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United Kingdom Cards & Payments Market Report

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  • Published Date: May 2021

UK CARDS & PAYMENTS MARKET REPORT

A detailed analysis of the consumer banking and card and payments market in the United Kingdom, with clear commentary supported by historic and forecast data.
The dynamic nature of contemporary payments is nowhere clearer than in this market. The migration from cash, new technical possibilities coming on stream from Open Banking and Faster Payments, and ongoing regulatory reshaping of markets present opportunities for canny and innovative players.
Contactless, already a mass phenomenon, has flourished further in the Covid era, with cash usage in the UK falling by a fifth in half a decade. As credit cards embark on a two- or three-year recovery period after the initial Covid lockdowns, online debit card purchase volume has soared.
In contrast, BNPL, from a very low base, has boomed as younger UK consumers show an appetite for new ways of doing things. A Request-to-Pay feature, far surpassing direct debit in terms of flexibility and customisation, was added to the Faster Payments Service in 2020.

What you can learn from this UK card payments report:

Why mobile proximity payments are set to take off.
The challengers to cards for e-commerce.
How BNPL has soared, and the headwinds gathering.
Why debit cards have steadily risen to dominate purchase volume.
The power and intent of regulatory reviews and rules.

UNITED KINGDOM COUNTRY REPORT | KEY FACTS

  • Covid-related lockdowns led to a decline in real GDP of 9.9 percent during 2020, among the worst developed countries.
  • The pandemic led to a substantial decline in cash usage during 2020, accelerating a trend that was well underway.
  • Credit card spend also experienced a significant decline, but debit card spending increased marginally as consumers' traditional spending patterns were upended.
  • Credit card outstandings fell by over 40 percent in 2020. While the pandemic was the primary cause, rules on persistent debt had already led to a slowdown in the market.
  • Competition from alternative lending is also increasing, with Buy now, pay later services proving popular among the younger generation.
  • The Big Four (Lloyds, Barclays, HSBC and NatWest) continue to dominate retail banking, despite regulatory initiatives to increase competition.
  • Faster Payments and Open Banking enable fintech providers to offer new and innovative services, while the Current Account Switch Service simplifies a once-onerous process for customers.
  • Although several challengers have gained prominence, the major banks are still overwhelmingly preferred for consumers' primary salary accounts.
  • Mastercard has gained ground in the debit cards arena thanks to deals with issuers including NatWest, Santander and Nationwide in recent years.

United Kingdom Payments Research | Report Contents

TABLE OF CONTENTS
Demographics and the economy.
Payments environment.
Cards market.
Mobile payments.
Profit pool.
The networks.
Key retail banks and issuers.
Acquiring and processing.
Online acquiring.
Regulatory and other cards market information.

UK Report Data Tables.
(All 2015-24F unless otherwise stated)

1: Demographic and economic indicators.
2: Ownership of key consumer devices.
3: Internet usage by population.
4: Access points: 2015-22F
5: Account penetration:
6: Consumer payment trends: 2015-22F.
7: B2C e-commerce payment methods: 2015-22F.
8: Total card payment metrics.
9: Contactless card metrics.
10: Credit card numbers.
11: Total credit card metrics.
12: Credit card profitability indicators.
13: Debit card numbers.
14: Debit card metrics.
15: Pre-paid/e-money card metrics.
16: Mobile proximity payment metrics: 2017-2024F
17: Mobile P2P payments: 2017-2024F
18: Profit pool includes credit card numbers, billed volumes, oustandings, interest incomes, net interest revenues, merchant revenues, card fee revenues, other non-interest incomes, total revenues, net credit losses, operating expenses, total expenses, pre-tax profits, merchant service charges, rollover rates, APR, net credit losses to outstandings, operating costs to revenues, ROA (pre-tax profits to outstandings).

(All 2015-22F below unless otherwise stated)

19: Networks' credit card market shares.
20: Networks' credit card data numbers.
21: Networks' credit card billed volume.
22: Networks' number of credit card transactions.
23: Networks' average credit card transaction value.
24: Credit card interchange fees by network.
25: Networks' debit card market shares.
26: Networks' debit card data numbers.
27: Networks' debit card billed volume.
28: Networks' number of debit card transactions.
29: Networks' average debit card transaction value.
30: Debit card interchange fees by network.
31: Key credit card issuers market shares by credit card numbers: 2016-22F
32: Key issuers market shares in credit card outstandings: 2016-22F
33: Key debit card issuers market shares by debit card numbers: 2016-22F
34: Merchant acquirer credit card market share: 2021E.
35: Credit card merchant service charges: 2015-24F
36: Merchant acquirer debit card market share: 2021E.
37: Debit card merchant service charges: 2015-24F
38: Credit card issuer/issuing processor relationships.
39: Credit card acquirer/acquiring processor relationships.
40: Credit card issuing processor market shares by card numbers: 2021E.
41: Credit card acquiring processor market shares by the number of POS transactions: 2021E.
42: Online merchant acquirer market share: 2021E.

United Kingdom Country Report | Selected Extracts

Demographics and the economy
Real GDP is forecast to increase during 2021 and 2022. However, this greatly depends on the response to the pandemic, especially with regard to the rollout of vaccines. In addition, as the UK's transition period after leaving the EU ended so recently, it is difficult to predict the precise impact of Brexit on economic performance.

Payments Environment
The United Kingdom's retail banking and payments markets are highly developed and competitive. Emerging payment technologies and progressive regulation have accelerated the pace of development in recent years.

Payment Cards Market
Britain is Europe's biggest market for payment cards – and one of the world's most advanced and innovative. The market is also mature, with a high penetration rate of credit and debit cards by global standards.

Mobile Payments
Most mobile wallets currently available here run exclusively over card rails. There may be opportunities for players to offer differentiated services which leverage the FPS (Faster Payments Service) infrastructure and Open Banking. In particular, large merchants and tech players have both the scale and market influence to drive consumer adoption of new payment systems.

Profit Pool
There was a substantial decline of 21% in industry-wide profitability during 2020. This was primarily due to the decline in British economic activity as pandemic-related restrictions confined Britons to their homes, which resulted in a substantial decrease in credit card spending and borrowing.

Card Networks
Mastercard and Visa account for the vast majority of credit cards in issue. At the end of 2020, the total number of credit cards issued by Mastercard stood at 40 million, equating to a market share of 61%; Visa had 22 million cards, representing 34%. Visa is the leader in Britain's debit card networks market, with a market share of 85% of cards in issue at the end of 2020.

Key Retail Banks and Issuers
Five banks dominate the British retail banking market: Lloyds Banking Group, NatWest Group (formerly RBS), HSBC, Barclays and Santander. These accounted for around 76% of debit cards in issue at the end of 2020.

Acquiring and Processing
Britain's acquiring market is concentrated, with some 60% of total acquired billed volume in the hands of two of the largest merchant acquirers globally: FIS (Fidelity National Information Service) and Barclaycard. Independent service operators have made significant inroads into the British acquiring processing market as they have globally. These service providers have more scope to invest in technology while offering competitive pricing thanks to their large scale.

Online Acquiring
The United Kingdom is a global leader in e-commerce adoption: total online acquired billed volume made using payment cards reached an estimated $342 billion in 2020, through an estimated total of 2.8 billion transactions. CNP billed volume represented an estimated 36% of total acquired billed volume during 2020.

Regulatory and Markets Information
Pay.UK is also responsible for delivering the 'New Payments Architecture' (NPA), which aims to unite the various interbank clearing systems under one authority, thus simplifying retail payments. As of early 2021, two aspects of the NPA have been implemented: Confirmation of Payee (CoP) and Request to Pay (RtP).

United Kingdom Payments Report | Entities Referenced

Abbey National
Advent International
Adyen
Aer Lingus
Afterpay
Alibaba
Alliance & Leicester
Allied Irish Banks
Amazon
American Express
Amex
Android Pay
Apple Pay
Apple
Aqua Card
Argos
Asda
Asos
Atom Bank
Aviva
AXA
BACS
Bacs
Bain Capital
Bank of America
Bank of England
Bank of Ireland
Bank of Scotland
Barclaycard
Barclays
BC Card
BoE
bPay
Bradford & Bingley
Braintree
Brit Awards
British Airways
Capital One
Cardnet
Cardstream
Cheque and Credit Clearing Company
Clearpay
Coinbase
Coop
Cooperative Bank
Coutts
CyberSource
Danske Bank
DataCash
DinaCard
Diners Club
Discover
eBay
ECB
European Central Bank
Facebook
Faster Payments Service
FCA
Fidelity National Information Service
Financial Conduct Authority
First Data
First Direct
FIS
Fiserv
FPS
GDPR
Global Payments
Google Pay
Halifax
HBOS
HSBC
HSBC
IMF
Ingenico
International Monetary Fund
International Telecommunication Union
Intuit
ITU
iZettle
John Lewis
John Lewis Financial Services
Kinetic
Klarna
KLM
LaSer UK
Laybuy
LBG
Lex Autolease
LINK
Lloyds
Marks & Spencer
Marks and Spencer Financial Services
Marriott Bonvoy
Mastercard
MBNA
Metro Bank
Mobile Payments Service Company
Monzo
N26
Nationwide
NatWest
NatWest Tyl
Netflix
New Payments Architecture
NewDay
Next
NPA
O2
Office for National Statistics
ONS
Opayo
Paddy Power
Pay by Bank app
Pay.UK
Payment System Regulator
PayPal
PbBa
People's Bank of China
Pingit
Play.com
Post Office
Prudential Regulation Authority
PSD2
PSR
RBS
Realex Payments
Revolut
Sage Pay
Sainsbury's Bank
Samsung Pay
Santander
SCA
Scottish Widows
Secure Trading
Shop Direct
Spotify
Starling Bank
Stripe
SumUp
Tencent
Tesco Bank
Tesco
TfL
TransferWise
Transport for London
TSB
TSYS
Twitter
Uber
UK Finance
UK Payments Administration
Ulster Bank
UNCTAD
UnionPay
Universal Trust Service Provider
UTSP
Vanquis Bank
Vantiv
Virgin Atlantic
Visa
Vocalink
Vodafone
Wise
Woolard Review
World Bank
Worldpay
Zapp


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