The online payment space is poised to become a key battleground for UK credit card issuers over the upcoming years, according to research recently conducted by the Auriemma Consulting Group (ACG).

Credit cards are currently utilised for 49% of online purchases, but payment methods such as PayPal now account for over 20% of online purchases. PayPal poses a significant risk, because their market share has primarily been taken from credit cards. This trend is expected to continue, as both PayPal and emerging payment methods expand into new categories.

Consumers ranked their primary reason for using credit cards over other online payment methods as follows:

• Purchases are more secure with credit cards: 36%
• Ability to earn rewards on purchases: 33%
• Available credit on my account: 16%
• The card is nearby when I want to make online purchases: 8%
• The card has a good interest rate: 7%

Credit cards are considered more secure than other payment types, primarily as a result of the protection offered by Section 75 of the Consumer Credit Act. Section 75 makes card issuers equally liable if something goes wrong for purchases over £100 (and less than £30,000). PayPal also offers a similar buyer protection scheme, making rewards the key differentiator against credit cards emerging payment types. Issuers may wish to also focus on the development of alternative areas of online differentiation, because of the inherent risk of competitors launching competing online rewards programmes.

“Rewards programmes 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 programmes and the development of benefits tailored to the needs of the online consumer will be poised to better compete.”

Cardbeat is a syndicated market research service that tracks key metrics and consumer attitudes towards topics that affect the payments industry. For additional information about this press release or to subscribe to Cardbeat, please contact Mark Jackson at +44 (0) 207 629 0075 or mark.jackson@acg.net.

About ACG

Since 1984, ACG has offered comprehensive management consulting, research, industry roundtable and benchmarking services to the cards and payments industry. ACG clients include credit card issuers and networks, commercial banks, auto and mortgage lenders, merchants, and industry vendors. With offices in London and New York, ACG offers actionable solutions to help clients make important business decisions to maximise their efficiencies and revenues.