The UK’s 2009 credit card market could look a lot different in 2010.

2009’s current credit card market could soon change, with the onset of contactless cards and the introduction of the Consumer Credit Directive next June, according to PricewaterhouseCooper’s (PwC) Precious Plastic report.

Innovations such as paying using mobile phones, contactless cards – where cards are issued without the gold ‘contact’ tab and so can be more easily scanned, for example in vending machines and taxis – and prepaid cards look set to become more commonplace in the credit card market.

PwC also expects APRs to increase and annual fees to become a regular feature. June 2010’s Consumer Credit Directive is also likely to bring changes to the way credit is sold.

Richard Thompson, Partner at PwC LLP, said: “Over the last 12 months there has been a cooling passion for plastic – credit card borrowing has fallen by 3% to £64 billion and the number of cards in circulation has fallen by 8%.

“Bad debts in the sector have reached historic highs, standing at nearly 6% of outstanding balances. Our analysis suggests that bad debts are likely to continue to rise and could reach 9% by the end of 2010. This would have enormous implications for the profitability of credit cards in the UK market.”

According to the company, the average UK household has a total debt of £60,000 – £50,000 of which is secured debt, £10,000 unsecured – meaning each household has to spend around 15% of its net income solely on interest payments.

“As the recovery gains momentum, consumer demand for credit will return. Lenders will be unable or unwilling to increase supply sufficiently to match demand. Lenders will focus on those customer segments that are the most profitable, rather than those that are in the most need of credit.

“Some consumers will therefore be forced towards the less mainstream corners of the industry in search of credit, a trend that may not be in their interest. We expect there to be an increasing number of transactions in debt portfolios,” added Thompson.