Thanks to the volatility of the payments industry and the rise of providers of no credit check short term loans to Brits in need, traditional credit providers such as credit card issuers and banks find themselves at a crossroads after years of dominating the marketplace, experts say.
Card issues have begun to feel the pressure exerted upon them by alternative credit providers such as payday advance lenders and other providers of short term loans, such as pawnbrokers, who were not as involved in the market as they were previously. The industry is indeed fighting an uphill battle, according to a recent PriceWaterhouseCoopers report.
Consumers have made a concerted effort to pay down their credit card debt as a result of the worldwide economic downturn, the PWC report said. In addition, approximately one million credit cards have actually been cancelled over the course of the last year as consumers bin their plastic, meaning that the number of credit cards in circulation has plummeted to the lowest figure seen in the past ten years.
Debit cards instead have become a primary source of making payments, as consumers deciding to live within their means have increased the number of payments made by debit cards by 10 per cent. Credit card borrowing has also dropped, with amounts undergoing a 5 per cent decline, and the popularity of payday lending and other types of credit has grown by leaps and bounds to fill the gaps.
One of the key reasons for the sudden popularity can be traced to a reluctance on the part of banks to provide access to credit as easy as they did in the days before the economic recession.