Table of Contents
Introduction and Abbreviations
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- Personal loans face stiff competition
- Report contents
- Methodology
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- There is too much choice for some consumers
- Consumers do not want to be penalised for early repayment
- Sponsorship of relevant television programmes may be effective
- Opportunities exist for affinity marketing
- Highlight the HP ownership issue
Executive Summary
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- The value of unsecured personal loans increases
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- Figure 1: Estimated value of unsecured personal loans, gross lending, 2000-2004
- Implications of new regulations and enforcement of the Data Protection Act
- Competitor products proffer strong competition
- Big financial institutions are most favoured
- Customers vote with their feet
- Advertising expenditure increases
- Reasons for arranging a loan remain fairly practical
Market Factors
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- New rules could result in falling revenue for some lenders
- Consumer Credit Act revamped
- MPC expects consumer spending to decelerate
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- Figure 2: Bank of England base rate, January 1992-October 2004
- Consumers have become more cautious
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- Figure 3: Headline confidence and consumer expectations regarding personal finances – index movements, August 2002-August 2004
- The total workforce stood at 30 million in 2003
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- Figure 4: Size of total workforce, self-employed and proportion unemployed, 1994-2009
- European directive follows
- Rise in PDI encourages personal loans
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- Figure 5: PDI, expenditure and savings ratio, at current prices, 1999-2009
- A rising base rate has latterly made consumers more cautious about spending
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- Figure 6: Total debt (outstanding consumer credit and lending secured on dwellings) as a proportion of total PDI, at current prices, 2000-04
- Information commissioner recommends credit rating overhaul
- Bankruptcy orders – heading for a 10-year-high?
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- Figure 7: Number of individual bankruptcy orders and IVAs (England and Wales), 1995-Q2 2004
Competitor Products
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- All-in-one products steal away customers
- Premium and packaged bank accounts attempt to tie-in users
- The credit card market is thriving
- Car finance deals
- The value of new car financing has risen
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- Figure 8: Consumer car finance provided – new business, by type, 1999-2004
- New car sales buoyant
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- Figure 9: Consumer car finance, volume of units – new business, by type, 1999-2003
- Extended mortgage borrowing
- Service provider loans
- The best loan provider?
Market Size
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- The value of unsecured personal loans accelerated to £56.9 billion in 2004
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- Figure 10: Unsecured personal loans as a proportion of total consumer credit, gross lending, 1998-2004
- Further advances increase in value
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- Figure 11: Gross mortgage lending by type of loan, including further advances, 1999-2005
- Credit card provider activity could increase market size
Key Players
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- Lloyds TSB leads the market
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- Figure 12: Personal loans, indicative market share, September 2004
- Other providers come to the fore
- Abbey favoured by some for home improvement loans
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- Figure 13: Loan provider by top reason for arranging, September 2004
- An estimated 80% of current accounts are held by five providers
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- Figure 14: Estimated market share of current account providers, 2000 and 2003
- Specialist lenders are the second largest lending group
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- Figure 15: Proportion of consumer credit gross lending accounted for by the main types of lender, 2000-2004
- Profiles of the leading providers
- Lloyds TSB
- NatWest
- HSBC
- Barclays
- Halifax
- Abbey
Product Detail
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- APR rates deceptive
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- Figure 16: Representative rates and repayments for unsecured Internet and telephone arranged loans, November 2004
- New regulation will highlight insurance costs
- Non-standard loan products
- Product features show the friendly side of marketing strategies
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- Figure 17: Personal loans – representative list of product features, November 2004
Distribution and the Internet
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- Providers see growth in Internet distribution
- DEs are significantly less likely than average to use the Internet
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- Figure 18: Internet penetration by gender, socio-economic group, age and working status, July 2004
- Providers sometimes prefer to divert customers to website services
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- Figure 19: Source used to arrange last loan, September 2004
Advertising and Promotion
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- Advertising expenditure has grown more than 153%
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- Figure 20: Total advertising expenditure on personal loans, by category, 1999-2003
- Direct mail is king
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- Figure 21: Total advertising expenditure on personal loans, by outlet, 2003
- MBNA was the largest spender in 2003
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- Figure 22: Top personal loan advertisers, by loan category, 2002 and 2003
- Manufacturers spend comparatively modest amounts on finance advertising
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- Figure 23: Car manufacturer finance advertising expenditure, 1999-2003
Consumer Financial Activity
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- The personal loans business will remain buoyant
- Relationship with the main financial services providers (MFSP)
- Saving and investment activity will intensify
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- Figure 24: Savings, investment, borrowing and debt repayment – consumers’ expected activity, June 2003-September 2004
- Those aged 23-39 will be most active
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- Figure 25: Expected financial activity, by socio-demographic and income groups, September 2004 and average for the last eleven quarters
- Savings and pension providers have reason to be optimistic
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- Figure 26: Leading financial activities planned in the next 6 months, September 2003-June 2004
- Mortgage demand will continue to weaken
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- Figure 27: Intended mortgage and property purchase activity, June 2002-September 2004
- Barclays and Lloyds TSB underpin their position as main MFSPs
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- Figure 28: Leading main financial services providers: Market shares, September 2003-September 2004
- Nationwide BS should see significant ISA business
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- Figure 29: Saving, investment and lending, market sizes by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), September 2004
- Customers of HSBC and RBS lead the way in terms of proposed activities
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- Figure 30: Activity levels of main financial providers’ customer bases, September 2004
The Consumer
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- Some 11% of consumers said that they own a personal loan
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- Figure 31: Penetration of selected loan products, September 2004
- Widespread availability of unsecured loan products has contributed to the sector’s success
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- Figure 32: Profile of unsecured and secured personal loan holders, by gender, age and socio-economic group, September 2004
- People with high incomes are perhaps more likely to choose extending their mortgage
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- Figure 33: Profile of unsecured and secured personal loan holders, by marital status, lifestage, working status and gross annual household income, September 2004
- Tabloid readers are more likely to favour an unsecured loan
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- Figure 34: Profile of unsecured and secured personal loan holders, by new technology users, newspaper readership, commercial television viewing and supermarket usage, September 2004
- The third most cited reason for arranging a loan is debt consolidation
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- Figure 35: Reasons for arranging a loan, September 2004
- Nearly a fifth of consumers have used a loan for car purchase
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- Figure 36: Top reasons for arranging a loan, by gender, age and socio-economic group, September 2004
- Married people are more likely to have a personal loan
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- Figure 37: Top reasons for arranging a loan, by marital status, lifestage and Special Groups, September 2004
- People buying a home are more likely to make use of a personal loan
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- Figure 38: Top reasons for arranging a loan, by working status, gross annual household income and tenure, September 2004
- People living in London are more likely to use a loan to consolidate debts
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- Figure 39: Top reasons for arranging a loan, by TV region and ACORN category, September 2004
- Tesco shoppers more likely to arrange a loan for car purchase
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- Figure 40: Top reasons for arranging a loan, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, September 2004
Consumer Attitudes and Targeting Opportunities
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- Current account providers are the most favoured choice
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- Figure 41: Preferred method of arranging a personal loan, September 2004
- Younger people favour telephone services
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- Figure 42: Preferred method of arranging a personal loan, by gender, age and socio-economic group, September 2004
- Some consumers prefer to deal with financial matters face-to-face
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- Figure 43: Preferred method of arranging a personal loan, by marital status, lifestage and Special Groups, September 2004
- Less affluent consumers favour visiting the branch of their current account provider
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- Figure 44: Preferred method of arranging a personal loan, by working status, gross annual household income and tenure, September 2004
- Comfortably Off are more likely to telephone another provider
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- Figure 45: Preferred method of arranging a personal loan, by TV region and ACORN category, September 2004
- Consumers need a minimum level of guidance
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- Figure 46: Preferred method of arranging a personal loan, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, September 2004
- Company reputation is an important factor
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- Figure 47: Most influential factors affecting loan choice, September 2004
- There is too much choice for some consumers
- Consumer attitude to financial services providers
- The loan interest rate was cited by just under a quarter of respondents
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- Figure 48: Most influential factors affecting loan choice, by gender, age and socio-economic group, September 2004
- Pre-/no family lifestage more likely to favour low APR Internet offers
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- Figure 49: Most influential factors affecting loan choice, by marital status, lifestage, working status and gross annual household income, September 2004
- A fifth of respondents would consider arranging a personal loan through the Internet to obtain a low APR
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- Figure 50: Most influential factors affecting loan choice, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, September 2004
- Consumer typologies/clusters
- Some consumers fully expect to repay their loan before the end of their term
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- Figure 51: Consumer typologies, by gender, age, socio-economic group and ACORN category, September 2004
- Broadsheet readers favour low rates
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- Figure 52: Consumer typologies, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, September 2004
- The main target groups for providers
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- Figure 53: Analysis of personal loan main target groups using CHAID, September 2004
Industry Views
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- Market size
- Advertising expenditure
- Product development
- Internet distribution
- IFA distribution
The Future
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- The rise of premium and packaged bank accounts
- Credit cards riding on a wave
- Will Barclays’ new format show the way?
- How have traditional high street banks faired against newer market entrants?
- Can providers meet the expectations of a more discerning consumer?
Forecast
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- Unsecured personal loans
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- Figure 54: Forecast of unsecured personal loans as a proportion of gross lending, 2004-09
- Further advances
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- Figure 55: Forecast, gross lending, further advances, 2004-09
- Factors used in the forecast
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