Table of Contents

Overview 1
Catalyst 1
Summary 1
Table of Contents 2
Table of figures 3
Table of tables 4
Non-standard Credit Cards in the UK 5
Introduction 5
The non-standard market refers to consumers who are not considered for credit by mainstream issuers 5
The non-standard market covers the sub-prime sector 6
The term 'non-standard' covers a wide range of perceived risk 7
Despite the risks involved, the non-standard market has proved an attractive market to certain issuers in the UK 8
Careful segmentation and risk management is the key 9
Issuers in the non-standard segment face greater risks but charge a higher interest rate 9
Issuers in the non-standard space mitigate their risk with lower credit limits 10
Intense competition has led to decreasing margins and profitability in the mainstream market 10
Datamonitor estimates that the non-standard market in the UK consists of seven million adults and 5.6 million credit cards 10
Datamonitor estimates that there are seven million adults in the UK that fall into the non standard category. 10
Datamonitor uses seven steps to size the UK non-standard population 11
Elimination of double counting 13
Several factors can explain why the non-standard population has been growing in the UK 14
The number of registered CCJs increased for the second year running 14
Mortgage repossessions are rising, though arrears slowed in 2006 15
Personal bankruptcies hit another record 17
Payments in arrears are at a high 18
Mainstream issuers have been tightening their criteria 19
Datamonitor estimates that there are 5.6 million credit cards issued to non-standard individuals in the UK 19
Self employment and having a CCJ account for over half of the non-standard cards in issue 20
Average cardholding is lower in the non-standard segment 21
The value of transactions on non-standard credit cards amounted to £7.8 billion in 2006 22
Datamonitor's estimation methodology 22
Datamonitor estimates that the value of transactions on non-standard cards reached £7.8 billion in 2006 23
The market is composed of mainstream and specialist providers 24
Capital One and Barclaycard are still active in this market 24
Several mainstream players have acquired specialist lenders in order to gain the expertise needed to issue in this market 25
There are several advantages to this approach, as compared to direct market entry 26
Mainstream players have used different branding strategies to enter this market 27
Market entry through a subsidiary allows mainstream issuers to protect their prime brands 28
However, Capital One has stayed faithful to its prime brand 29
Other specialist issuers target the lower end of the non-standard spectrum 30
Profile: SAV Credit 30
Profile: Vanquis Bank 31
Non-standard specialist lenders are benefiting as a result of mainstream lenders tightening their issuing criteria 32
As a result, Vanquis and SAV have continued to grow rapidly 33
As a result, non-standard specialist providers are confident about the future 33
It is likely that other firms will eventually enter the non-standard market 34
Datamonitor forecasts moderate growth in the non-standard credit card market 34
Datamonitor forecasts that the value of transactions on non standard cards will grow at a CAGR of 5.4% 34
Datamonitor's estimation methodology 34
Datamonitor forecasts the value of non-standard credit card transactions to reach £10 billion by 2011 34
A number of factors are forecast to drive growth in the non-standard credit card market 36
Growth will be fastest among those with poor or limited credit histories 38
Summary 38
APPENDIX 39
Definitions 39
AAGR 39
APACS 39
Average transaction value 39
Balances outstanding 39
Bank of England base rate 39
CAGR 39
Charge card 39
Credit card 39
CVV 40
Debit card 40
EMV 40
Fraudulent use of card details (card-not-present fraud), also known as fraud on phone, mail order or internet transactions 40
Interchange 40
Non-standard 40
OFT 40
Methodology 41
Primary research 41
Secondary research 41
Further reading 42
Ask the analyst 43
Datamonitor Consulting 43
Disclaimer 43
List of Tables
Table 1: A selection of credit cards from non-standard to mainstream, 2007 9
Table 2: Number of mortgage repossessions and arrears, 2002-06 16
Table 3: Cardholding per person in the mainstream and non-standard sectors, 2002-06 22
Table 4: SAV Credit Fact File, 2007 30
Table 5: Vanquis Bank fact file, 2007 31
Table 6: Datamonitor's forecast for the non-standard credit card market, 2006-11 36
Table 7: Current relevant Datamonitor publications, 2007 42
Table 8: Future relevant Datamonitor publications, 2007 43
List of Figures
Figure 1: The non-standard sector encompasses a range of consumers 6
Figure 2: The sub-prime market accounts for just one part of the non-standard market 7
Figure 3: The non-standard population covers a spectrum of risk prospects from the near prime to the heavy sub-prime 8
Figure 4: The number of CCJs on record increased for the first time since 1995, 1987-2006 15
Figure 5: Arrears and repossessions on record have continued to decline but it may not be long until they begin to rise once again, 1997-2006 17
Figure 6: Bankruptcies have continued to increase in recent years, 1997-2006 18
Figure 7: The number of non-standard cards has grown from 4.7 million to 5.6 million, 2002-06 20
Figure 8: Self employment and having a CCJ account for over half of the cards in the possession of non-standard individuals, 2006 21
Figure 9: Non-standard cards account for 8% of the total value of UK credit card transactions, 2006 23
Figure 10: Several UK issuers have a presence in the non-standard card market 25
Figure 11: Mainstream issuers entering the non-standard market have employed one of two branding strategies 28
Figure 12: Datamonitor expects the value of transactions to grow at a CAGR of 5.4%, 2006-11 35