Table of Contents
Issues in the Market
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- Key issues
- Definition
- Abbreviations
Future Opportunities
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- Trend: No Middleman
- Trend: Resilience
Market in Brief
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- Personal loan lending declined by 36% in 2009
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- Figure 1: New gross unsecured loan advances, 2004-10
- Competitive context – loans lose ground
- Two distinct sectors in the loans market
- A third of adults have some type of unsecured debt
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- Figure 2: Type of credit on which money is owed, June 2010
- Personal loan trends
- Demand for personal loans continues to fall
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- Figure 3: Intended consumer credit activities, Q3/Q4 2002-Q2/Q3 2010
- New regulation to impact loan providers
- Branch remains key channel for loan
- Credit crisis leads to a sharp drop in personal loan advertising
- A third of adults regard loans as a last resort product
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- Figure 4: Attitudes towards personal loans, June 2010
Internal Market Environment
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- Key points
- Household debt levels begin to fall
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- Figure 5: Outstanding lending to individuals, Q1 1993-Q2 2010
- Financial crisis leads to a major shift in the supply of credit
- An increase in advertised personal loan rates
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- Figure 6: Average advertised rates versus actual interest rate on personal loans, three-month LIBOR and base rate, May 2007- May 2010
- But lenders report some downward pressure on price
- Changes to consumer credit legislation
- Impact of the CCD
- OFT issues new irresponsible lending guidance
- PPI ban may be costly for loan providers
- PPI complaints top the list…
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- Figure 7: Number of new complaints cases, by financial product or service, 2009 and 2010
- … but loan complaints also increase
Broader Market Environment
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- Key points
- Consumer confidence is on a downward trend
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- Figure 8: UK Consumer confidence major indices, May 2004-June 2010
- Spending intentions remain weak
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- Figure 9: Spending and saving confidence, March 2001-June 2010
- Consumers remain largely debt-averse…
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- Figure 10: Agreement with selected lifestyle statements on finance, 2005-09
- And take a more cautious approach to their finances
- Demand for personal loans continues to fall
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- Figure 11: Intended consumer credit activities, Q3/Q4 2002-Q2/Q3 2010
- Unsecured loan write-off increased by 30% in 2009
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- Figure 12: Quarterly write-offs of lending to individuals, by sector, 2004-10
- But lenders report an improving picture
- Unemployment and indebtedness
Competitive Context
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- Key points
- Competing credit products
- Personal loans lose ground in consumer credit market
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- Figure 13: Gross consumer credit lending, by type, 2004-10
- Net consumer credit lending turned negative in 2009
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- Figure 14: Net consumer credit lending, 2004-09 (seasonally adjusted)
- Figure 15: Amounts outstanding on personal loans, credit cards and overdrafts, 2004-10*
- Appetite for secured borrowing remains suppressed
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- Figure 16: Housing Equity Withdrawal (seasonally adjusted), Q1 2003-Q1 2010
- Recession leads to growth in the high-cost credit market
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- Figure 17: High cost credit lending, by sector, 2008
Strengths and Weaknesses in the Market
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- Figure 18: Unsecured personal loans – a summary of strengths, weaknesses, opportunities and threats, 2010
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Who’s Innovating?
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- Key points
- A lack of innovation in the mainstream market
- Loan providers target existing customers
- Peer-to-peer lending continues to go from strength to strength
- New entrants in the peer-to-peer lending market
- Payday loan iPhone app
Market Size and Forecast
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- Key points
- Loans market continues to decline
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- Figure 19: New gross unsecured loan advances – total market and MBBG, 2004-10
- Forecast – Loan market is set for a slow and bumpy recovery
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- Figure 20: Forecast of gross unsecured loan advances – total market, 2005-15
Market Share
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- Key points
- Major banking groups dominate the personal loan sector
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- Figure 21: Type of provider, where loan held, 2007-09
- The top five loan providers
- Banks reduce exposure to unsecured loans
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- Figure 22: Overview of loans and advances to customers (loans and unsecured lending) at selected personal loan providers, 2008-09
- Other loan providers compete on price
Companies and Products
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- Major players
- Barclays Plc
- HSBC Bank Plc
- Lloyds Banking Group Plc
- Nationwide Building Society
- RBS Group
- Grupo Santander
Channels to Market
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- Key points
- Branch remains the favoured channel to arrange loans
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- Figure 23: Methods used to arrange loan, 2005-09
- Limited experience of arranging loans online
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- Figure 24: Types of financial services products considered to arrange or buy over the internet, May 2010
- Desire to get the best possible loan deal is likely to boost online sales
Brand Communication and Promotion
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- Key points
- Personal loan adspend continues on a sharp decline
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- Figure 25: Personal loan adspend, 2007-10
- Lloyds TSB continues to top personal loan adspend
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- Figure 26: Top 15 advertisers in the unsecured loans category, 2007-10
- Short-term credit providers face ASA scrutiny
- Direct mail accounts for more than 80% of loan advertising
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- Figure 27: Total adspend on unsecured loans segmented, by media type, 2007-10
Consumer Finances in Context
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- Key points
- Note on consumer research
- Most people are coping financially despite the challenging economy
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- Figure 28: Current financial position, June 2010
- No significant increase in the number of financial strugglers
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- Figure 29: Consumers’ financial situation, 2006-10
- But consumers suggest greater financial caution
- A generational divide
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- Figure 30: Current financial position, by lifestage, age group and presence of children in household, June 2010
- Not all affluent consumers have a financial cushion
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- Figure 31: Current financial position by socio-economic group, annual household income and housing tenure, June 2010
Credit Ownership
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- Key points
- More than half of people have some level of debt
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- Figure 32: Type of credit on which money is owed, June 2010
- Those without savings are more likely to have unsecured debt
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- Figure 33: Type of credit on which money is owed, by current financial position, June 2010
- Cross-sale opportunities
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- Figure 34: Type of credit on which money is owed, by most popular type of credit on which money is owed, June 2010
- Multiple credit holders are more likely to have personal loans
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- Figure 35: Repertoire of type of credit on which money is owed, June 2010
- Figure 36: Type of credit on which money is owed, by repertoire of type of credit on which money is owed, June 2010
Personal Loan Ownership and Motivation
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- Key points
- Families represent a key group for personal loan ownership
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- Figure 37: Personal loan ownership, by age group, lifestage and children in household, June 2010
- Higher income groups are more likely than average to have a loan
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- Figure 38: Personal loan ownership, by socio-economic group and annual household income, June 2010
- Loan ownership remains broadly unchanged
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- Figure 39: Loan ownership, 2007-09
- Sharp decline in the number of new loans taken out
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- Figure 40: When loan taken, 2007-09
- Growth in longer-term loans
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- Figure 41: Tenure of loan, 2007-09
- Some shift in loan amounts borrowed
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- Figure 42: Value of the loan, 2007-09
- An increase in the proportion of loans for debt consolidation
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- Figure 43: Purpose of loan, 2007-09
Attitudes Towards Personal Loans
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- Key points
- Loans – a grudge product
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- Figure 44: Attitudes towards personal loans, by credit products owned, June 2010
- The power of an existing relationship
- Shopping around for the best loan rate
- Financial situation influences attitude towards loans
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- Figure 45: Attitudes towards personal loans, by current financial position, June 2010
- Over 35-54-year-olds more likely to shop around for the best rate
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- Figure 46: Most popular attitudes towards personal loans, by demographics, June 2010
Key Target Groups
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- Key points
- Personal loans target groups
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- Figure 47: Target groups for unsecured personal loans, June 2010
- Rate focused
- Provider influenced
- Unlikely loan prospects
- Not really bothered
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- Figure 48: Attitudes towards personal loans, by target groups, June 2010
Appendix – Broader Market Environment
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- Figure 49: GDP, PDI, consumer expenditure and savings, at current prices, 2005-15
- Figure 50: Rate of UK unemployment, by gender, 2000-15
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Appendix – Current Financial Situation
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- Figure 51: Current financial position, by demographics, June 2010
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Appendix – Credit Ownership
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- Figure 52: Most common type of credit on which money is owed, by demographics, June 2010
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Appendix – Attitudes Towards Personal Loans
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- Figure 53: Most popular attitudes towards personal loans, by demographics, June 2010
- Figure 54: Next most popular attitudes towards personal loans, by demographics, June 2010
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Appendix – Key Target Groups
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- Figure 55: Type of credit on which money is owed, by target groups, June 2010
- Figure 56: Target groups, by demographics, June 2010
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- Figure 57: Target groups, by current financial posiition, June 2010
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