European Credit Card Market (The) - Europe - February 2004

SUMMARY

There are more than 450 million plastic cards in circulation across the 15 EUmember states, and numerous differences in the ways that they are used in eachcountry. Although traditionally debit cards have dominated the market there arenow more than 100 million credit cards in issue highlighting a number ofopportunities for suppliers.

This report compare attitudes to plastic cards in the key countries - UKconsumers are by far the most conversant users of credit cards, accounting formore than 60% of the total market alone. While France the number of cards inissue is low the use their cards intensively at point of sale. In contrast tothe French, German consumers own an above-average number of plastic cards yetbelow-average card usage. Whereas in Italy the market has been inhibited byconsumers' traditional strong attachment to cash and a relatively debt-aversenature. Spanish consumers subscriber to a wide variety of cards but appearreticent to use them at the point of sale.

The overall amount being spent via plastic cards has grown substantially overthe past few years and this report will provide you with the tools to capitalisefrom that trend. What are the high risk strategies for your business? How shouldyou tailor your promotional message to reach different consumers?

TABLE OF CONTENTS

Introduction and Abbreviations

• Aims of the report

Abbreviations

Executive Summary

• Debit cards dominate the European plastic cards market
• But there are now more than 100 million credit cards in issue
• Plastic card transaction volumes also continue to grow
• Card expenditure on plastic cards topped ?900 billion in 2003
• Number of merchant locations has risen sharply in the last few years
• French consumers are avid users of plastic cards
• Debit cards dominate the German plastic cards market
• Italy's strong attachment to cash has dampened demand for credit
• Plastic cards enjoy widespread popularity in Spain
• The UK spends more on plastic than any other EU member state

Market Background

• Figure 1: Three-month interest rates, 2003
• Consumer confidence also has a major impact on the credit card market
• Figure 2: Consumer confidence indicator, balance of opinion, all EUcountries, 2003 and 2004
• Introduction of the euro should be positive for plastic cards
• The Consumer Credit Directive could stimulate credit card growth
• Consolidation across the banking sector could boost credit card sales
• Growth in Internet sales could stimulate card usage

European Overview

• There are now over 100 million credit cards in issue across the EU
• Figure 3: Number of credit cards issued in the EU, 1998-2003
• But debit cards still dominate the European plastic cards market
• Figure 4: Number of credit cards and debit cards in the EU, 1998-2003
• UK consumers hold the majority of credit cards in issue...
• Figure 5: Number of credit cards and debit cards in issue, by EU memberstate, 2003
• ...while Germany tops the debit card league table
• UK boasts the highest number of credit cards per adult
• Figure 6: Country rankings, by card issuance per adult, 2003
• Luxembourg, Ireland, Spain and Greece are also high in credit cardrankings
• Denmark, Finland and Belgium have a low number of credit cards per adult
• The total number of credit card transactions continues to grow
• Figure 7: Total number of credit card transactions in the EU, 1998-2003
• But debit card usage in the EU remains much higher...
• Figure 8: Total number of credit card and debit card transactions in theEU, 1998-2003
• ...with more transactions being made with each debit card
• Figure 9: Average number of transactions per card in the EU, 1998-2003
• UK consumers complete by far the most credit card transactions
• Figure 10: Number of credit card and debit card transactions, EU memberstates, 2003
• Consumers in the UK, Luxembourg and Ireland use credit cards the most
• Figure 11: Country rankings, by card usage per adult, 2003
• German and Italian consumers have low levels of card usage in general
• Total credit card expenditure has been boosted by rising transactions...
• Figure 12: Total value of credit card transactions in the EU, 1998-2003
• ...but the value of debit card transactions is nearly three times higher
• Figure 13: Total value of credit card and debit card transactions in theEU, 1998-2003
• UK consumers spend the most on credit cards
• Figure 14: Country rankings, by card expenditure as a proportion of GDP,2003
• Ireland, Luxembourg, Portugal and Spain also feature high in the rankings
• France and Belgium top the debit card expenditure rankings
• Number of card acceptance locations has risen sharply in the last fewyears
• Figure 15: Total number of credit card acceptance locations in the EU,1998-2003
• Italy boasts the most merchant locations which accept credit cards
• Figure 16: Number of credit card acceptance locations, by member state,2003
• Greece and Spain have the most merchant locations per person

France

• France is the second most heavily populated EU member state
• Figure 17: Total populations of the five largest EU countries, 1997-2007
• Future population growth will all come from the over-55s
• Figure 18: French population, by age bracket, 1997-2007
• The French economy has posted modest growth rates in recent years
• Figure 19: GDP and consumer expenditure in the five largest EUcountries, 1997-2007
• French consumers are typically comfortable with non-cash transactions
• Plastic card issuance in France is below the EU average
• Figure 20: Total number of plastic cards per 1,000 adults, France versusEU, 1998-2003
• Debit cards dominate the French payment cards market
• Figure 21: Proportion of plastic cards in issue, France versus EU, 2003
• The number of credit cards per person is therefore relatively low
• Figure 22: Number of credit cards per 1,000 adults, five largest EUcountries, 2001 and 2003
• But French consumers are avid users of their plastic cards
• Figure 23: Total number of plastic card transactions per adult, Franceversus EU, 1998-2003
• Debit cards account for the vast majority of transactions
• Figure 24: Proportion of plastic card transactions, France versus EU,2003
• But credit card transactions per card are extremely high in France
• Figure 25: Credit card usage, five largest EU countries, 2001 and 2003
• French consumers also spend more on plastic than their EU counterparts
• Figure 26: Value of card expenditure as a proportion of GDP, Franceversus EU, 1998-2003
• But credit card spending as a proportion of GDP is extremely low
• Figure 27: Value of credit card transactions, five largest EU countries,2003
• France has an above-average number of merchant locations
• Figure 28: Number of credit card acceptance locations per 1,000 adults,France versus EU, 1998-2003
• Egg's experiences highlight difficulties entering the French market

Germany

• Germany offers the largest potential market in Europe
• Figure 29: Total populations of the five largest EU countries, 1997-2007
• Population growth will largely stem from the over-45s
• Figure 30: German population, by age bracket, 1997-2007
• The German economy has been relatively lacklustre in the last few years
• Figure 31: GDP and consumer expenditure in the five largest EUcountries, 1997-2007
• The level of consumer debt is relatively high in Germany
• German consumers own an above-average number of plastic cards
• Figure 32: Total number of plastic cards per 1,000 adults, Germanyversus EU, 1998-2003
• But debit cards dominate the German market
• Figure 33: Proportion of plastic cards in issue, Germany versus EU, 2003
• The number of credit cards per person is therefore very low
• Figure 34: Number of credit cards per 1,000 adults, five largest EUcountries, 2001 and 2003
• German consumers use plastic cards less often their EU counterparts
• Figure 35: Total number of plastic card transactions per adult, Germanyversus EU, 1998-2003
• Debit cards account for the vast majority of transactions at POS
• Figure 36: Proportion of plastic card transactions, Germany versus EU,2003
• Credit card transactions per card are also low in Germany
• Figure 37: Credit card usage, five largest EU countries, 2001 and 2003
• German consumers spend less on plastic than their EU counterparts
• Figure 38: Value of card expenditure as a proportion of GDP, Germanyversus EU, 1998-2003
• Credit card expenditure as a proportion of GDP is extremely low
• Figure 39: Value of credit card transactions, five largest EU countries,2003
• Germany has relatively few merchant locations per person
• Figure 40: Number of credit card acceptance locations per 1,000 adults,Germany versus EU, 1998-2003
• Loyalty schemes may provide a boost to future credit card growth

Italy

• Italy has a total population of almost 58 million
• Figure 41: Total populations of the five largest EU countries, 1997-2007
• Almost a fifth of Italy's population are aged 65+
• Figure 42: Italian population, by age bracket, 1997-2007
• Italian economy is set for modest growth over the next few years
• Figure 43: GDP and consumer expenditure in the five largest EUcountries, 1997-2007
• Italy's attachment to cash has dampened demand for consumer credit
• Italian consumers display a weak propensity to hold plastic cards
• Figure 44: Total number of plastic cards per 1,000 adults, Italy versusEU, 1998-2003
• Debit cards are much more popular than credit cards in Italy
• Figure 45: Proportion of plastic cards in issue, Italy versus EU, 2003
• Italy has a relatively low number of credit cards per person
• Figure 46: Number of credit cards per 1,000 adults, five largest EUcountries, 2001 and 2003
• Italian consumers have extremely low plastic card usage rates
• Figure 47: Total number of plastic card transactions per adult, Italyversus EU, 1998-2003
• Debit cards account for the majority of transactions at POS
• Figure 48: Proportion of plastic card transactions, Italy versus EU,2003
• Credit card transactions per card are extremely low in Italy
• Figure 49: Credit card usage, five largest EU countries, 2001 and 2003
• Total plastic card expenditure in Italy is much lower than the EU average
• Figure 50: Value of card expenditure as a proportion of GDP, Italyversus EU, 1998-2003
• Credit card spending as a proportion of GDP is also comparatively low
• Figure 51: Value of credit card transactions, five largest EU countries,2003
• Italy boasts the most credit card-accepting merchant locations
• Figure 52: Number of credit card acceptance locations per 1,000 adults,Italy versus EU, 1998-2003
• Future credit card growth may be stimulated by low interest rates

Spain

• Spain has the fastest-growing population of the large EU states
• Figure 53: Total populations of the five largest EU countries, 1997-2007
• Around a third of Spain's population are aged 25-44
• Figure 54: Spanish population, by age bracket, 1997-2007
• The Spanish economy is expected to grow strongly over the next few years
• Figure 55: GDP and consumer expenditure in the five largest EUcountries, 1997-2007
• Spain has traditionally had moderate levels of consumer credit
• Plastic cards enjoy widespread popularity in Spain
• Figure 56: Total number of plastic cards per 1,000 adults, Spain versusEU, 1998-2003
• Credit cards are a relatively popular product in Spain
• Figure 57: Proportion of plastic cards in issue, Spain versus EU, 2003
• Spanish consumers own a relatively high number of credit cards per person
• Figure 58: Number of credit cards per 1,000 adults, five largest EUcountries, 2001 and 2003
• Use of plastic cards at POS, though, is still relatively low in Spain
• Figure 59: Total number of plastic card transactions per adult, Spainversus EU, 1998-2003
• Credit cards account for almost four in ten transactions
• Figure 60: Proportion of plastic card transactions, Spain versus EU,2003
• Credit card usage per adult has risen by almost 20% in the last two years
• Figure 61: Credit card usage, five largest EU countries, 2001 and 2003
• Consumers in Spain spend less on plastic than their EU counterparts
• Figure 62: Value of card expenditure as a proportion of GDP, Spainversus EU, 1998-2003
• But credit card spending as a proportion of GDP is above average
• Figure 63: Value of credit card transactions, five largest EU countries,2003
• Spain boasts an extensive network of merchant locations
• Figure 64: Number of credit card acceptance locations per 1,000 adults,Spain versus EU, 1998-2003
• Increased competition may further stimulate demand for credit cards

UK

• The UK is the third most populous EU nation
• Figure 65: Total populations of the five largest EU countries, 1997-2007
• Future population growth will largely stem from the over-45s
• Figure 66: UK population, by age bracket, 1997-2007
• Strong consumer spending has boosted the UK economy
• Figure 67: GDP and consumer expenditure in the five largest EUcountries, 1997-2007
• Consumer credit has grown rapidly in the UK
• Plastic cards enjoy widespread appeal across the UK
• Figure 68: Total number of plastic cards per 1,000 adults, UK versus EU,1998-2003
• Credit cards are extremely popular in the UK
• Figure 69: Proportion of plastic cards in issue, UK versus EU, 2003
• UK consumers own a particularly high number of credit cards per person
• Figure 70: Number of credit cards per 1,000 adults, five largest EUcountries, 2001 and 2003
• More card transactions take place in the UK than in any other EU country
• Figure 71: Total number of plastic card transactions per adult, UKversus EU, 1998-2003
• Credit cards account for four in ten transactions in the UK
• Figure 72: Proportion of plastic card transactions, UK versus EU, 2003
• Credit card transactions per adult in the UK are the highest in the EU
• Figure 73: Credit card usage, five largest EU countries, 2001 and 2003
• The UK also spends more on plastic than any other EU member state
• Figure 74: Value of card expenditure as a proportion of GDP, UK versusEU, 1998-2003
• Credit card spending as a proportion of GDP is also high in the UK
• Figure 75: Value of credit card transactions, five largest EU countries,2003
• The number of merchant locations in the UK is below average
• Figure 76: Number of credit card acceptance locations per 1,000 adults,UK versus EU, 1998-2003
• Further growth in the UK credit card market seems assured

The Future and Conclusions

• Each of the markets is at a different stage of maturity
• Figure 77: Summary of plastic card markets in the 15 EU member states

Forecast

• A tale of two markets
• Figure 78: Forecast of number of credit and debit cards in issue,continental Europe and UK, 2003-07
• Half a billion cards in use by 2007
• UK to account for even more of the plastic card market
• Future does bring a slowdown
• Big four provide the inputs for continental forecast