Premium Credit Cards - UK - October 2003

SUMMARY

Mintel's 'Premium Credit Cards, 2003' charts the factors that are driving the sector and the potential market size for providers who insist that applicants meet a minimum income. The spectacular increase in the number of premium cards in issue is detailed, alongside Mintel's estimates of the total value of the premium card market. Analysis of products and providers examines the benefits and pricing of premium cards, while an Advertising and Promotion section of the report looks at the marketing mix employed by providers.

Key to the report and your understanding of the challenges and opportunities that providers face are revealing findings from Mintel's exclusive consumer research. In Consumer Ownership and Behaviour, Mintel examines the ownership patterns of consumers - not only whether the respondents hold a premium or standard card, but also how many they hold. Overall account balances are also considered, highlighting the distribution of the most profitable consumers and those who tend to maintain a relatively high average balance.

In Consumer Attitudes and Perceptions, Mintel examines the way in which premium cards and the features they offer are viewed by consumers. Questions include whether or not gold or platinum cards retain any of their original prestige, or whether they are viewed as being no different from standard cards.

Finally, the likely developments in this market are detailed in The Future section of the report, forecasting the potential market size in the coming years.

Supplying an expert and practical understanding of the UK premium credit card market, Mintel's latest report offers the level of information needed to understand the market as a whole, while identifying where the next opportunities for growth are going to come from.

Key findings include:

• UK consumers are spending on credit cards like never before - gross new consumer credit was almost =200 billion in 2002, with credit cards accounting for the majority of this spending.
• In today's highly competitive market, offering gold, platinum or black cards is one way for providers to stand out from the crowd.
• Around a third of taxpayers earn at least =20,000, meaning that there is a sizeable market for those providers who set a minimum income requirement for potential card holders.
• While relatively low minimum income criteria maximises the potential size of the market, there are concerns that this has led to a reduction in the perceived exclusivity of premium credit cards.

Offering you a new, fully up-to-date examination of:

• Market factors
• Market size
• Products and providers
• Distribution
• Advertising and promotion
• Consumer trends and attitudes
• Future trends
• Sales forecasts

TABLE OF CONTENTS

Introduction and Abbreviations

• Global information and research
• Consumer research
• ACORN

Abbreviations

Executive Summary

• A chance to stand out from the crowd...
• ...for both cardholders and providers
• Credit card spending doubles in a decade...
• ...with premium cards making a sizeable contribution
• A wide variety of features and minimum income requirements
• Direct mail the key advertising channel
• Most adults have a credit card, while a fifth have a number of accounts
• Card protection a winning feature
• Premium cards have not entirely lost their cachet
• Premium cards will remain an important tool for providers...
• ...but there is a limit to how far the concept can be taken

Market Factors

• Consumer expenditure remains healthy
• Figure 1: Total GDP, PDI, consumer expenditure and the savings ratio, at constant 1998 prices, 1998-2007
• Consumer confidence waning somewhat
• Figure 2: Changes in consumer confidence by income band, July 2001-July 2003
• Low interest rates help providers cut costs
• Figure 3: Bank of England base rate, 1992-2003
• Consumer credit hits new heights
• Figure 4: Gross new consumer credit, 1995-2002
• House prices a key driver of consumer credit
• Almost ten million taxpayers have sufficient income for a premium card...
• Figure 5: Income distribution, 1998/99-2002/03
• ...calling into question the 'exclusivity' of these products

Market Size

• A card for every man, woman and child in the UK
• Figure 6: Number of credit and charge cards in issue, 1993-2002
• Even stripping out inflation, credit and charge card spending has doubled in a decade
• Figure 7: Value of credit and charge card transactions, 1993-2002
• Figure 8: Proportion of consumer expenditure accounted for by credit and charge card transactions, 1993-20027
• Premium cards now account for a quarter of credit and charge cards in issue
• Figure 9: Total number of premium credit and charge cards in issue, and overall value of transactions, 1996-2002
• Gold cards account for the bulk of the premium market...
• Figure 10: Number of gold credit and charge cards in issue, and number and value of gold card transactions, 1996-2002
• ...but platinum cards are catching up
• Figure 11: Number of gold credit and charge cards in issue, and number and value of gold card transactions, 1997-2002
• Average turnover confirms the democratisation of premium cards
• Figure 12: Average turnover on premium and standard credit/charge cards, 1996-2002
• A steady increase in outstanding balances...
• Figure 13: Credit outstanding and percentage of balances bearing interest, January 1998-October 2002
• ...of which premium cards account for a disproportionate share
• Travel insurance will have its attractions for premium card holders
• Figure 14: Overseas transactions on credit/charge cards, 2002

Products and Providers

• Gold cards - does the claim of exclusivity stand up to examination?
• Figure 15: Rates, benefits and availability of selected gold cards, September 2003
• Valuable benefits available to platinum card applicants
• Figure 16: Rates, benefits and availability of selected platinum cards, September 2003
• The new breed of premium card - 'credit for those that don't need credit'
• Figure 17: Rates, benefits and availability of selected charge and ultra-premium cards, September 2003

Advertising and Promotion

• Direct mail accounts for the lion's share of premium card adspend
• Figure 18: Premium credit card advertising outlets, Year to August 2003
• Card specialists top the list of above-the-line advertisers
• Figure 19: Above-the-line advertising expenditure on premium credit cards, years to August 2002 and August 2003
• Direct mail adspend dwarfs that on standard media
• Figure 20: Direct mail adspend on premium credit cards, years to August 2002 and August 2003
• Affinity relationships also used by premium card providers

The Consumer

• The majority of the UK's adults have a credit card
• Figure 21: Credit card ownership, August 2003
• Multiple card ownership most common among the middle-aged and the affluent
• Figure 22: Credit card ownership by gender, age and socio-economic group, August 2003
• A fifth of all respondents have at least one premium card
• Figure 23: Ownership of premium credit cards, by gender, age and socio-economic group, August 2003
• Premium card ownership highest in London and the South East
• Figure 24: Ownership of premium credit cards, by television region, August 2003
• Three in ten full-time employees have more than one credit card
• Figure 25: Ownership of premium credit cards, by working and marital status, August 2003
• Credit card ownership peaks among third-agers
• Figure 26: Ownership of premium credit cards, by lifestage and Special Group, August 2003
• Ownership of premium cards reflects the demographic profile of the broadsheet newpapers
• Figure 27: Ownership of premium credit cards, by media usage, August 2003
• Two fifths always clear their credit card balance
• Figure 28: Balance owed on credit cards, August 2003
• Younger cardholders tend to maintain higher balances
• Figure 29: Balance owed on credit cards, by gender, age and socio-economic group, August 2003
• C1s and Des most likely to maintain a balance on their card
• Third-agers and the retired avoid sizeable balances
• Figure 30: Balance owed on credit cards, by lifestage, August 2003
• Premium card holders tend to maintain higher balances
• Figure 31: Balance owed on credit cards, by card ownership, August 2003
• Protection and low rates are a winning combination
• Figure 32: Most attractive premium card features, by gender and socio-economic group, August 2003
• Protection the priority for key premium card targets
• Figure 33: Most attractive premium card features, by age, August 2003
• Travel insurance a key reason for applying for a premium card?
• Figure 34: Most attractive premium card features, by card ownership, August 2003
• Premium cards are still seen as prestigious
• Figure 35: Attitudes towards premium credit cards and card switching, August 2003
• Older consumers become more cynical
• Figure 36: Perceived difference between premium and standard credit cards, by socio-demographic group, August 2003
• The 'prestige factor' is less important for the more affluent
• Figure 37: Perceived prestigiousness of premium credit cards, by socio-demographic group, August 2003
• Younger consumers also rank the prestige factor highly
• Three in ten cardholders have switched provider in the last three years
• Figure 38: Proportion of respondents who have switched credit card provider in the last three years, by socio-economic group, August 2003
• Are premium card holders disillusioned by their existing providers?
• Figure 39: Attitudes towards premium credit cards and card switching by card ownership, August 2003
• Potential for premium card providers to expand market share
• Figure 40: Gender, age, socio-economic and regional profile of potential premium card switchers, August 2003
• Affluent families offers rich pickings to card providers
• Figure 41: Profile of potential premium card switchers by working status, marital status, lifestage, media usage and ACORN group, August 2003
• The Internet - an ideal sales medium for premium cards?

The Future

• Credit has become an integral part of day-to-day life in the UK
• Competition will remain keen, and premium cards will remain an essential tool for providers
• The size of the premium card sector will stabilise
• How long can the 'prestige factor' remain?
• Will black cards share the fate of the gold and platinum offerings?

Forecast

• Credit card spending leads the way
• A dynamic market
• Figure 42: Forecast of the UK market for premium credit cards, by value, 2002-07
• Figure 43: Forecast of the UK market for premium credit cards, by volume, 2002-07
• Added value features boost demand
• Elitism must be preserved
• Factors incorporated