3,001.5 2,269.1 2,428.2 1,758.8 1,413.6 1,161.9 925.5 1,205.3 968.2 57.8 3,137.4 69,437.8
2007 11,177.5 9,211.6 6,630.7 6,624.9 5,963.4 5,796.7 3,554.8 3,103.0 2,350.9 2,268.8 1,962.2 1,459.5 957.7 967.7 1,101.4 861.9 80.1 3,158.3 67,231.1
2008 10,856.0 9,011.4 6,486.4 6,552.5 5,830.2 5,672.6 3,513.0 3,092.5 2,472.8 2,253.8 1,871.7 1,480.4 1,026.4 961.3 1,046.2 881.7 99.2 2,906.0 66,014.0
2009 9,750.9 7,509.8 5,589.9 5,584.3 5,123.0 4,527.0 3,364.7 2,964.6 2,497.0 2,169.0 1,694.6 1,427.0 1,051.8 942.2 934.9 867.2 117.4 2,188.2 58,303.7
Barclays Group Plc Royal Bank of Scotland Group HSBC Bank Plc MBNA America Bank NA (MBNA) Lloyds TSB Group Plc Bank of Scotland plc Capital One Bank (Europe) Plc Marks & Spencer Financial Services Plc Tesco Personal Finance Plc Abbey National Plc Citigroup Inc Nationwide Building Society First Direct Co-operative Bank, The Clydesdale Bank Plc J Sainsbury Plc American Express Co Others Total
Source:
Table 81 '000 cards
Credit Cards: Number of Cards by Operator 2005-2009
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Company MasterCard International Inc Visa Europe American Express Co Others Total
Source:
2005 28,111.7 41,766.3 49.4 0.0 69,927.4
2006 31,650.1 37,729.9 57.8 0.0 69,437.8
2007 35,959.4 31,191.6 80.1 0.0 67,231.1
2008 39,216.8 26,698.0 99.2 0.0 66,014.0
2009 36,067.3 22,119.0 117.5 0.0 58,303.7
Credit Cards Payment Transaction Value by Issuer 2005-2009
2005 19,527.8 12,027.5 7,296.5 10,450.1 11,052.5 10,201.3 4,551.5 6,264.5 3,136.3 3,518.6 2,476.2 2,466.5 2,296.4 1,616.0 1,711.7 1,025.7 185.6 7,142.9 106,947.5
2006 19,032.0 11,276.1 9,662.2 9,115.4 10,209.3 8,138.3 5,252.4 5,858.5 4,253.9 3,706.7 2,403.4 2,272.9 2,231.2 1,918.4 1,668.2 681.9 252.3 7,030.1 104,963.2
2007 16,005.5 12,877.1 9,980.9 10,825.3 9,726.1 8,361.4 6,725.7 5,797.6 5,202.3 4,286.4 2,385.8 2,100.5 2,002.6 2,154.9 1,621.6 505.6 328.5 8,845.4 109,733.4
2008 15,826.5 14,275.7 10,049.0 10,467.6 9,824.6 8,517.3 7,945.3 6,034.5 4,674.7 4,200.9 2,571.5 2,421.9 2,219.1 2,162.8 1,746.0 660.9 456.6 9,508.8 113,563.7
2009 14,640.1 13,510.4 9,286.5 9,152.0 8,986.8 7,652.8 7,379.5 5,656.0 4,041.0 3,927.5 2,442.2 2,380.0 2,076.2 1,985.1 1,640.7 967.3 471.8 11,566.5 107,762.5
Royal Bank of Scotland Group Barclays Group Plc HSBC Bank Plc MBNA America Bank NA (MBNA) Lloyds TSB Group Plc Bank of Scotland plc Tesco Personal Finance Plc Capital One Bank (Europe) Plc Marks & Spencer Financial Services Plc Citigroup Inc Abbey National Plc First Direct Clydesdale Bank Plc Nationwide Building Society J Sainsbury Plc Co-operative Bank, The American Express Co Others Total
Source:
Credit Cards Payment Transaction Value by Operator 2005-2009
2005 41,725.9 65,036.0 185.6 0.0 106,947.5
2006 46,591.8 58,119.1 252.2 0.0 104,963.2
2007 56,127.2 53,277.7 328.5 0.0 109,733.4
2008 61,604.6 51,502.5 456.6 0.0 113,563.7
2009 58,786.4 48,504.3 471.8 0.0 107,762.5
MasterCard International Inc Visa Europe American Express Co Others Total

Source:
Table 84 '000 cards
Personal Credit Cards: Number of Cards by Issuer 2005-2009
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Company Barclays Group Plc Royal Bank of Scotland Group MBNA America Bank NA (MBNA) HSBC Bank Plc Lloyds TSB Group Plc Bank of Scotland plc Capital One Bank (Europe) Plc Marks & Spencer Financial Services Plc Tesco Personal Finance Plc Abbey National Plc Citigroup Inc Nationwide Building Society First Direct Co-operative Bank, The Clydesdale Bank Plc J Sainsbury Plc American Express Co Others Total
Source:
2005 12,763.0 9,936.9 6,818.3 6,650.2 6,510.6 6,657.1 4,098.4 1,951.6 2,107.4 2,454.9 1,597.4 1,201.2 1,060.7 1,363.7 1,297.9 982.0 49.3 2,280.8 69,781.3
2006 12,586.6 9,504.1 6,003.1 6,915.2 6,040.5 6,058.3 3,873.0 3,001.5 2,265.2 2,420.6 1,752.5 1,413.6 1,161.9 919.8 1,205.3 968.2 57.5 3,124.6 69,271.5
2007 11,147.9 9,183.8 6,608.2 6,608.2 5,939.3 5,777.9 3,543.5 3,103.0 2,346.2 2,260.2 1,952.8 1,459.5 957.7 961.5 1,101.4 861.9 79.7 3,142.1 67,034.7
2008 10,823.6 8,981.3 6,533.6 6,461.3 5,803.3 5,652.0 3,500.4 3,092.5 2,467.4 2,243.7 1,862.1 1,480.4 1,026.4 954.1 1,046.2 881.7 98.7 2,888.5 65,797.0
2009 9,719.9 7,483.1 5,565.9 5,565.9 5,098.9 4,508.5 3,352.1 2,964.6 2,491.0 2,158.9 1,685.3 1,427.0 1,051.8 934.9 934.9 867.2 116.9 2,171.9 58,098.8
Personal Credit Cards: Number of Cards by Operator 2005-2009
2005 28,046.0 41,686.0 49.3 0.0 69,781.3
2006 31,571.0 37,643.0 57.5 0.0 69,271.5
2007 35,860.0 31,095.0 79.7 0.0 67,034.7
2008 39,103.6 26,594.7 98.7 0.0 65,797.0
2009 35,956.7 22,025.2 116.9 0.0 58,098.8

Source:
Personal Credit Cards Payment Transaction Value by Issuer 2005-2009
2005 19,444.9 11,907.2 7,229.4 10,386.9 10,982.3 10,142.4 4,539.6 6,240.7 3,136.3
2006 18,944.2 11,155.9 9,592.0 9,039.4 10,134.2 8,080.2 5,233.9 5,828.2 4,253.9
2007 15,890.4 12,734.1 9,904.0 10,731.1 9,642.8 8,293.2 6,693.4 5,757.4 5,202.3
2008 15,713.9 14,136.9 9,969.0 10,363.3 9,743.7 8,448.3 7,907.6 5,992.7 4,674.7
2009 14,539.9 13,389.0 9,216.3 9,064.4 8,916.4 7,590.7 7,342.7 5,621.0 4,041.0
Royal Bank of Scotland Group Barclays Group Plc HSBC Bank Plc MBNA America Bank NA (MBNA) Lloyds TSB Group Plc Bank of Scotland plc Tesco Personal Finance Plc Capital One Bank (Europe) Plc Marks & Spencer
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Financial Services Plc Citigroup Inc Abbey National Plc First Direct Clydesdale Bank Plc Nationwide Building Society J Sainsbury Plc Co-operative Bank, The American Express Co Others Total
Source:
3,497.8 2,466.5 2,466.5 2,296.4 1,616.0 1,711.7 1,010.0 184.5 7,055.5 106,314.6
3,680.4 2,387.6 2,272.9 2,231.2 1,918.4 1,668.2 656.8 249.9 6,933.7 104,261.1
4,255.5 2,361.7 2,100.5 2,002.6 2,154.9 1,621.6 468.0 323.5 8,701.2 108,838.1
4,167.8 2,545.8 2,421.9 2,219.1 2,162.8 1,746.0 619.5 450.6 9,360.7 112,644.3
3,899.2 2,420.6 2,380.0 2,076.2 1,985.1 1,640.7 931.8 465.9 11,390.0 106,910.7
Personal Credit Cards Payment Transaction Value by Operator 2005-2009
2005 41,339.8 64,790.3 184.5 0.0 106,314.6
2006 46,152.9 57,858.3 249.9 0.0 104,261.1
2007 55,548.9 52,965.8 323.5 0.0 108,838.1
2008 60,996.9 51,196.8 450.6 0.0 112,644.3
2009 58,216.9 48,228.0 465.9 0.0 106,910.7

Source:
Commercial Credit Cards: Number of Cards by Issuer 2005-2009
2005 23.1 21.9 19.0 16.7 15.1 12.6 6.0 4.7 3.2 4.0 3.0 0.1 16.9 146.1
2006 25.8 25.1 18.7 20.2 16.5 14.1 9.5 7.6 6.2 5.6 3.9 0.2 12.9 166.3
2007 29.7 27.9 22.5 24.1 18.9 16.7 11.3 8.6 9.5 6.1 4.7 0.4 16.2 196.4
2008 32.4 30.1 25.1 26.9 20.6 18.8 12.6 10.2 9.6 7.3 5.4 0.5 17.5 217.0
2009 30.9 26.7 24.1 24.1 18.5 18.5 12.5 10.1 9.3 7.3 6.0 0.6 16.2 205.0
Barclays Group Plc Royal Bank of Scotland Group HSBC Bank Plc Lloyds TSB Group Plc Bank of Scotland plc MBNA America Bank NA (MBNA) Capital One Bank (Europe) Plc Abbey National Plc Citigroup Inc Co-operative Bank, The Tesco Personal Finance Plc American Express Co Others Total
Source:
Table 89 '000 cards Company MasterCard
Commercial Credit Cards: Number of Cards by Operator 2005-2009
2005 65.7
2006 79.1
2007 99.4
2008 113.2
2009 110.6
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International Inc Visa Europe American Express Co Others Total

Source:
80.3 0.1 0.0 146.1
86.9 0.3 0.0 166.3
96.6 0.4 0.0 196.4
103.3 0.5 0.0 217.0
93.8 0.6 0.0 205.0
Commercial Credit Cards Payment Transaction Value by Issuer 2005-2009
2005 120.2 82.9 63.2 70.3 67.1 58.9 11.9 15.7 23.8 20.8 9.7 1.1 87.3 632.9
2006 120.2 87.8 76.0 75.1 70.1 58.1 18.5 25.1 30.3 26.3 15.8 2.4 96.4 702.1
2007 143.1 115.1 94.2 83.4 76.9 68.1 32.4 37.6 40.2 31.0 24.1 5.1 144.2 895.3
2008 138.8 112.6 104.4 80.9 80.0 69.0 37.7 41.4 41.8 33.1 25.7 6.0 148.0 919.4
2009 121.4 100.3 87.5 70.4 70.2 62.2 36.9 35.6 35.0 28.3 21.7 5.9 176.5 851.8
Barclays Group Plc Royal Bank of Scotland Group MBNA America Bank NA (MBNA) Lloyds TSB Group Plc HSBC Bank Plc Bank of Scotland plc Tesco Personal Finance Plc Co-operative Bank, The Capital One Bank (Europe) Plc Citigroup Inc Abbey National Plc American Express Co Others Total
Source:
Commercial Credit Cards Payment Transaction Value by Operator 2005-2009
2005 386.1 245.7 1.1 0.0 632.9
2006 438.9 260.8 2.4 0.0 702.1
2007 578.4 311.9 5.1 0.0 895.3
2008 607.7 305.7 6.0 0.0 919.4
2009 569.5 276.4 5.9 0.0 851.8

Source:
Table 92
Credit Cards Forecast Category Performance: 2010-2015 2010 2011 2,024.7 112,150.6 2012 2,132.6 115,906.0 2013 2,228.3 117,776.9 2014 2,301.5 121,371.5 2015 2,339.0 122,409.4

Source:
1,937.3 110,101.3
Table 93
Credit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
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'000 cards 2010 Credit Function

Source:
2011 54,182.6
2012 53,126.8
2013 53,419.3
2014 54,311.9
2015 55,714.0
55,894.3
Table 94 % growth
Credit Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 3.8 2.1
2010/15 TOTAL 20.7 11.2
1.6 0.9
Credit Cards in Circulation Forecast Category Performance: % Growth 2010-2015
2010-15 CAGR Credit Function

Source:
2010/15 TOTAL -0.3
-0.1
Table 96
Personal Credit Cards Forecast Category Performance: 2010-2015 2010 2011 2,014.3 111,257.8 2012 2,121.8 114,982.7 2013 2,216.9 116,837.7 2014 2,289.6 120,423.5 2015 2,326.7 121,458.0

Source:
1,927.2 109,230.7
Table 97
Personal Credit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
'000 cards 2010 Personal Credit Cards

Source:
2011 53,994.9
2012 52,942.0
2013 53,233.2
2014 54,122.1
2015 55,518.5
55,699.3
Table 98 % growth
Personal Credit Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 3.8 2.1
2010/15 TOTAL 20.7 11.2
1.6 0.9
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Table 99
Personal Credit Cards in Circulation Forecast Category Performance: % Growth 20102015
% cards growth 2010-15 CAGR Personal Credit Cards

Source:
2010/15 TOTAL -0.3
-0.1
Table 100
Commercial Credit Cards Forecast Category Performance: 2010-2015 2010 2011 10.4 892.8 2012 10.8 923.2 2013 11.4 939.2 2014 11.9 948.0 2015 12.3 951.3

Source:
10.1 870.6
Table 101
Commercial Credit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
'000 cards 2010 Commercial Credit Cards

Source:
2011 187.7
2012 184.9
2013 186.1
2014 189.8
2015 195.5
195.0
Table 102 % growth
Commercial Credit Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 3.9 1.8
2010/15 TOTAL 20.9 9.3
3.5 0.3
Table 103
Commercial Credit Cards in Circulation Forecast Category Performance: % Growth 2010-2015
% cards growth 2010-15 CAGR Commercial Credit Cards

Source:
2010/15 TOTAL 0.3
0.1
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DEBIT CARDS IN THE UNITED KINGDOM CATEGORY ANALYSIS

HEADLINES
Debit transactions increases in value by 10% in 2010 to 291.0 billion while volume increases by 8% to 6.4 billion Positive growth is recorded in debit volume, value and cards in circulation as British consumers move from credit to debit cards Average debit cards transaction value increases by 2% to 46 in 2010 Lloyds TSB Group Plc remains the leading debit card issuer in 2010 with a volume share of 18% Debit transactions is set to increase in constant value at a CAGR of 7% over the forecast period to 411.8 billion in 2015 while volume is set to rise at a CAGR of 4% to 7.9 billion
TRENDS
For the first time ever, the value of debit cards transactions overtook the equivalent figure in cash in the UK during 2010. As British consumers decided to move from credit to debit cards in an attempt to maintain a higher degree of control over their finances, the value of debit transactions reached 291 billion in 2010, an increase of 10%. At the same time, cash transactions value declined by 5% to 252 billion. The positive growth in both debit transactions volume and value as well as the increase registered in the number of debit cards in circulation in the UK during 2010 are all clear indicators that British consumers want greater control of their domestic finances. These increases were all related to the migration away from credit cards towards to debit cards as well as consumers reducing their cash payments. Many Britons believe that it is easier to track their spending if they can see transactions on their bank statements. Debit cards also offer a better way of controlling expenditure than using the non-revolving credit of their credit cards as debit card transactions result in funds being debited directly from their current accounts. British consumers use their debit cards both for making purchases and withdrawing money from cash machines. Another common way of obtaining cash in the UK is requesting cash-back when making a payment at a retail outlet, typically supermarkets or hypermarkets. British consumers are charged for the amount of their shopping and the cash they want to receive from the cashier, and the total value of the transaction is then charged directly to their current accounts. With most major retailers offering up to 50 in cash back per transaction, this is becoming very popular as the most convenient way of obtaining cash in British society. The average value of debit transactions increased by 2% in 2010. This was mainly due to British consumers becoming more reliant on debit cards as they abandoned their credit cards in an attempt to control spending during the economic downturn. This trend was reflected in debit card expenditure by product area, with food, beverages and tobacco sales gaining almost a percentage point in share from 2009 to account for 22% of debit transactions in 2010. These transactions are typically for lower amounts than purchases of household goods and services, which lost share during 2010. British consumers have the opportunity to use their debit cards within a wide range of retail outlets as even small merchants and small grocery retailers offer this payment option. Many retailers require a minimum, spend of only 1 in order for customers to be able to take advantage of the debit card payment, while in many continental European countries the minimum spend is 6. This has had the effect of stimulating micropayments and has helped to bring down the average expenditure per debit transaction by more than 3 since 2007. Unlike many other Western European countries, the majority of consumer banking services in the UK remain free of charge and consumers do not have to pay annual fees to use their debit cards. The possibility of having a free card linked to their current accounts has steadily increased the number of debit cards per
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person in the UK, a figure which stood at 1.35 per capita in 2010, one of the highest rates in Western Europe.
Debit cards in the UK is dominated by retail banks, even more so as building societies lost ground over the review period. Lloyds TSB Group Plc retained its leading position in 2009, accounting for 18% of total debit cards issued, a one percentage point decrease from 2008. Lloyds TSB benefits both from its extensive network of branches throughout the UK and its long established presence in the UK. Four other banksRoyal Bank of Scotland Group, Barclays Group Plc HBOS Group an HSBC Bank Plc managed to surpass the 10% threshold for the proportion of debit cards issued in the UK. These five banks together accounted for 74% of total debit cards in circulation in the UK during 2009, reflecting the high level of concentration in consumer banking in the UK. Abbey managed to maintain a 6% in both transactions value and number of cards in circulation in 2009. By offered to its customers benefits linked to its current account such as better conditions for mortgages owners the bank managed to retain its position within this very competitive environment. Since it was acquired by Spain-based Banco Santander in 2004, the bank has worked hard to improve its presence on the British high street and has managed to increase its volume share in the very concentrated competitive environment in debit cards in the UK. Visa continues to be the largest operator of debit cards in the UK in 2010 with a 67% volume share of debit cards. The company steadily increased its volume share over the review period as many banks, such as HSBC, switched their alliance from MasterCard to Visa. In order to lure consumers to their debit cards, many British issuers focused on offering cards which offer good value-for-money when used abroad. For example, Nationwide, through its Flex Account, offers the possibility of withdrawing cash in Europe without conversion charges and a charge of just 1% if the currency is obtained elsewhere. This card does not have a fee for cash withdrawals at overseas ATMs either. Similarly attractive conditions were offered by Metro Bank, which initiated its operations in the UK in July 2010. Its debit card, which is linked to its current account, is free from conversion charges and no fees for levied for withdrawals from ATMs overseas. Metro Bank Plc, the first bank to enter the British high street in 100 years, started its operations by launching, among other services, debit cards on the spot. Thanks to its partnership with Verisoft, the customers can leave the branchor the store as the bank prefers to refer to its brancheswith a new card and PIN. Debit cards tend to be offered as a standard element of a bank account in the UK, and therefore there is little direct competition for cardholders; rather the competition exists in terms of account holders. Issuers focus on offering benefits such as attractively low fees for banking and a wide network of ATMs.
PROSPECTS
The UK is likely to see a slow recovery from the financial crisis. The country closed 2010 with negative GDP growth recorded during the final quarter and the prospects for 2011 remain uncertain. At the same time, unemployment is not expected to fall in 2011. Ongoing uncertainty surrounding the employment situation will hinder the performance of debit cards during the early stages of the forecast period as consumers reduce spending on non-essential items. Nevertheless, following the witnessed during the latter years of the review period, debit cards will likely outperform credit cards over the forecast period. Ownership of debit cards in the UK, which was 1.35 per capita in 2010, is expected to increase to around 1.63 per capita by 2015. All indicators suggest that debit cards is likely to see positive growth over the forecast period, albeit at slower pace than during the review period. The volume of debit card transactions is expected to rise at a CAGR of 4% to reach 7.9 billion in 2015 while transactions is set to rise in current value at a CAGR of 7% to 411.8 billion. The number of debit cards in circulation is expected to rise to 104 million by 2015.
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Banks and building societies will look for new ways to increase their revenues over the forecast period. For example, Nationwide announced that from November 2010 its very competitive Flex Account debit card would charge 2% for conversion on foreign currency when used abroad and also a 1 fee when using ATMs outside the UK. In late April 2010, Visa Europe proposed to cut its multilateral interchange fees (MIFs), a bank-to-bank fee collectively fixed by Visa Europe's member banks for card payments which is ultimately paid by consumers. The reduction will be capped at 0.2% for four years. However, the pressure on member banks might influence the decisions taken by them about MIF reduction. Any reduction in fees would have a positive effect on the number of POS terminals in use in the UK and would likely lead to an increase in cashless transactions made with debit cards. The British banking system began its migration to the EMV standard earlier than other European countries, and by 2009 all debit cards issued in the UK included chip-and-pin technology. Therefore, technological innovation over the forecast period will come in the form of contactless technology, which is likely to become increasingly popular as the forecast period progresses. Issuers will add this new payment option on top of chip and pin functionality, and its success will depend on the number of retailers interested in using it. Although transaction safety could be an issue for many British consumers, options such as setting a maximum amount to be spent could play in favour of the new technology. Electronic Direct/ACH Transactions are expected to become one of the main competitive elements in debit cards in the UK over the forecast period. The increasing popularity of internet banking in the UK is expected to push Electronic Direct/ACH Transactions over the forecast period, thus curbing the growth of debit card payments. Debit cards transactions are also expected to be affected by the increasing use of credit cards as an internet payment method as consumers often feel that the latter represents a safer option.
CATEGORY DATA
Table 104 Debit Cards Category Performance: 2005-2010 2005 Number of transactions (mn) Transaction value ( mn)
Source:
2006 4,518.9 202,327.0
2007 4,938.5 228,791.4
2008 5,384.6 249,771.5
2009 5,893.1 264,203.0
2010 6,354.2 290,570.0
4,178.9 176,480.7
Table 105 '000 cards
Debit Cards Category Performance: Number of Cards in Circulation 2005-2010
2005 Debit Function

Source:
2006 68,348.0
2007 71,624.0
2008 76,271.0
2009 80,313.9
2010 83,871.8
66,991.0
Table 106 % growth
Debit Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 8.7 10.5
2005/10 TOTAL 52.1 64.6
7.8 10.0
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Debit Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Debit Function

Source:
2005-10 CAGR 4.6
2005/10 TOTAL 25.2
4.4
Debit Cards: Number of Cards by Issuer 2005-2009
2005 11,835.9 13,945.6 11,294.8 6,488.3 6,800.0 3,764.9 2,887.9 1,882.5 1,557.7 1,151.3 894.8 4,487.3 66,991.0
2006 12,302.7 13,327.9 10,935.7 7,518.3 7,105.0 4,100.9 3,417.7 2,033.0 2,050.4 1,359.9 919.5 3,277.0 68,348.0
2007 13,604.0 12,172.0 11,646.1 8,953.0 7,450.0 4,333.3 3,580.0 2,148.0 2,090.0 1,421.0 1,002.1 3,224.6 71,624.0
2008 14,346.6 12,752.5 11,966.9 10,479.6 7,916.9 4,744.1 3,775.4 2,372.0 2,181.4 1,494.9 1,098.3 3,142.4 76,271.0
2009 14,721.5 12,874.3 12,705.7 10,481.0 8,585.6 5,180.2 3,935.4 2,610.2 2,256.8 1,598.2 1,212.7 4,152.2 80,313.9
Lloyds TSB Group Plc Royal Bank of Scotland Group Barclays Group Plc HBOS Group HSBC Bank Plc Abbey National Plc Nationwide Building Society Clydesdale Bank Plc Alliance & Leicester Plc Co-operative Bank, The First Direct Others Total
Source:
Debit Cards: Number of Cards by Operator 2005-2009
2005 42,432.0 24,559.0 66,991.0
2006 43,435.0 24,913.0 68,348.0
2007 45,811.0 25,813.0 71,624.0
2008 50,155.8 26,115.2 76,271.0
2009 53,609.5 26,704.4 80,313.9
Visa Europe MasterCard International Inc Total

Source:
Debit Cards Payment Transaction Value by Issuer 2005-2009
2005 33,654.8 30,213.5 22,695.4 19,059.9 21,036.5 9,918.2 7,959.3 4,429.7 4,112.0
2006 38,786.1 35,569.1 26,302.5 22,053.6 24,238.8 12,139.6 9,367.7 5,402.1 4,633.3
2007 44,018.8 38,939.7 27,432.1 24,709.1 27,523.2 13,978.9 10,936.1 6,177.3 5,056.2
2008 46,956.9 40,837.5 31,721.0 26,600.6 29,847.6 15,610.7 12,039.0 6,843.7 5,445.0
2009 47,424.4 41,876.2 35,403.2 29,722.8 29,115.2 15,984.3 12,285.4 7,556.2 6,103.1
Lloyds TSB Group Plc Royal Bank of Scotland Group Barclays Group Plc HSBC Bank Plc Bank of Scotland plc Abbey National Plc Nationwide Building Society Clydesdale Bank Plc Alliance & Leicester Plc
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Co-operative Bank, The First Direct Others Total

Source:
2,506.0 2,506.0 18,389.5 176,480.7
3,419.3 2,933.7 17,481.1 202,327.0
3,843.6 3,637.7 22,538.8 228,791.4
4,545.8 4,296.1 25,027.7 249,771.5
5,178.4 4,834.9 28,718.9 264,203.0
Debit Cards Payment Transaction Value by Operator 2005-2009
2005 104,600.1 71,880.6 176,480.7
2006 123,439.7 78,887.3 202,327.0
2007 144,997.7 83,793.7 0.0 228,791.4
2008 164,474.8 85,296.7 0.0 249,771.5
2009 174,770.3 89,432.7 0.0 264,203.0
Visa Europe MasterCard International Inc Others Total

Source:
Table 112
Debit Cards Forecast Category Performance: 2010-2015 2010 2011 6,711.9 312,618.1 2012 7,156.2 342,335.3 2013 7,458.2 371,500.9 2014 7,696.1 395,867.0 2015 7,852.4 411,821.7

Source:
6,354.2 290,570.0
Debit Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
2010 Debit Function

Source:
2011 88,593.8
2012 94,458.7
2013 98,444.8
2014 101,585.2
2015 103,647.4
83,871.8
Table 114 % growth
Debit Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 4.3 7.2
2010/15 TOTAL 23.6 41.7
2.0 4.0
Debit Cards in Circulation Forecast Category Performance: % Growth 2010-2015
2010-15 CAGR Debit Function

Source:
2010/15 TOTAL 23.6
4.3
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PRE-PAID CARDS IN THE UNITED KINGDOM CATEGORY ANALYSIS

HEADLINES
Pre-paid cards transactions increases in value by 16% in 2010 while transactions volume increases by 32% Growth in general purpose reloadable cards pushes closed loop pre-paid cards to 92% of total pre-paid cards in circulation during 2010 Average spend per card declines by 5% in 2010, falling to 187 The popularity of Oyster card on Londons transport network means Transport for London remains the leader in pre-paid cards in 2009 Pre-paid cards is set to increase in transaction volume at a CAGR of 20% over forecast period to 781 million in 2015 while transaction constant value will rise at a CAGR of 6% to 15.7 billion
TRENDS
In a repeat of the situation which prevailed in 2009, both open loop and closed loop pre-paid cards recorded a much more positive performance than other categories in financial cards and payments in the UK during 2010. Thanks to the popularity of merchant issued gift cards, closed loop pre-paid cards continued to see very strong growth in 2010 as transactions increased in number by 33%, pushed mainly by clothing and footwear specialist retailers, notably: Arcadia Group, the operator of retailing brands such as Topshop, Topman, Outfit and Miss Selfridge; Aurora Fashions Ltd, the operator of Karen Millen, Oasis and Warehouse; and Inditex, the operator of Zara, Massimo Dutti and Bershka. Upmarket department stores such as Selfridges also offer gift cards with the value set by the customer who purchases the card. In the case of Selfridges, the value of the cards can range from 10 to 1,000. Topshop gift cards have proved to be very successful among young consumers as gifts for friends. The company also allows customers purchasing these cards to top up the gift cards with any value from 10 to 300 and they can be registered online for protection against theft or loss. Against this background, closed loop pre-paid cards transactions value increased by 15% in 2010, while the total number of cards in circulation increased by 22%. Transport for Londons (TfL) Oyster card is the most popular way of paying when using the public transport network in the British capital. The fact that paying with the card is much cheaper that using cash for the same journey is the prime reason for its overwhelming popularity. For example, a single bus trip paid for in cash costs 2.20, while the same journey costs only 1.30 if paid for with an Oyster card. This means that almost every single Londoner carries an Oyster card, bringing the total number of cards in circulation to some 6.7 million. Transport for London estimates that around 80% of its total revenue come from commuters using Oyster cards. Oyster cards were distributed for free following their initial introduction in London and were available for the purchase of a season ticket of at least one week in duration. However, the policy changed in May 2009 when TfL decided to introduce a 2 deposit for any new Oyster card issued, which was increased to 3 in 2010. As TfL noticed that many of its passengers were failing to bring their Oyster cards with them when renewing their season tickets, TfL first introduced a campaign to make clear that the cards could be reused indefinitely. Although the campaign helped reduce the number of non-active cards, the technological costs attached to issuing new cards were the reason for TfL introducing the 3 deposit policy. Open loop pre-paid cards recorded healthy growth of 20% in transactions value in 2010. This was mainly due to the popularity of TfLs pre-paid Oyster travel cards. Open loop pre-paid cards transactions volume increased by 31% in 2010 while the number of cards in circulation increased by 22%. The ICE Pre-paid Money Travel Card allows cardholders to purchase the card pre-paid in sterling, euros or US dollars. This brings convenience to travellers as they immediately know how much money is available
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on their cards in the local currency of the country being visited. By paying in local currency, cardholders are also able to avoid the high exchange rates which are generally applicable to foreign cards. The volume and value of pre-paid card transactions remains quite low in the UK in comparison with other payment instruments such as credit and debit cards. For example, credit cards amounted to 110.1 billion in 2010 while pre-paid cards only reached 11.6 billion. However, the extension of the Oyster card in London to all commuters, including the many hundreds of thousands of commuters using National Rail services to travel into London daily from outlying towns and suburbs, and the popularity of schemes such as the National Grid household power payment system among the unbanked and underbanked population are combining to make pre-paid cards an increasingly popular payment method in the UK.
The almost mandatory possession of the Oyster card for Londoners as it gives access to the citys public transport network makes Transport for London (TfL) the leading issuer of pre-paid cards in the UK in value terms. TfL held a 25% value share in 2009 and its Oyster card accounted for 13% of total pre-paid cards in circulation. The significant difference in the price of a fare between cash payment and the use of an Oyster card has helped to establish TfL as the leading player and also as the leading operator as the company is responsible for administering both sides of its pre-paid cards ticketing system. Acceptance of the Oyster card was extended to Londons commuter railway network in 2009. Currently the Oyster cards pre-paid function cannot be used on National Rail trains in London and Oyster Cards cannot be purchased at railway stations in the London metropolitan area. According to TfL, in 2009 railway stations were fitted with entry and exit gates which allow commuters to use their Oyster cards both as prepaid or season tickets. Many stations were provided with self-service machines where passengers can topup their Oyster cards. Although Visa Europe performed positively in pre-paid cards operators over the review period, in 2009 MasterCard International still accounted for 86% of total cards in circulation in open loop pre-paid cards. MasterCard has a very well established presence in the UK and has several different pre-paid cards schemes in operation. For example, together with Newcastle Building Society, the leading issuer in open loop cards with a 62% total value share in 2000, it owns cards such as the Fidenza Village Gift Card, which can be used at all European outlets within Chic Outlet Shopping Villages as well as at any retailer which accepts MasterCard cards. The landscape within closed loop pre-paid cards is quite different to that of open loop pre-paid cards. Transport for London (TfL) is the leading issuer and operator. As issuer TfL accounted for 14% of total cards in circulation and 36% of total transactions value in 2009. The second player in open loop pre-paid cards in 2009 was National Grid Plc, one of the largest utility companies in the UK. The company offers its British customers the possibility of using closed loop pre-paid cards to pay for its services. National Grid accounted for 9% of total transactions value in 2009. National Grid cards can be topped up at newsagents and are plugged into meters within customers homes. This service is widely used among people living is shared households as well as among the unbanked and consumers who are unable to obtain permission from their banks to set up a direct debit payment and wish to avoid the inconvenience of visiting a post office or bank branch in order to pay their utility bills. With respect to closed loop pre-paid cards, there are many different types of merchants in the UK which offer such cards, specifically retail outlets. Moreover, closed loop pre-paid cards are common for foodservice outlets such as restaurants and coffee shops including Pizza Hut, Pizza Express, Starbucks and Prt A Manger. Service companies which make use of closed loop pre-paid cards include hairdressing salons such as Toni & Guy, spas such as Spa Finder and ticket services such as Ticketmaster. As a result of such a wide diversity of different companies offering closed loop pre-paid cards, the competitive environment is far too fragmented to track the success of the majority of operators and issuers. In order to lure consumers to their pre-paid cards, some issuers focus on offering cards with good value for money when used abroad. For example, Caxton, a company which specialises in pre-paid cards with value calculated in euros or dollars, offers the possibility of withdrawing cash abroad without charging fees. The exchange rate is fixed at the time of loading the funds in the card. These cards also have a conversion charge of 1.3% and are issued by Newcastle Building Society, the leading issuer of open loop pre-paid cards in the UK, with MasterCard as the operator.
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In February 2009, the transport company Go-ahead Group launched a trial for its closed loop card called The Key (http://www.londonmidland.com/tickets-and-fares/the-key/). This is a contactless card which passengers can use to purchase rail tickets online and it can also be used as a travel pass. Thanks to smart technology, the company expects the passenger queuing times will be reduced. In December 2010, MasterCard announced its acquisition of Travelexs pre-paid Card Programme Management (CPM). The deal is expected to be completed during the first half of 2011 and will cost MasterCard 290 million upfront, with an earn-out of up to an additional 35 million if certain performance targets are met.
PROSPECTS
Pre-paid cards is expected to register positive growth over the forecast period and gain further ground in financial cards in the UK. Transactions value is expected to increase in constant value at a CAGR of 6%, while transactions volume is expected to rise at a CAGR of 20%. Closed loop merchant issued gift cards are expected to account for the bulk of both volume and value growth. However, the migration to the EMV standard, which has already been met by UK card issuers, and the extension of contactless technology will also allow card issuers to apply pre-paid functions to more debit and charge cards as the number of cards with microchips and contactless features will increase massively, thereby boosting the use of open loop prepaid cards. TfLs Oyster card is expected to retain its leadership in pre-paid cards over the forecast period, remaining the most popular pre-paid card in the UK. Acceptance of the Oyster card was extended to Londons commuter rail network in 2009 and it is expected that all railway stations in the London metropolitan area will soon have self-service machines where passengers can top up their Oyster cards. Nevertheless, it is unclear whether commuters living in Londons outlying towns and suburbs will be able to top up their Oyster cards at their local ticket offices or whether they will be required to visit an underground station or TfL licensed newsagent in order to do so. Closed loop pre-paid cards are expected to be subject to major increases in all measures if schemes similar to Londons Oyster card are implemented in other British cities. Cities such as Manchester and Birmingham might follow the capitals example and move towards pre-paid cards for their respective transport networks. The success or failure of Go-Ahead Groups The Key pre-paid card ticketing scheme will be a significant influence on the actions to be taken by other British cities in terms of moving towards pre-paid ticketing for public transport. Retailers issuing closed loop pre-paid merchant issued gift cards are expected to sign more agreements with Visa Europe and MasterCard International in order to make their pre-paid cards more multifunctional, moving from closed loop to open loop functionality. This would offer pre-paid cardholders more options, for example enabling them to withdraw money from ATMs. This would benefit open loop pre-paid cards to the detriment of merchant gift cards. MasterCard International signed a deal in late 2010 with TfL to brand the wallets given away free for use with Oyster cards in London in 2011. MasterCard is believed to have paid a multimillion pound sum to use this platform to promote PayPass, its contactless open loop payment system. This deal could be the beginnings of TfL moving its closed loop pre-paid Oyster card to an open loop pre-paid card incorporating MasterCard payment technology. M-commerce is expected to become an important competitor to pre-paid cards in the UK during the forecast period, especially as smart phones are increasing the usability of mobile communications devices. However, this niche still has a long way to go before it can compete with more established pre-paid cards in terms of scope. American Express Co launched its PASS pre-paid card in 2010 in the US and the company is likely to bring the scheme to the UK at some stage during the forecast period. PASS is an open loop pre-paid card which is marketed to adults who then give it to teenagers as an e-purse. It is positioned as a safer alternative to cash, credit cards and debit cards and also as a tool for parents to teach financial skills to their children as the parent can check the balance online and reload the card when the balance becomes low.
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CATEGORY DATA
Table 116 Pre-paid Cards Category Performance: 2005-2010 2005 Number of transactions (mn) Transaction value ( mn)
Source:
2006 66.2 3,875.3
2007 119.8 5,991.8
2008 170.1 7,823.5
2009 233.9 9,985.7
2010 308.2 11,613.3
32.8 2,477.0
Table 117
Open Loop Pre-paid Cards Category Performance: 2005-2010 2005 2006 26.4 684.0 2007 57.5 1,750.0 2008 80.5 2,450.0 2009 106.9 3,018.8 2010 139.8 3,621.8

Source:
10.5 275.0
Table 118
Closed Loop Pre-paid Cards Category Performance: 2005-2010 2005 2006 39.8 3,191.3 2007 62.3 4,241.8 2008 89.6 5,373.5 2009 127.0 6,966.9 2010 168.4 7,991.5

Source:
22.3 2,202.0
Pre-paid Cards Category Performance: Number of Cards in Circulation 2005-2010
2005 Closed Loop Pre-Paid Function Open Loop Pre-Paid Function Pre-Paid Function
Source:
2006 15,254.0 1,200.0 16,454.0
2007 24,490.0 2,500.0 26,990.0
2008 35,554.6 3,353.8 38,908.3
2009 46,704.5 4,237.5 50,942.0
2010 57,063.6 5,147.3 62,210.8
8,100.0 500.0 8,600.0
Table 120 % growth
Pre-paid Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 56.5 36.2
2005/10 TOTAL 838.8 368.8
31.8 16.3
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Table 121 % growth
Open Loop Pre-paid Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 67.8 67.5
2005/10 TOTAL 1,231.0 1,217.0
30.7 20.0
Table 122 % growth
Closed Loop Pre-paid Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR 49.8 29.4
2005/10 TOTAL 654.3 262.9
32.6 14.7
Table 123
% cards growth
Pre-paid Cards in Circulation Category Performance: % Growth 2005-2010

2009/10 2005-10 CAGR 47.8 59.4 48.6 2005/10 TOTAL 604.5 929.5 623.4
Closed Loop Pre-Paid Function Open Loop Pre-Paid Function Pre-Paid Function
Source:
22.2 21.5 22.1
Pre-paid Cards: Number of Cards by Issuer 2005-2009
2005 3,641.0 450.0 600.0 30.0 3,879.0 8,600.0
2006 4,954.0 950.0 630.0 180.0 9,740.0 16,454.0
2007 5,841.0 1,760.0 620.0 420.0 18,349.0 26,990.0
2008 6,515.0 2,257.1 605.0 486.3 29,045.0 38,908.3
2009 6,683.0 2,612.0 595.0 556.9 40,495.0 50,942.0
Transport for London Newcastle Building Society National Grid plc Clydesdale Bank Plc Transco Metering Services Ltd Others Total
Source:
Pre-paid Cards: Number of Cards by Operator 2005-2009
2005 3,641.0 480.0 600.0 20.0
2006 4,954.0 1,120.0 630.0 80.0
2007 5,841.0 2,300.0 620.0 200.0
2008 6,515.0 3,001.6 605.0 352.1
2009 6,683.0 3,654.8 595.0 582.7
Transport for London MasterCard International Inc National Grid plc Visa Europe
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Transco Metering Services Ltd Others Total

Source:
3,859.0 8,600.0
9,670.0 16,454.0
18,029.0 26,990.0
28,434.6 38,908.3
39,426.5 50,942.0
Pre-paid Cards Transaction Value by Issuer 2005-2009
2005 1,250.0 253.0 624.0 12.4 337.6 2,477.0
2006 1,650.0 555.2 671.0 92.3 906.8 3,875.3
2007 1,866.0 1,267.0 675.8 267.7 1,915.3 5,991.8
2008 2,086.0 1,727.2 671.5 333.2 3,005.5 7,823.5
2009 2,485.8 1,948.6 634.1 390.9 4,526.2 9,985.7
Transport for London Newcastle Building Society National Grid plc Clydesdale Bank Plc Transco Metering Services Ltd Others Total
Source:
Pre-paid Cards Transaction Value by Operator 2005-2009
2005 265.0 1,250.0 624.0 10.0 328.0 2,477.0
2006 634.0 1,650.0 671.0 50.0 870.3 3,875.3
2007 1,600.0 1,866.0 675.8 150.0 1,700.0 5,991.8
2008 2,178.1 2,086.0 671.5 272.0 2,616.0 7,823.5
2009 2,555.4 2,485.8 634.1 463.4 3,847.0 9,985.7
MasterCard International Inc Transport for London National Grid plc Visa Europe Transco Metering Services Ltd Others Total
Source:
Open Loop Pre-paid Cards: Number of Cards by Issuer 2005-2009
2005 450.0 30.0 0.3 19.7 500.0
2006 950.0 180.0 1.2 68.8 1,200.0
2007 1,760.0 420.0 2.3 317.7 2,500.0
2008 2,257.1 486.3 3.1 607.3 3,353.8
2009 2,612.1 556.9 3.7 1,064.8 4,237.5
Newcastle Building Society Clydesdale Bank Plc Travelex Plc Others Total
Source:
Open Loop Pre-paid Cards: Number of Cards by Operator 2005-2009
2005
2006
2007
2008
2009
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MasterCard International Inc Visa Europe Total

Source:
480.0 20.0 500.0
1,120.0 80.0 1,200.0
2,300.0 200.0 2,500.0
3,001.6 352.1 3,353.8
3,654.8 582.7 4,237.5
Open Loop Pre-paid Cards Transaction Value by Issuer 2005-2009
2005 253.0 12.4 0.2 9.4 275.0
2006 555.2 92.3 0.9 35.6 684.0
2007 1,267.0 267.8 2.0 213.2 1,750.0
2008 1,727.3 333.2 3.2 386.4 2,450.0
2009 1,948.6 390.9 4.5 674.7 3,018.8
Newcastle Building Society Clydesdale Bank Plc Travelex Plc Others Total
Source:
Open Loop Pre-paid Cards Transaction Value by Operator 2005-2009
2005 265.0 10.0 0.0 275.0
2006 634.0 50.0 0.0 684.0
2007 1,600.0 150.0 0.0 1,750.0
2008 2,178.1 272.0 0.0 2,450.0
2009 2,555.4 463.4 0.0 3,018.8
MasterCard International Inc Visa Europe Others Total

Source:
Closed Loop Pre-paid Cards: Number of Cards by Issuer 2005-2009
2005 3,641.0 600.0 3,859.0 8,100.0
2006 4,954.0 630.0 9,670.0 15,254.0
2007 5,841.0 620.0 18,029.0 24,490.0
2008 6,515.0 605.0 28,434.6 35,554.6
2009 6,683.0 595.0 39,426.5 46,704.5
Transport for London National Grid plc Transco Metering Services Ltd Others Total
Source:
Closed Loop Pre-paid Cards: Number of Cards by Operator 2005-2009
2005 3,641.0 600.0 3,859.0
2006 4,954.0 630.0 9,670.0
2007 5,841.0 620.0 18,029.0
2008 6,515.0 605.0 28,434.6
2009 6,683.0 595.0 39,426.5
Transport for London National Grid plc Transco Metering Services Ltd Others
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Total
Source:
8,100.0
15,254.0
24,490.0
35,554.6
46,704.5
Closed Loop Pre-paid Cards Transaction Value by Issuer 2005-2009
2005 1,250.0 624.0 328.0 2,202.0
2006 1,650.0 671.0 870.3 3,191.3
2007 1,866.0 675.8 1,700.0 4,241.8
2008 2,086.0 671.5 2,616.0 5,373.5
2009 2,485.8 634.1 3,847.0 6,966.9
Source:
Closed Loop Pre-paid Cards Transaction Value by Operator 2005-2009
2005 1,250.0 624.0 328.0 2,202.0
2006 1,650.0 671.0 870.3 3,191.3
2007 1,866.0 675.8 1,700.0 4,241.8
2008 2,086.0 671.5 2,616.0 5,373.5
2009 2,485.8 634.1 3,847.0 6,966.9
Source:
Table 136
Pre-paid Cards Forecast Category Performance: 2010-2015 2010 2011 396.0 12,797.0 2012 499.6 13,511.6 2013 607.4 14,224.0 2014 700.9 15,079.1 2015 780.5 15,739.5

Source:
308.2 11,613.3
Table 137
Open Loop Pre-paid Cards Forecast Category Performance: 2010-2015 2010 2011 179.3 4,239.3 2012 226.6 4,884.6 2013 273.0 5,544.5 2014 317.4 6,251.8 2015 356.9 6,879.5

Source:
139.8 3,621.8
Table 138
Closed Loop Pre-paid Cards Forecast Category Performance: 2010-2015 2010 2011 216.7 2012 273.0 2013 334.4 2014 383.4 2015 423.6
Number of transactions
168.4
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(mn) Transaction value ( mn)

Source:
7,991.5
8,557.6
8,626.9
8,679.4
8,827.4
8,860.1
Table 139
Pre-paid Cards Forecast Category Performance: Number of Cards in Circulation 20102015
'000 cards 2010 Closed Loop Pre-Paid Function Open Loop Pre-Paid Function Pre-Paid Function
Source:
2011 68,402.1 6,043.9 74,446.0
2012 77,752.7 6,913.6 84,666.3
2013 85,325.8 7,679.6 93,005.4
2014 91,196.2 8,406.9 99,603.1
2015 94,378.9 9,050.9 103,429.8
57,063.6 5,147.3 62,210.8
Table 140 % growth
Pre-paid Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 20.4 6.3
2010/15 TOTAL 153.2 35.5
11.4 4.4
Table 141 % growth
Open Loop Pre-paid Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 20.6 13.7
2010/15 TOTAL 155.4 89.9
12.4 10.0
Table 142 % growth
Closed Loop Pre-paid Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR 20.3 2.1
2010/15 TOTAL 151.5 10.9
10.5 0.4
Pre-paid Cards in Circulation Forecast Category Performance: % Growth 2010-2015
2010-15 CAGR Closed Loop Pre-Paid Function Open Loop Pre-Paid Function Pre-Paid Function 10.6 11.9 10.7
2010/15 TOTAL 65.4 75.8 66.3
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Source:
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STORE CARDS IN THE UNITED KINGDOM CATEGORY ANALYSIS

HEADLINES
Store card transactions decreases in value by 17% in 2010 to 2.1 billion, while transactions volume falls by 21% to 36 million Retailers continue moving to third-party issuers, abandoning their own store cards in favour of co-branded credit cards Average store card spend per transaction increases by 6% to 57 in 2010 Santander UK plc rises to pole position in store cards with a 40% volume share in 2009 thanks to its acquisition of GE Capital Bank Ltd Store card transactions is set to decrease in constant value at a CAGR of -13% over the forecast period while transactions volume will fall at a CAGR of -15%
TRENDS
Store cards posted a negative performance again in 2010 as retailers continued moving away from offering their own store cards towards offering co-branded credit cards. Against this background, the number of store cards in the UK fell by 17% to 10.8 million cards, two million fewer than in 2009. High interest rates and the lack of real differentiation between store cards and alternatives such as credit cards played an important role in the ongoing demise of store cards in the UK. Much like credit cards, store cards proved susceptible to the negative economic situation which subsisted in the UK during 2010, with a 6% decrease registered in the number of transactions per card. While retailers enjoyed the benefits of issuing store cards when financial cards enjoyed stronger performances, the fallout of the global economic crisis adversely impacted upon the profitability of issuing store cards. Many issuing retailers unloaded their respective store card operations onto financial card issuing banks. An example of this was Marks & Spencer Financial Services Plc, which reached an agreement with HSBC Holdings Plc, while others such as John Lewis Partnership Plc have maintained their store cards portfolios, at least partially. John Lewis is currently offering co-branded credit cards with MasterCard as the operator. High interest rates represent one of the main factors deterring British consumers from using store cards. The high interest of store cards continued to play a key role in the waning popularity of store cards in the UK during 2010 as British consumers were more aware than ever of the high cost of store card use. Some store cards have interest rates as high as 30% APR. For example, the Miss Selfridge store card, issued in conjunction with Santander UK plc, charged 29.9% APR, while the average credit card in the UK has interest levied at around 17% APR.
Santander UK plc attained the leading position in store cards in the UK in 2009, accounting for 40% of total cards in circulation, as a result of its acquisition of GE Capital Bank Ltd. LaSer UK and Marks & Spencer Financial Services Plc, with 18% and 12% respectively, ranked in second and third players in 2009. Santander UK plcs store cards portfolio includes retailers such as Debenhams, Top Shop, Dorothy Perkins and House of Fraser, while LaSer collaborates with USC, M&Co and Selfridges for the issuing of these retailers store cards. Marks & Spencer issues store cards solely for its department store outlets. Its advantageous position is due to the Marks & Spencer chain being a much loved part of British culture. The decrease in popularity of store cards in the UK during the review period affected all major players, with many retail companies reporting a decrease in the actual number of its store cards in circulation. Only Ikano
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Financial Services Ltd saw a slight increase in the total number of store cards in circulation during 2009, the result of the increasing presence of IKEA outlets. In light of the high interest rates charged by store cards issuers, the co-branded credit cards which are offered by the same retailers are proving strong competitors for store cards. Consumers can choose between a co-branded credit card with an interest rate in line with credit cards offered by high street banks or a store card with a much higher APR. The former allows cash-strapped British consumers to use the card to pay at any other retail outlets which accept credit cards, while store cards can only be used at the outlets of the issuing retailer. In these times of economic uncertainty, consumers in the UK are moving towards cobranded credit cards, which offer more flexibility and more favourable interest and other terms and conditions. Many retailers which previously offered store cards are withdrawing them altogether. For example, John Lewis Partnership Ltd no longer offers its so-called account card. The company is attempting to convince all current holders of its account card to move towards its so-called partnership card, a credit card which has MasterCard as its operator.
PROSPECTS
Store cards in the UK is expected to experience a strong decline over the forecast period. Transactions volume is expected to fall at a CAGR of -15%, while transactions constant value is also set to decrease, falling at a CAGR of -13% over the forecast period. As well as decreases in transactions volume and value, the total number of store cards will also experience a significant decline over the forecast period, falling to 7 million by the end of the forecast period. All of these negative figures mean that the number of transactions per card is expected to reach just over two per year in 2015, with an average transaction of 72. Unemployment in the UK remained at around 8% in 2010 and it is likely to stay at this level for at least the first half of the forecast period. This high level of unemployment has engendered a high level of debt awareness among British consumers, the likes of which has not been seen for many years, with many consumers paying off their debts and avoiding any kind of spending on credit as a precautionary measure. Against this background, store cards are expected to continue suffering over the early stages of the forecast period as consumers avoid the high interest rates which store cards tend to carry. Rewards programmes from certain retailers will not be sufficient to maintain the current levels of store card ownership, let alone attract new store card holders. Although women in the 55-64 age segment remain the key demographic for the store cards of clothing and footwear specialist retailers, younger consumers are proving much less enthusiastic with regards to store cards as brand loyalty is far lower among such consumers. Nevertheless, regular users of store cards who pay off the full balance in a timely fashion could still enjoy greater benefits from using their store cards than if they were to move towards credit cards. Given the flurry of movements towards co-branded credit cards, retailers such as John Lewis and Marks & Spencer could potentially end up moving all of their store card holders towards co-branded credit cards. Both retailers are already issuing co-branded credit cards in conjunction with MasterCard and it is possible that all cardholders could be moved towards these schemes in a bid to optimise resources.
CATEGORY DATA
Table 144 Store Cards Category Performance: 2005-2010 2005 Number of transactions (mn) Transaction value ( mn)
Source:
2006 67.9 3,366.0
2007 61.1 3,042.0
2008 55.6 2,863.0
2009 46.1 2,488.6
2010 36.2 2,067.8
83.4 3,765.0
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Store Cards Category Performance: Number of Cards in Circulation 2005-2010
2005 Store Cards

Source:
2006 15,934.0
2007 15,637.0
2008 14,800.5
2009 12,947.5
2010 10,799.5
17,875.0
Table 146 % growth
Store Cards Category Performance: % Growth 2005-2010

Source:
2005-10 CAGR -15.4 -11.3
2005/10 TOTAL -56.6 -45.1
-21.4 -16.9
Store Cards in Circulation Category Performance: % Growth 2005-2010
2009/10 Store Cards

Source:
2005-10 CAGR -9.6
2005/10 TOTAL -39.6
-16.6
Store Cards: Number of Cards by Issuer 2005-2009
2005 2,404.2 1,373.8 755.6 1,030.4 7,548.3 3,068.7 1,044.0 650.0 17,875.0
2006 2,142.9 1,224.5 1,068.0 673.5 918.4 6,591.3 2,735.5 580.0 15,934.0
2007 2,815.0 1,959.9 1,161.8 1,125.0 696.0 883.5 6,455.8 540.0 15,637.0
2008 2,593.0 1,814.5 1,087.8 1,031.6 674.9 845.1 6,016.4 737.1 14,800.5
2009 5,211.4 2,324.1 1,605.5 886.9 861.0 783.3 757.4 517.9 12,947.5
Santander UK plc LaSer UK Marks & Spencer Financial Services Plc Royal Bank of Scotland Group Home Retail Group Ikano Financial Services Ltd John Lewis Partnership Plc GE Capital Bank Ltd Creation Financial Services Ltd GUS plc Others Total
Source:
Store Cards: Payment Transaction Value by Issuer 2005-2009
2005
2006
2007
2008
2009
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Santander UK plc LaSer UK Marks & Spencer Financial Services Plc John Lewis Partnership Plc Home Retail Group Royal Bank of Scotland Group Ikano Financial Services Ltd GE Capital Bank Ltd Creation Financial Services Ltd GUS plc Others Total
Source:
583.6 293.7 233.1 149.8 1,475.9 571.2 229.3 228.5 3,765.0
521.7 262.5 233.9 208.0 134.0 1,292.5 510.6 202.6 3,366.0
486.7 441.1 234.2 226.3 180.4 127.8 1,165.1 180.4 3,042.0
455.2 403.7 211.9 203.3 148.9 128.8 1,090.8 220.5 2,863.0
937.0 403.2 347.2 191.6 173.0 123.2 118.2 195.4 2,488.6
Table 150
Store Cards Forecast Category Performance: 2010-2015 2010 2011 29.2 1,749.4 2012 24.5 1,512.4 2013 20.9 1,324.9 2014 18.1 1,166.7 2015 15.8 1,040.1

Source:
36.2 2,067.8
Store Cards Forecast Category Performance: Number of Cards in Circulation 2010-2015
2010 Store Cards

Source:
2011 9,262.7
2012 8,272.5
2013 7,652.1
2014 7,237.4
2015 7,084.7
10,799.5
Table 152 % growth
Store Cards Forecast Category Performance: % Growth 2010-2015

Source:
2010-15 CAGR -15.3 -12.8
2010/15 TOTAL -56.4 -49.7
-12.5 -10.9
Store Cards in Circulation Forecast Category Performance: % Growth 2010-2015
2010-15 CAGR Store Cards

Source:
2010/15 TOTAL -34.4
-8.1
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Financial Cards and Payments in UK

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Financial Cards and Payments in the United Kingdom

Euromonitor International March 2011

Financial Cards and Payments

List of Contents and Tables

Financial Cards and Payments

Financial Cards and Payments

ATM CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ................................................31

CHARGE CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ........................................35

Financial Cards and Payments

CREDIT CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ..........................................45

Financial Cards and Payments

DEBIT CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS .............................................56

Financial Cards and Payments

Table 112 Table 113 Table 114 Table 115

PRE-PAID CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ......................................62

STORE CARDS IN THE UNITED KINGDOM - CATEGORY ANALYSIS ...........................................72

Financial Cards and Payments

Financial Cards and Payments

Financial Cards and Payments

FINANCIAL CARDS AND PAYMENTS IN THE UNITED KINGDOM - INDUSTRY OVERVIEW

Debit Transactions Overtakes Cash for the First Time

Barclays Group Plc Leads Financial Cards and Payments in 2009

Mobile Commerce Will Continue Growing in the UK

Economic Recovery Expected To Dominate the Forecast Period

KEY TRENDS AND DEVELOPMENTS

Financial Cards and Payments

the British Banking Landscape Changes As A Result of the Recession

Financial Cards and Payments

Mobile Commerce Continues Growing in the UK

Financial Cards and Payments

New Regulations for Issuers of Credit Cards and Store Cards

Financial Cards and Payments

Contactless Cards Slowly Become More Popular in the UK

Financial Cards and Payments

Financial Cards and Payments

Table 1 '000 Units

Number of POS Terminals 2005-2010

2005 No of POS terminals

Table 2 '000 Units

Number of ATMs 2005-2010

Value Lost to Fraud 2005-2010

2006 98.6 68.5 212.6 15.4 31.9 427.0

2007 144.3 56.2 290.5 10.2 34.1 535.3

2008 169.7 54.1 328.4 10.3 47.5 610.0

2009 183.6 51.7 369.0 9.5 53.3 667.1

2010 196.8 50.4 409.2 8.8 59.8 725.0

96.8 89.0 183.2 40.0 30.5 439.5

Table 4 % value analysis

Card Expenditure by Location 2010

Card holder not present 19.6 21.6 9.1 24.1

80.4 78.3 90.9 75.8

100.0 100.0 100.0 100.0

Table 5 % value analysis

Card Expenditure by Category 2010

Clothing and footwear

Food, beverages, tobacco

Household goods and services 10.3

Leisure and recreation

Operation of personal transport

Charge Card Transactions

Financial Cards and Payments

4.9 4.1 5.8

16.3 21.8 25.2