Table of Contents
Issues in the Market
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- Abbreviations
Insights and Opportunities
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- Who is responsible?
- Embracing innovation and risk-based pricing
- Debt help
- Getting back on your feet
- Cross-selling is full of potential
Market in Brief
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- Consumers’ appetite for borrowing is diminishing
- Rising levels of bad debt do not bode well for providers
- Credit cards are the most popular form of consumer credit
- Innovation may be the way forward
- Personal loans account for just over a quarter of total consumer credit gross lending
- Lloyds TSB is the leading provider of personal loans in 2006
- Adspend on personal loans is third highest in financial services
- More consumers are arranging loans through remote channels
- Most consumers have responsible attitudes regarding borrowing money
- Existing customer relationships may be key to gaining share in this market
Fast Forward Trends
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- Trend 1: Invasion of the data snatchers
- Definition
- Context
- Market touch points/implications
- Trend 2: Life after debt
- Definition
- Context
- Market touch points/implications
- Trend 3: Eastern Promise
- Definition
- Context
- Market touch points/implications
- Trend 4: I want it all and I want it NOW
- Definition
- Context
- Market touch points/implications
Broader Market Environment
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- Interest rate rises may mean tougher times ahead
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- Figure 1: Bank of England base rates, 1990-2006
- Rising unemployment might contribute to more cautious sentiment
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- Figure 2: Size of the total workforce and the proportions unemployed and self-employed, 2000-11
- Savings set to increase over the coming years
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- Figure 3: PDI, consumer expenditure, savings and savings ratio, 2000-11
- Unsecured lending falls to pre-2000 levels
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- Figure 4: Total gross securd and unsecured lending, 2000-06
Internal Market Environment
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- What makes consumers take out loans?
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- Figure 5: Main reasons for arranging (most recent) loan, October 2005
- Debt problems continue to grow
- The number of IVAs continues to rise sharply
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- Figure 6: Number of individual bankruptcy orders and IVAs (England and Wales), Q1 2004-Q3 2006
- More aggressive advertising for debt management companies
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- Figure 7: Advertising expenditure on debt management services, 2001/02-2005/06
- PPI: the beginning of the end?
Competitive Context
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- Credit cards
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- Figure 8: Credit cards: number in issue, total annual transaction volumes and value, 2000-05
- Overdrafts
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- Figure 9: Overdraft advances (MBBG only), 2000-05
- 1.9 million adults owed money on a student loan in 2006
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- Figure 10: Student loan take-up, 1990/91-2004/05
Strengths and Weaknesses in the Market
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- Less of an appetite for borrowing
- Greater data sharing might help to combat bad debt
Who’s Innovating?
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- Using innovation to gain a leading edge
- Cashback loans
- Moneyback Bank
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- Figure 11: Annual moneyback payment, according to loan size
- Nationwide
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- Figure 12: Cashback examples, Nationwide, 2006
- It’s all about speed
- Convenience and flexibility also matter
- Other innovations
- Zopa.com
Trade Perspective
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- Product opportunities
- Distribution
- Present and future challenges
- Stemming the rise of IVAs
Market Size and Forecast
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- 3.8 million adults have a personal unsecured loan
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- Figure 13: Estimated number of consumers with an outstanding balance on lending products, September 2006
- Lending on loans is expected to drop for the second consecutive year
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- Figure 14: Consumer credit gross lending, by product category, 2000-06
- The value of secured loans has tripled since 2000
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- Figure 15: Other secured lending as a proportion of gross secured lending (approvals), 2000-06
- The UK’s personal loans market was worth an estimated £83 million in 2006
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- Figure 16: Gross lending on unsecured and secured personal loans, 2000-06
- The personal loan market is expected to grow by 19% by 2011
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- Figure 17: Forecast of personal loan market, by sector, 2006-11
Market Share
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- Lloyds TSB is the leading provider of personal loans
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- Figure 18: Where loan holders arranged their most recent loan, September 2006
- The ‘big five’ cater for half of the market
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- Figure 19: Where loan holders arranged their most recent loan, by type of organisation, September 2006
Companies and Products
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- Smaller providers tend to offer more competitive rates
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- Figure 20: Repayment terms for selected unsecured loans of £3,000 over 36 months, by APR*, November 2006
- A diversity of players operate in this market…
- …although the banks have the largest share
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- Figure 21: Top five major British banking groups and their (selected) subsidiaries, 2006
- New entrants
Brand Communication and Promotion
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- Adspend on personal loans accounts for 15% of all adspend on financial services
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- Figure 22: Advertising expenditure on financial services, 2001/02-2005/06
- More than half of adspend in this sector was dedicated to promoting unsecured personal loans
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- Figure 23: Advertising expenditure on personal loans, by sub-category, 2001/02-2005/06
- Loans.co.uk is the leading advertiser
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- Figure 24: Top ten advertisers of personal loans, 2001/02-2005/06
- Over half of adspend was dedicated to direct mail
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- Figure 25: Advertising expenditure on personal laons, by media type, 2005/06
Channels to Market
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- More people are arranging loans via remote channels
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- Figure 26: Use of remote channels in arranging a loan, 2005 and 2006
- Many turn to the Internet for information
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- Figure 27: Websites browsed and purchased from, by type of financial product, 2002-06
Consumer Financial Activity
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- A quiet Christmas and New Year for providers
- Activity levels look set to drop sharply
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- Figure 28: Savings, investment, borrowing and debt repayment – consumers’ expected activity, June 2005-September 2006
- UK savings and spending climate
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- Figure 29: UK savings and spending climate – indexed, January 2001-October 2006
- Subdued picture across all sub-groups
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- Figure 30: Expected financial activity, by socio-demographic and income groups, September 2006 and average for the last 19 quarters
- Only ISA and life business will hold up
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- Figure 31: Leading financial activities planned in the next six months, September 2005-September 2006
- Property intentions may be hit by the rate rise
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- Figure 32: Intended mortgage and property purchase activity, September 2004-September 2006
- Identifying main financial services providers
- Bank of Scotland and Halifax customers will be the busiest
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- Figure 33: Activity levels of main financial services providers’ customer bases, September 2006
- NatWest and Barclays customers are looking to repay debt
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- Figure 34: Activity intentions and current household financial situation, by MFSP, September 2006
The Consumer: Product Ownership
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- One in four adults owe money on a credit card
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- Figure 35: Loan ownership, September 2006
- Implications and opportunities
- Younger consumers tend to borrow on bank overdrafts
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- Figure 36: Proportion of adults owing money on lending products, by gender, age and socio-economic group, September 2006
- Implications and opportunities
- Working status has an impact on loan eligibility
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- Figure 37: Proportion of adults owing money on lending products, by working status, gross annual household income and tenure, September 2006
- Implications and opportunities
- More than half of consumers do not owe money on any lending product
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- Figure 38: Number of lending products on which consumers owe money (mortgages excluded), September 2006
- Implications and opportunities
- The over-65s are not big on borrowing
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- Figure 39: Number of lending products on which consumers owe money, by gender, age and socio-economic group, September 2006
- Implications and opportunities
- Half of unsecured loan holders also owe money on a credit card
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- Figure 40: Proportion of adults owing money on lending products, by other products owned, September 2006
- Implications and opportunities
- Credit card borrowers also appear to be diligent savers
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- Figure 41: Number of savings products owned, by the type of lending product on which money is owed, September 2006
- Implications and opportunities
The Consumer: Purchasing Activity
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- One in three consumers shop around before taking out a loan
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- Figure 42: Loan arranging behaviour, 2005 and 2006
- Implications and opportunities
- Those shopping for cheap rates turn to smaller providers
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- Figure 43: Loan arranging behaviour, by type of loan company, September 2006
- Implications and opportunities
- Most consumers blame the banks
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- Figure 44: ‘It is the banks’ responsibility not to lend people more than they can afford to pay back’, September 2006
- Implications and opportunities
- The over-65s overwhelmingly hold the banks responsible
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- Figure 45: ‘It is the banks’ responsibility not to lend people more than they can afford to pay back’, by gender, age and socio-economic group, September 2006
- Implications and opportunities
- Even active borrowers refuse to accept responsibility
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- Figure 46: ‘It is the banks’ responsibility not to lend people more than they can afford to pay back’, by repertoire of lending products (excluding mortgages), September 2006
- Implications and opportunities
- Borrowing activity will probably not pick up over the next two years
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- Figure 47: ‘I do not anticipate having to borrow money in the next two years’, September 2006
- Implications and opportunities
- Who is most likely to need to borrow money?
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- Figure 48: ‘I do not anticipate having to borrow money in the next two years’, by gender, age and socio-economic group, September 2006
- Implications and opportunities
- The more affluent are more likely to borrow money
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- Figure 49: ‘I do not anticipate having to borrow money in the next two years’, by workiing status, gross annual household income and tenure, September 2006
- People already in debt seem to be the most likely to need to borrow more money
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- Figure 50: ‘I do not anticipate having to borrow money in the next two years’, by repertoire of lending products (excluding mortgages), September 2006
- Implications and opportunities
- Current account providers clearly have a competitive advantage
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- Figure 51: ‘If I needed a loan, I would probably go first to my current account provider’, September 2006
- Implications and opportunities
- Are 25-34s the most savvy?
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- Figure 52: ‘If I needed a loan, I would probably go first to my current account provider’, by gender, age and socio-economic group, September 2006
- Implications and opportunities
- Where would people who already owe money go for a loan?
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- Figure 53: ‘If I needed a loan, I would probably go first to my current account provider’, by working status, gross annual household income and tenure, September 2006
- Implications and opportunities
The Consumer: Typologies
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- Half of consumers claim to never buy goods on credit
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- Figure 54: Attitudes towards borrowing, September 2006
- Implications and opportunities
- Debt typologies
- Two in five ABs are Prudent Borrowers
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- Figure 55: Credit typologies, by gender, age and socio-economic group, September 2006
- Implications and opportunities
- Retirees are the most likely to shun credit
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- Figure 56: Credit typologies, by working status, gross annual household income and tenure, September 2006
- The Possibly Problematic are the heaviest borrowers
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- Figure 57: Typologies, by lending products on which money is owed, September 2006
- Implications and opportunities
- Who uses the most forms of credit?
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- Figure 58: Number of lending products on which money is owed, by typologies, September 2006
- Implications and opportunities
- Are the Prudent Borrowers also sophisticated investors?
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- Figure 59: Savings and investment products owned, by credit typologies, September 2006
- The Prudent Borrowers are also keen on saving
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- Figure 60: Credit typologies, by the number of saving and investment products owned, September 2006
- Implications and opportunities
- Even ‘savvy’ borrowers would turn first to current account provider for a loan
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- Figure 61: Attitudes towards borrowing money, by typologies, September 2006
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