U.K. Credit-Card Issuers Challenged by PayPal for Online Supremacy

Feb. 9, 2012

Credit-card issuers in the U.K. must stave off challenges from alternative payment providers—notably PayPal—over the next few years as they compete to be the dominant payment method for online purchases, according to new research from Auriemma Consulting Group (ACG). The report said credit cards are currently used for 49 percent of online purchases, but alternative payment methods now account for more than 20 percent of online purchases. ACG said PayPal poses a significant risk to credit-card issuers because its market share has primarily been taken from credit cards. The consultancy expects the trend to continue as PayPal and other emerging payment methods expand into new categories. Issuers may wish to also focus on the development of areas of online differentiation, such as rewards. “Rewards programs are a key area of opportunity for credit card issuers to maintain market share and top-of-wallet status over the upcoming years”, said Mark Jackson, director at ACG. “We expect the issuers that invest in both rewards programs and the development of benefits tailored to the needs of the online consumer will be poised to better compete.”