Table of Contents
Overview
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- What you need to know
- Products covered in this report
Executive Summary
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- The market
- Growth expected to slow in the coming years
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- Figure 1: Forecast of the value of unsecured personal loans, by gross advances, 2011-21
- Consumers are as likely to go direct or to a comparison site for loan information
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- Figure 2: Most likely source of information when taking out an unsecured loan, October 2016
- Interest rates reach record lows
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- Figure 3: £5,000 and £10,000 loan interest rates, average credit card rates, LIBOR, and base rate, November 2010-October 2016
- Companies and brands
- Lloyds Banking Group is the market leader in personal loans
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- Figure 4: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2014 and 2015
- Adspend for unsecured loans falls by nearly half
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- Figure 5: Total above-the line, online display and direct mail advertising expenditure on loans, 2011/12-2015/16
- High-street brands have higher levels of awareness and trust
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- Figure 6: Attitudes towards and usage of selected finance brands, December 2016
- The consumer
- One in 10 owe money on a personal loan
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- Figure 7: Loan and credit product ownership, October 2016
- People are most likely to have taken a loan with a bank
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- Figure 8: Type of personal loan, October 2016
- A fifth of credit users owe less than £500
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- Figure 9: Amount owed on all loans and credit products, October 2016
- Flexible features are important when considering a loan
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- Figure 10: Interest in loan features, October 2016
- Advertised rates play a big part in decision-making
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- Figure 11: Attitudes towards interest rates, October 2016
- Majority want to repay their debts as quickly as possible
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- Figure 12: Attitudes towards borrowing, October 2016
- What we think
Issues and Insights
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- Short-term mindset makes loans unappealing
- The facts
- The implications
- Vulnerable consumers should be given personal indicative rates
- The facts
- The implications
- Soft-search tools will change the way people search and apply for loans
- The facts
- The implications
The Market – What You Need to Know
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- ‘Other’ consumer credit growing faster than credit cards
- Growth expected to slow in the coming years
- Consumers are as likely to go direct or to a comparison site for loan information
- Interest rates reach record lows
- Write-offs total just 0.5% of unsecured lending
Market Size and Forecast
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- Unsecured lending continues to grow
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- Figure 13: Gross unsecured lending, 2006-15
- Figure 14: Gross unsecured lending, 2012-16 (est)
- Other consumer credit growing at a faster rate
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- Figure 15: Other consumer credit, 2012-16 (est)
- Growth expected to slow in the coming years
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- Figure 16: Forecast of the value of unsecured personal loans, by gross advances, 2011-21
- Figure 17: Forecast for gross lending for personal loans, 2011-21
- The impact of the EU Referendum vote
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- Figure 18: Post-Brexit alternative market scenarios for the value of unsecured personal loans, by gross advances, 2016-21
- Figure 19: Detailed post-Brexit alternative market scenarios for the value of unsecured personal loans, by gross advances, 2016-21
- Forecast methodology
Channels to Market
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- Consumers are as likely to go direct or to a comparison site for loan information
- In reality, people will use a mix of sources
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- Figure 20: Most likely source of information when taking out an unsecured loan, October 2016
- Generational differences point to future cross-selling challenges
- … whilst the use of family and friends for advice highlights need for unbiased source
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- Figure 21: Source of information, by age, October 2016
- Loan-holders are slightly more likely to borrow from their main bank
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- Figure 22: Financial product ownership and cross-sales, July 2016
Market Drivers
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- Interest rates reach record lows
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- Figure 23: £5,000 and £10,000 loan interest rates, average credit card rates, LIBOR, and base rate, November 2010-October 2016
- Consumers benefit from increased competition
- CMA’s open banking proposals
- Innovative Finance ISA
- Credit conditions remain positive
- Consumer confidence sustains demand for credit
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- Figure 24: Financial confidence, January 2009-October 2016
- Write-offs total just 0.5% of unsecured lending
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- Figure 25: Annual write-offs of other unsecured lending to individuals, 2010-15
Companies and Brands – What You Need to Know
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- Lloyds Banking Group is the market leader in personal loans
- High-street banks target existing customers
- The rise of blending
- Adspend for unsecured loans falls by nearly half
- Lack of awareness means challengers struggle to differentiate themselves
Market Share
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- Lloyds Banking Group is the market leader in personal loans
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- Figure 26: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2014 and 2015
- Supermarket banks continue to perform well
- Alternative providers fight for share
Competitive Strategies
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- High-street banks target existing customers…
- … whilst challengers are open to all
- Lenders move into the HCMTC market
- P2P continues to gain traction
- Student loan providers seek greater market share
- Incumbents focus on digital to match Fintech lenders
Launch Activity and Innovation
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- Lenders increase loan sizes
- Doorstep loans adapt to changing channel preferences
- The rise of blending
- Credit cards as loans
- Loans as credit cards
- Secured loans as credit cards
- Soft searches starting to be rolled out to loans
Advertising and Marketing Activity
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- Adspend for unsecured loans falls by nearly half
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- Figure 27: Total above-the line, online display and direct mail advertising expenditure on loans, 2011/12-2015/16
- Payday lenders are the biggest spenders
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- Figure 28: Top 20 spenders on advertising for unsecured and payday loans, 2013/14-2015/16
- TV attracts majority of adspend
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- Figure 29: Advertising spend for loans, by media type, 2015/16
- Nielsen Ad Intel coverage
Brand Research
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- What you need to know
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- Figure 30: Attitudes towards and usage of selected finance brands, December 2016
- Key brand metrics
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- Figure 31: Key metrics for selected finance brands, December 2016
- Brand attitudes: Loan specialists recognised for offering something different
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- Figure 32: Attitudes, by brand, December 2016
- Brand personality: M&S stands out for being exclusive
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- Figure 33: Brand personality – Macro image, December 2016
- High-street providers associated with helpfulness and competency
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- Figure 34: Brand personality – Micro image, December 2016
Brand Analysis
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- Traditional challengers have high levels of awareness
- Non-financial services brands influenced by consumer perceptions of other products
- Sunny fails to shine
The Consumer – What You Need to Know
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- One in 10 owe money on a personal loan
- People are most likely to have taken a loan with a bank
- Flexible features are important when considering a loan
- Advertised rates play a big part in decision-making
- Protection products need to be repositioned
Loan and Credit Product Ownership
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- Two thirds of adults owe money on a loan or credit product
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- Figure 35: Loan and credit product ownership, October 2015 vs October 2016
- One in 10 owe money on a personal loan
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- Figure 36: Repertoire of loan and credit product ownership, October 2016
- Higher earners are more likely to owe money on a loan
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- Figure 37: Ownership of any type of unsecured loan (including car loan/ other car finance plan and personal loan/ other type of loan), October 2016
- Credit ownership rises along with socio economic status
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- Figure 38: Repertoire of loan and credit product ownership, October 2016
Type of Personal Loan
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- People are most likely to have taken a loan with a bank
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- Figure 39: Type of personal loan, October 2016
- Specialist loan providers increase their market share
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- Figure 40: Type of personal loan, by sources of information, October 2016
Amount Owed on Loan and Credit Products
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- A fifth of credit users owe less than £500
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- Figure 41: Amount owed on all loans and credit products, October 2016
- Personal loan holders have higher outstanding balances
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- Figure 42: Loan and credit product ownership, by amount owed, October 2016
- Over-55s tend to have lower outstanding balances
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- Figure 43: Amount owed on all loans and credit products, October 2016
Interest in Loan Features
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- Flexible features are important when considering a loan …
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- Figure 44: Interest in loan features, October 2016
- … and consumers want loans to adapt to changes in their finances
- Soft-search checks will dispel concerns over rejections
- On-the-go access is not that important for loans
- Added flexibility could attract potential loan users
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- Figure 45: Interest in loan features, by agreement with the statement ‘I prefer to use other credit products (eg credit cards, overdraft) before taking out a loan’, October 2016
Attitudes towards Interest Rates
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- People recognise the differences between advertised and actual rates
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- Figure 46: Attitudes towards interest rates, October 2016
- … but they still play a big part in decision-making
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- Figure 47: Response to the statement ‘I look for the best advertised rate when selecting a loan provider’, by demographic group, October 2016
- People want to know how they can get the best rates
- Confusion means people look elsewhere
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- Figure 48: Agreement with the statement ‘It's difficult to understand how to get the best rates’, by type of personal loan, October 2016
Attitudes towards Borrowing
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- Borrowers have an aversion to credit
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- Figure 49: Attitudes towards borrowing, October 2016
- Protection products need to be repositioned
- Credit cards pose a challenge for the prime market
- Two thirds of loan holders would have preferred to use a different credit product
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- Figure 50: Attitudes towards borrowing, any ‘Yes’, October 2016
- Low repayments are key for younger generations
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
- Methodology
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- Figure 51: Attitudes towards interest rates – CHAID – Tree output, October 2016
Appendix – Market Size and Forecast
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- Additional best/ worst forecast table
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- Figure 52: Best and worst case forecasts for the value of unsecured personal loans, by gross advances, 2011-21
- Forecast methodology
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