Christmas Cards

According to APACS, the UK banking association, spending on plastic cards during the last Christmas period – December 2007 – was £32.2billion, up 4% on a year earlier.

If you take inflation into account – the UK Retail Price Index over the same period is also around 4% – then the trend for overall card use, in real terms, is flat.

Delving into the figures some more and we see the familiar trend is there – spending on debit cards is up nearly 7% and spending on credit cards fell.  (Quite why anyone would use a debit card in preference to a credit card is beyond me, but more later.)

From other APACS data, we know the general trend for the credit card business – usage/spend peaked in 2004 and has been in gentle decline ever since.  Credit card issuers must be morphing the business plan into a survival plan.

For a prolific user of credit cards, such as myself, it’s great.  I’m being tempted by all sorts of fabulous 0% offers, free air miles, and the like.  So, the industry is now fighting for my business – does that means margins will get squeezed too?

Perhaps the industry will consolidate, make efficiencies and protect profits that way?  Barclaycard recently purchased Goldfish for £35million (a rather poor ROI for Discover, by the way).  Perhaps we’ll just end up with a few super-size issuers?

There may be hope in new technology, such as contactless.  It’s new business, i.e. cash displacement.  But, it takes a lot of coffees and newspapers to match the average credit card transaction of over £60.  Smaller margins on smaller transactions?

Two-thirds of retail spend over Christmas was on cards, four per cent on cheques (oh yes, cheques!) and the remaining 30% (ish) for cash, beads and bartering.

So, I’m a credit card issuer.  Should I start a war on cash, tempt the credit unworthy or try to convert the unbanked?

Well, twice as much was spent on debit cards than credit cards.  Debit card users aren’t afraid of plastic but they get little protection – and a sixth of the retail card spend at Christmas was online.  Surely it’s got to be easier to tempt debit card users with the security of credit card purchases?

In February, I added up how much I would have spent on a contactless card if acceptance were ubiquitous.  I reckon it was about £400 – double what I expected.  If it were on my NFC mobile phone I would have used it in the pub, too.  But I might also want protection since I’ve read those scare stories in the press recently – I’ll use a contactless credit card product every time.

So, it’s not all gloom in credit card land.  New technology, new channels and targeting products to exploit the protection afforded consumers will help.  In the meantime, I’m trying to work out what I’ll buy using my credit card in the TV.