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
- Unsecured lending continues steady growth
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- Figure 1: Forecast of the value of unsecured personal loans, by gross advances, 2012-22
- More than half of borrowers arranged their loan online
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- Figure 2: Loan arrangement methods, October 2017
- Bank of England’s base rate rises to 0.5%
- Companies and brands
- LBG is the market leader in personal loans
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- Figure 3: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2014, 2015 and 2016
- Adspend for unsecured loans rose by 20% in 2016/17
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- Figure 4: Total above-the line, online display and direct mail advertising expenditure on loans, 2012/13-2016/17
- Traditional lenders have high levels of popularity
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- Figure 5: Attitudes towards and usage of selected brands, November 2017
- The consumer
- Majority of consumers owe money on a loan or credit product
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- Figure 6: Loan and credit product ownership, October 2017
- Consumers most likely to borrow from a bank, building society or major retailer
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- Figure 7: Type of personal loan, October 2017
- Majority of borrowers do not know what their interest rate is
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- Figure 8: Rates paid on recent loans, October 2017
- Over half of borrowers took out their most recent loan within the last two years
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- Figure 9: Timing of most recent loan, October 2017
- Acceptance can be more important than rate
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- Figure 10: Borrowing behaviours, October 2017
- 60% of consumers want to view all their borrowing/debts in one place
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- Figure 11: Attitudes towards borrowing, October 2017
- Only 7% of people pay to receive a regular credit report
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- Figure 12: Paying for monthly credit reports, October 2017
- What we think
Issues and Insights
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- Open Banking is the next stage of evolution for arranging and managing personal loans
- The facts
- The implications
- Traditional lenders are best positioned in the market
- The facts
- The implications
- Soft-searches help find acceptance
- The facts
- The implications
The Market – What You Need to Know
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- Unsecured lending continues steady growth
- Growth expected to be slow but steady
- More than half of borrowers arranged their loan online
- Open Banking will give lenders a new platform
- Lending criteria to be tightened amid Bank of England warning
- Bank of England’s base rate rises to 0.5%
- Write-offs fell to below £1 billion in 2016
Market Size and Forecast
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- Unsecured lending continues steady growth
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- Figure 13: Gross unsecured lending, 2012-16
- Figure 14: Gross unsecured lending, 2012-17 (est)
- Credit card lending keeps pace for 2017
- Growth in ‘other’ consumer credit slows
- Unclear Brexit direction is causing problems for the car finance market
- Big purchases may be put on hold
- Overdrafts are in decline
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- Figure 15: Other consumer credit, 2012-17 (est)
- Growth expected to be slow but steady
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- Figure 16: Forecast of the value of unsecured personal loans, by gross advances, 2012-22
- Figure 17: Forecast for gross lending for personal loans, 2012-22
Channels to Market
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- More than half of borrowers arranged their loan online…
- … Whilst two fifths of borrowers opted for more traditional channels
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- Figure 18: Loan arrangement methods, October 2017
- Traditional lenders boosted by online banking traffic
- Arranging loans online could help to find better value
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- Figure 19: Loan arrangement methods, by rates paid on recent loans, October 2017
Market Drivers
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- Open Banking will give lenders a new platform
- P2P continues to build on last year’s success
- Term Funding Scheme due to close
- Lending criteria to be tightened amid Bank of England warning
- Bank of England’s base rate rises to 0.5%
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- Figure 20: £5,000 and £10,000 Loan Interest rates, average credit card rates, LIBOR, and base rate, January 2013-November 2017*
- Concern for those struggling with their financial obligations
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- Figure 21: Consumers’ financial situation, June 2017
- Write-offs fell to below £1 billion in 2016
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- Figure 22: Annual write-offs of other unsecured lending to individuals, 2012-16
Companies and Brands – What You Need to Know
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- LBG is the market leader in personal loans
- Lenders compete to attract customers
- Soft-searches are becoming more common
- Adspend for unsecured loans rose by 20% in 2016/17
Market Share
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- LBG is the market leader in personal loans
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- Figure 23: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2014, 2015 and 2016
Competitive Strategies
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- Lenders compete to attract customers…
- …by slashing prices
- …and increasing accessibility
- Soft-searches are becoming more common
- Employee lenders lead the way
- The UK trails in chatbot tech for lending
Advertising and Marketing Activity
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- Adspend for unsecured loans rose by 20% in 2016/17
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- Figure 24: Total above-the line, online display and direct mail advertising expenditure on loans, 2012/13-2016/17*
- QuickQuid spends most on advertising
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- Figure 25: Top 20 spenders on advertising for unsecured and payday loans, 2014/15-2016/17**
- TV is the major media platform
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- Figure 26: Advertising spend for loans, by media type, 2016/17*
- Nielsen Ad Intel coverage
Brand Research
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- What you need to know
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- Figure 27: Attitudes towards and usage of selected brands, November 2017
- Key brand metrics
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- Figure 28: Key metrics for selected brands, November 2017
- Brand attitudes: Tesco Bank stands out for rewarding loyalty
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- Figure 29: Attitudes, by brand, November 2017
- Brand personality: Nationwide and The AA seen as most accessible
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- Figure 30: Brand personality – Macro image, November 2017
- Payday lenders seen as irresponsible
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- Figure 31: Brand personality – Micro image, November 2017
Brand analysis
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- Traditional lenders have high levels of popularity
- Non-financial brands benefit from high awareness
- Specialist lenders are the least trusted
The Consumer – What You Need to Know
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- Majority of consumers owe money on a loan or credit product
- Consumers most likely to borrow from a bank, building society or major retailer
- Majority of borrowers do not know what their interest rate is
- Over half of borrowers took out their most recent loan within the last two years
- Acceptance can be more important than rate
- Only 7% of people pay to receive a regular credit report
Loan and Credit Product Ownership
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- Majority of consumers owe money on a loan or credit product
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- Figure 32: Loan and credit product ownership, October 2017
- Consumers with loans seek improved accessibility
- Borrowing to make ends meet
- Nearly one in three people owe money on two or more products
- People with low savings are more likely to owe on multiple products
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- Figure 33: Repertoire of loan and credit ownership, October 2017
Type of Personal Loan
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- Consumers most likely to borrow from a bank, building society or major retailer
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- Figure 34: Type of personal loan, October 2017
- Young people have more high cost credit
Rates Paid on Unsecured Loans
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- Majority of borrowers do not know what their interest rate is
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- Figure 35: Rates paid on recent loans, October 2017
- Aggregation can help consumers to keep track
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- Figure 36: Rates paid on recent loans, October 2017
- More young people arrange borrowing online
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- Figure 37: Loan arrangement methods, October 2017
Timing of Most Recent Loan
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- Over half of borrowers took out their most recent loan within the last two years
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- Figure 38: Timing of most recent loan, October 2017
- Structured loans market may have benefited from payday struggles
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- Figure 39: Type of personal loan, by timing of most recent loan, October 2017
Borrowing Behaviours
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- Acceptance can be more important than rate
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- Figure 40: Borrowing behaviours, October 2017
- Being accepted is even more important for 18-44s
- AI could engage young borrowers
Attitudes towards Borrowing
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- 60% of consumers want to view all their borrowing/debts in one place
- Consumers look for convenience
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- Figure 41: Attitudes towards borrowing, October 2017
- Millennials have the most to gain from Open Banking
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- Figure 42: Response to the statement ‘I would like to view all my borrowing/debts from different providers in one place’, by generation, October 2017
Credit Reports
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- Only 7% of people pay to receive a regular credit report
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- Figure 43: Paying for monthly credit reports, October 2017
- Almost two fifths of consumers have signed up or are interested in a free credit report
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- Figure 44: Attitudes towards credit reports, October 2017
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Additional best/ worst forecast table
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- Figure 45: Best and worst case forecasts for the value of unsecured personal loans, by gross advances, 2017-22
- Forecast methodology
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