Executive Summary

At the end of 1995 there were 74.9 million credit and finance cards on issue in the UK and the value of card transactions for the year totalled £85.83bn. Since 1991, the annual volume of transactions using bank credit cards has risen from 690 million to 888 million, an increase of 28.7%. Over the same period, the annual volume of domestic retail debit card transactions has tripled, from 359 million to 1 billion. In 1995, the value of an average transaction with a credit card was £48.05 and with a debit card £28.34.

The market is increasingly competitive, with a number of new entrants from overseas, some of which have declared an intention to break the stranglehold on the market held by the UK retail banks, which are seen to be imposing excessively high interest rates. There is a great deal of activity surrounding company-branded cards, with new products promised from a number of card issuers; and American Express striving to increase its penetration. Tesco has taken the lead amongst retailers and introduced a card offering banking services. Meanwhile, another battle is raging amongst the network providers as Visa, MasterCard and American Express try to increase the number of financial institutions using their products and services.

Trials of electronic purses, in the UK and at the 1996 Olympics, have resulted in the formation of Mondex International and the announcement of a competitive product from Visa, already supported by a number of banks. All this activity is intensifying discussion about the lack of suitable standards, and who is to pay for a new generation of card reading equipment which must be installed in retail outlets if the proposed chip-based enhancements are to be readable.

Over the next 5 years, Key Note forecasts the number of credit and finance cards of all types on issue in the UK will increase by a further 27.1%, reaching 102.3 million by the year 2000. At current prices, the total annual value of transactions will increase by 38% to reach £130.2bn.

Debit cards will continue to grow the fastest and by the year 2000 this type of card will represent 44.4% of all credit and finance cards on issue. The total annual value of credit card transactions, at current prices, is forecast to increase by 26.2%, reaching £78.4bn; and that for debit cards by 60.7% reaching £51.85bn. Within the credit card sector, store cards will enjoy the strongest growth with the total value of transactions reaching £6.42bn (up 30.9%) by the year 2000.

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