Table of Contents
Executive Summary
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- The market
- Personal loans market grew by 13% in 2014
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- Figure 1: Forecast of personal loans industry revenue – Fan chart, 2009-19
- Gross unsecured lending grows by 3%
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- Figure 2: Gross unsecured lending, by product type, 2011-14
- Market factors
- Despite a retrenchment in 2014, financial consumer confidence is still strong
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- Figure 3: Financial confidence, January 2009-September 2014
- Below-inflation level rises of weekly income are creating an income squeeze
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- Figure 4: Single-month changes in weekly earnings, and CPI, September 2010-September 2014
- Regulators clamp down on the payday loan sector
- Brands and trust
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- Figure 5: Attitudes towards and usage of selected brands, December 2014
- Companies, products and innovations
- Eight out of the top 10 spenders on adverts were high-cost short-term credit lenders
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- Figure 6: Top 10 lenders’ spend, 2014 (est)
- High street banks continue to dominate market share, but supermarket banks are on the rise
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- Figure 7: Top seven providers in terms of value of outstanding unsecured consumer lending (UK), 2013
- The consumer
- Roughly one in five people have some form of unsecured structured loan
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- Figure 8: Types of loans and credit currently owned, September 2014
- Over one in 10 people currently owe money or have used a payday loan
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- Figure 9: Payday loan usage and consideration, September 2014
- Payday loan usage spans income groups
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- Figure 10: Payday loan ownership, by gross household income, September 2014
- Payday lenders are more appreciated among younger people
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- Figure 11: Agreement with the statement “payday lenders offer a valuable service”, by age, September 2014
- Paying for a new car and debt consolidation were the most popular reasons for credit use
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- Figure 12: Reasons for loan ownership, September 2014
- Over one in 10 people are considering taking a loan out in the next year
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- Figure 13: Likelihood of taking out a loan product in the next 12 months, September 2014
- Loan holders are much more likely to consider taking out another loan in the next 12 months
- 40% of all loans are applied for digitally
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- Figure 14: Method of loan application, September 2014
- Most people would prefer to go to a high street bank for a loan
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- Figure 15: Attitudes towards credit, by likelihood to withdraw a loan within the next 12 months, September 2014
- What we think
Issues and Insights
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- Regulations in the payday loans industry: The impacts on the lenders and borrowers
- The issues
- The implications
- How are people applying for loans, and the future
- The issues
- The implications
- The continued rise of peer-to-peer lending
- The issues
- The implications
Trend Application
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- Middle class shows demand for high-cost short-term credit
- Streamlining credit check procedure leads to more loan applications
- The bar has been raised for lenders’ responsibility
Market Drivers
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- Key points
- Consumer financial confidence has stabilised following a retrenchment in 2014
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- Figure 16: Financial confidence, January 2009-September 2014
- Little change in the proportion who plan to take out a loan product within the next 12 months
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- Figure 17: Comparison of likelihood of taking a loan product in the next 12 months, 2013 and 2014
- Weekly income earnings are increasing but at a below-inflation level
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- Figure 18: Single-month changes in weekly earnings, and CPI, September 2010-September 2014
- Employment levels
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- Figure 19: Employment rate (aged 16-64), seasonally adjusted, November 2011-July 2014
- Employment continues to rise…
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- Figure 20: Credit ownership, by working situation, September 2014
- …and borrowing rates continue to decline
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- Figure 21: £5,000 and £10,000 loan interest rates, three-month LIBOR, and base rate, August 2009-September 2014
- Major hike in write-offs in unsecured lending in mid-2014
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- Figure 22: Quarterly write-offs of lending to individuals, by lending type, September 2011-September 2014
- Regulators focus on the payday loan sector
Market SWOT Analysis
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- Figure 23: Personal loans 2015 – Market SWOT analysis
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Who’s Innovating?
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- Innovation amongst traditional lenders is limited, but necessary
- Halifax and Lloyds offer flexible loans
- Sainsbury’s Bank increases maximum loan amount to £35,000
Market Size and Forecast
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- Key points
- Credit is growing rapidly…
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- Figure 24: Gross credit card lending and other consumer credit, 2010-14
- …and the value of unsecured personal loans is expected to have hit £26 billion
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- Figure 25: Other consumer credit, 2010-14
- Market forecast
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- Figure 26: Forecast of the value of unsecured personal loans, by gross advances, fan chart, 2009-19
- Figure 27: Forecast of the value of unsecured personal loans, by gross advances, at current and constant prices, 2009-19
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Lloyds is still the market leader
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- Figure 28: Value of outstanding unsecured consumer lending (UK), by selected providers, 2012 and 2013
- Growing competition and presence from flexible supermarket banks
Companies and Products
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- Barclays
- Company background
- Relevant brands and subsidiaries
- Loan product range
- Recent financial performance
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- Figure 29: Barclays financial performance, Q1-Q3 2013 and 2014
- Recent activity
- Grupo Santander
- Company background
- Relevant brands and subsidiaries
- Loan product range
- Recent financial performance
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- Figure 30: Santander UK financial performance, Q1-Q3 2013 and 2014
- Recent activity
- HSBC
- Company background
- Relevant brands and subsidiaries
- Loan product range
- Recent financial performance
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- Figure 31: Interim for HSBC Bank financial performance, Q1-Q2 2013 and 2014
- Recent activity
- Lloyds Bank
- Company background
- Relevant brands and subsidiaries
- Loan product range
- Recent financial performance
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- Figure 32: Lloyds Interim financial performance, Q1-Q3 2013 and 2014
- Recent activity
- TSB
- Company background
- Loan product range
- Recent financial performance
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- Figure 33: TSB financial performance, Q2 2013 and Q3 2014
- Recent activity
- Nationwide
- Company background
- Relevant brands and subsidiaries
- Loan product range
- Recent financial performance
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- Figure 34: Nationwide financial performance, Q1-Q2 2013 and 2014
- Recent activity
- RBS Group
- Company background
- Relevant brands and subsidiaries
- Loan product range
- Recent financial performance
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- Figure 35: RBS interim financial results, Q3 2013 and Q3 2014
- Recent activity
- Wonga
- Company background
- Loan product range
- Recent financial performance
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- Figure 36: Wonga financial performance, FY 2012 and FY 2013
- Recent activity
- Zopa
- Company background
- Loan product range
- Recent activity
- Sainsbury’s Bank
- Company background
- Loan product range
- Recent financial performance
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- Figure 37: Sainsbury’s Bank annual report, FY 2013 and FY 2014
- Recent activity
- Tesco Bank
- Company background
- Loan product range
- Recent financial performance
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- Figure 38: Tesco Bank, FY 2013 and FY 2014
- Recent activity
Brand Research
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- Brand map
- High street brands enjoy considerably higher levels of trust
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- Figure 39: Attitudes towards and usage of selected financial services brands, December 2014
- Correspondence analysis
- Brand attitudes
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- Figure 40: Attitudes, by brand, December 2014
- Brand personality
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- Figure 41: Brand personality – Macro image, December 2014
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- Figure 42: Brand personality – Micro image, December 2014
- Brand experience
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- Figure 43: Selected brand usage, December 2014
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- Figure 44: Satisfaction with selected brands, December 2014
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- Figure 45: Consideration of selected brands, December 2014
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- Figure 46: Consumer perceptions of selected brand performance, December 2014
- Brand recommendation
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- Figure 47: Recommendation of selected brands, December 2014
Brand Communication and Promotion
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- Key points
- Overall adspend for structured loans falls 9.2% year on year
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- Figure 48: Advertising expenditure on structured loan products, 2010-14
- Payday lenders ramp up adspend operations, while Wonga scales back
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- Figure 49: Top 20 spenders on advertising in the personal loans market, 2011-14
- Payday lenders could face pre-watershed advert ban
- Television adverts continue to dominate the adspend space
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- Figure 50: Advertising expenditure on unsecured loans (inc. payday loans), by media type, 2011-14
- Lenders continue prudent spending on internet advertising
Loan and Credit Product Ownership
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- Key points
- 70% owe money on at least one kind of credit
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- Figure 51: Loan and credit product ownership, September 2014
- Smart use of credit cards continues to dominate the credit market
- Personal loans are the fifth most popular form of credit
- 25-34-year-olds have most appetite for borrowing
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- Figure 52: Credit product ownership, by age, September 2014
- People new to credit are hesitant about other forms of credit than credit cards
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- Figure 53: Number of different types of credit owed, by types of credit, September 2014
- Personal loans were owned by only 4% of people with one type of credit…
- …but ownership increases to 45% for people who have at least four types of credit
Reasons for Loan Ownership
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- Key points
- A quarter of personal loan owners had borrowed to buy a new car
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- Figure 54: Reasons for loan ownership, September 2014
- Large one-off payments were more common in larger households
- Consolidating existing debt is the second most common reason for people taking out a loan product
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- Figure 55: Reasons for taking out most recent loan product, by credit ownership and payday loan ownership, September 2014
- Payday and personal loan ownership was high for debt consolidators
Methods of Loan Application
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- Key points
- Digital leads the way
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- Figure 56: Method of loan application, September 2014
- Face-to-face sales still account for roughly a third of sales
- Digital methods are more commonly used by younger people
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- Figure 57: Method of application, by age, September 2014
- Rise in the popularity of price comparison websites
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- Figure 58: Method of loan application, by length of time borrowers have held their loan for, September 2014
- Face-to-face applications still an important channel
Likelihood of Taking Out a Loan in the Next 12 Months
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- Key points
- The majority of people are not considering a loan in the next year
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- Figure 59: Likelihood of taking out a loan product in the next 12 months, September 2014
- 14% of respondents are considering a loan product in the next year
- Loan usage is habitual
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- Figure 60: Likelihood of taking out a loan product in the next 12 months, by types of loans and credit currently owned, September 2014
- Unsecured structured loan users are much more likely to consider a loan
- Over one in five personal loan holders are considering taking out a loan in the next year
- 53% of people who have used or currently owe money on a payday loan are likely to take out a loan in the next year
- People who took a loan out one or two years ago are the most likely to take another out in the next year
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- Figure 61: Likelihood of taking out a loan product in the next 12 months, by period of time that loan owners have held their most recent loan for, September 2014
Payday Loans – Usage and Consideration
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- Key points
- There is still a negative association surrounding high-cost short-term credit.
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- Figure 62: Payday loan usage and consideration, September 2014
- However, there is still an appreciable market that is open to the idea of using payday loans…
- …particularly amongst Millennials
- Payday loans are not just for the below-average earner
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- Figure 63: People who have used/currently owe money on a payday loan, by gross annual household income, September 2014
Attitudes towards Payday Loans
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- Key points
- Perceptions of payday loans as a useful product suggest there is room for growth…
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- Figure 64: Attitudes towards payday loans and lenders, September 2014
- …even among the higher-income households
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- Figure 65: Agreement with the statement “A payday loan can be a useful product as long as it is used responsibly”, by gross annual household income, September 2014
- However, perceptions of payday loan lenders are less positive
- The younger generations are more positive
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- Figure 66: Agreement with the statement “Payday lenders offer a valuable service”, by age, September 2014
- Overdrafts are still viewed as a better option than using a payday loan
Attitudes towards Credit
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- Key points
- Most people would rather deal with a high street bank
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- Figure 67: Attitudes towards credit, September 2014
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- Figure 68: Attitudes towards credit, September 2014
- Price is the most important factor
- Nearly a quarter of respondents were worried whether they would pass a credit check
- Lenders are not solely responsible for credit victims
Appendix
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- Figure 69: Forecast data for loans, by confidence intervals 95%, 90%, 70%, 50%
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