CREDIT AND DEBIT CARD MARKET UK

Credit and Debit Card Market UK



Credit and Debit Card Market UK

Introduction

The achievement of a sustainable competitive advantage in the marketing of financial services requires both an understanding of and an ability to implement all the aspects of the wider marketing mix, as applied to services. One of these is the issue of distribution, where financial services providers face a wide choice in the combinations or mixes of channels that they can employ to market their products. Easingwood and Storey (1997) comment that, “getting the distribution strategy right, getting the correct mix of channels with the appropriate allocation of resources is one of the most critically important decisions faced by a Barclays Bank”.

Credit and Debit Card Market UK: The Case of Barclays

Howcroft (1993) describes the historical context for the importance of branch networks as an element of the distribution mix, commenting that, “branch networks evolved to attract relatively cheap retail deposits through the convenience of branch locations and branch-based payment systems”. This key money transmission function of the branch led to a belief that the branch was, “the corner piece of the clearing banks organisational structure” (Howcroft, 1993) and to what can be regarded as a branch centric paradigm of money transmission financial services. This has led to much research on the branch as a key element of the distribution mix (Greenland, 1995; Howcroft, 1992; Howcroft and Beckett, 1996; Nellis and Lockhart, 1995). Both Burton (1990) and Howcroft (1991) have discussed the limitations of the Barclays Bank branch and their future role in different national cultures has been addressed by Moutinho et al. (1997). However besides the branch network, many countries now also have a wide range of plastic payment cards to facilitate money transmission services.

Indeed during the last two decades, the plastic payment card has been introduced as another element in the distribution mix for financial services and the introduction of chip-based plastic cards opens up the possibility that in future decades the plastic card will be a key channel for distributing a wide range of financial services. For the moment however the impact of the plastic card has been most visible in the money transmission function of financial services provision.

Evidence of the increasing use of plastic payment cards by both individuals and organisations to purchase goods and services comes in the Chairman's foreword to the 1996 annual review of the UK's Association For Payment Clearing Services (APACS, 1997). It provides an eloquent summary of the changes taking place in the money transmission market, by reporting that, “during 1996 the use of plastic continued to grow strongly and paper continued to decline”. While, according to APACS, cash in the form of notes and coins continues to provide around 75 per cent of the volume of transactions over £1 in value, the number of paper cheques and credits continues to decline year on year. In the place of paper and to a lesser extent cash, is the plastic payment card, which itself has a typology based ...