Reality 1: The credit card's mid-life crisis - Video transcript
Jan-Willem Weggemans
So the credit card has been a very successful product and very popular with many customers in the UK ever since it was introduced about 45 years ago. What we found is that since its peak in about 2004 the gentle decline in demand has actually accelerated in the last couple of years.So the first issue we found for credit card players in the UK is that there is a generational shift in the users of credit cards. Young people under 35 use credit cards much less than our parents and its also fair to exonerate the decline in the credit card’s usage. The second issue that we found in the UK for credit card players and for banks is that the margins are coming under pressure. In the recent years the low interest environment has helped them with a very high spread, however as the interest rates will go and their spreads will go down. They will be faced with the further pressure on the margins and will probably make less money than they did before, so payment players like with the banks and credit card companies they first need to adapt to the lower demand and the lower margin environment and this will be done by reducing costs, not just by reducing cost quickly in a short term but really changing a cost structure of the company. The second thing that payment players would need to do is innovate. There is a decline in demand but it is not said that the younger generation will not use the credit card at all. If you come up with the right products innovative solutions which they value and our research had shown that they value new ideas, there is a lot to play for.
