Most consumers in the United Kingdom have not changed their payment habits, but some say they will rely less on credit cards even if the economy improves, suggest recent survey data from New York-based Auriemma Consulting Group.
Auriemma contends UK consumers are relying more on debit cards than credit cards because of the recession, and many are making the change to debit permanent. “There has been a cultural change toward thriftiness, and it’s not a temporary one, Megan Bramlette, Auriemma director of knowledge management, tells PaymentsSource. “This financial conservatism is going to be around the UK and the broader global financial-services industry for awhile.”
In an online survey of 510 UK credit cardholders Auriemma conducted in September to determine the impact of economic improvement on future use of credit and debit cards, 26% of respondents said they less likely would use their credit card for purchases, while only 10% said they would be more likely to use their credit card (see chart). Meanwhile, 26% said they more likely would use their debit card for purchases, while only 12% said they would be less likely to do so.
In that same survey, 34% of respondents said they would be less likely to carry a balance on their credit card account even if the economy improved in the next year, while 30% said they would spend less on their credit cards.
Such reactions could be problematic for UK credit card issuers, Auriemma contends.
“We’re taking a slightly more aggressive stance on this because it’s kind of a shocking finding,” says Bramlette. “Consumers are really not planning to go back to using credit cards, and this finding underscores the importance of reinvigorating, redeveloping and revisiting existing credit card product structures, especially regarding rewards.”
To get consumers to start using credit cards again, Auriemma suggests issuers improve their rewards programs. But it will be an uphill battle for issuers to lure consumers back because UK credit card rewards programs are not very robust, says Bramlette.
UK issuers offer the strongest rewards only to their affluent cardholders, she says. “The U.S. loyalty model, where rewards are for everyone and for a fee they get even better rewards, does not exist in the UK for the mass market,” says Bramlette.
UK issuers must ask themselves whether they are interested in offering credit cards to the mass market and, if they are, whether they willing to invest in a more compelling value proposition, she says.
