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.<br /><br />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 &ndash; further impacting the profitability of credit card firms.<br /><br />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 &ldquo;unsustainable&rdquo;, and that firms must innovate to survive.<br /><br />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 &pound;64bn, over the past year.<br /><br />&ldquo;Large scale change within the sector over the next few years in inevitable,&rdquo; said PwC partner Richard Thompson. &ldquo;We&rsquo;re likely to see credit cards being used as payment rather than borrowing tools.&rdquo;<br /><br />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.<br />