The payments industry has become very volatile over the last couple of years. Following years of domination by banks and card issuers it is now finding itself at a crossroads.
With the emergence of new payment channels and growing interest from companies not previously involved in this market, credit card issuers are beginning to feel the pressure.
The latest report by PricewaterhouseCoopers (PWC), Precious Plastic 2012: All change please, shows exactly what the industry is up against.
Firstly, as a direct result of the credit crunch, most consumers have decided to pay off the debt on their plastic. Many of them also decided to get rid of credit cards all together, with around 1 million of those disappearing from our wallets in 2011. This means that there are less credit cards in circulation now than at any time over the last decade.
As consumers have decided to live within their means we began seeing a huge rise in the use of debit cards. Payments made using this method have increased by 10%.
The amounts borrowed on credit cards are also down by some 5%.
In the meantime other types of loans are becoming more popular, with payday loans emerging as the main alternative to plastic. One of the main reasons for that seems to be the banks' unwillingness to make loans as accessible as prior to the credit crunch.
The other major reason for the decline in the usage of credit cards is the emergence of new payment channels. Digital micropayments have grown by some 15% and mobile payments increased by a massive 94%. They may not as yet be dominant in the market, but the trend to move away from the more established channels is clear.
The simple explanation is that with the digital era firmly upon us consumers want payment methods which suit their changing lifestyles. Online shopping has grown in popularity of late and using cards to pay for such purchases can be a real hassle.
Consumers are not just worried about debt, but they also no longer see credit cards as the easiest form of payment. This is an issue which issuers will need to somehow overcome.
We do not envisage plastic disappearing completely, but as the report from the PWC suggests, consumers are ready for new options.
Eva Grzybek works for PayPoint.net - Online Payment Solutions
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