PwC: Credit card market must innovate to survive
THE CREDIT card market needs urgent change to survive, with bad debts reaching historic highs, according to new data out today.
The PricewaterhouseCoopers (PwC) Precious Plastic report will show that bad debts have reached a record six per cent, and the accountancy firm predicts that this figure will climb to nine per cent by the end of 2010 – further impacting the profitability of credit card firms.
According to PwC, 2009 has been a watershed year with both lenders and borrowers reassessing the balance sheets. It says that the current business model is “unsustainable”, and that firms must innovate to survive.
The warning comes amid data which shows that there has been a reduced use of plastic, with credit card borrowing falling by three per cent, or £64bn, over the past year.
“Large scale change within the sector over the next few years in inevitable,” said PwC partner Richard Thompson. “We’re likely to see credit cards being used as payment rather than borrowing tools.”
Government-led changes to the way credit is sold, to be launched in June 2010, are also likely to heap pressure on credit card companies.