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Unsecured Loans - UK - January 2018

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Unsecured lending continues steady growth
Figure 1: Forecast of the value of unsecured personal loans, by gross advances, 2012-22
More than half of borrowers arranged their loan online
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
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
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
Figure 5: Attitudes towards and usage of selected brands, November 2017
The consumer
Majority of consumers owe money on a loan or credit product
Figure 6: Loan and credit product ownership, October 2017
Consumers most likely to borrow from a bank, building society or major retailer
Figure 7: Type of personal loan, October 2017
Majority of borrowers do not know what their interest rate is
Figure 8: Rates paid on recent loans, October 2017
Over half of borrowers took out their most recent loan within the last two years
Figure 9: Timing of most recent loan, October 2017
Acceptance can be more important than rate
Figure 10: Borrowing behaviours, October 2017
60% of consumers want to view all their borrowing/debts in one place
Figure 11: Attitudes towards borrowing, October 2017
Only 7% of people pay to receive a regular credit report
Figure 12: Paying for monthly credit reports, October 2017
What we think
ISSUES AND INSIGHTS
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
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
Unsecured lending continues steady growth
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
Figure 15: Other consumer credit, 2012-17 (est)
Growth expected to be slow but steady
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
More than half of borrowers arranged their loan online…
… Whilst two fifths of borrowers opted for more traditional channels
Figure 18: Loan arrangement methods, October 2017
Traditional lenders boosted by online banking traffic
Arranging loans online could help to find better value
Figure 19: Loan arrangement methods, by rates paid on recent loans, October 2017
MARKET DRIVERS
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%
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
Figure 21: Consumers’ financial situation, June 2017
Write-offs fell to below £1 billion in 2016
Figure 22: Annual write-offs of other unsecured lending to individuals, 2012-16
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
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
LBG is the market leader in personal loans
Figure 23: Value of outstanding balances for personal loans/unsecured lending (UK), by selected providers, 2014, 2015 and 2016
COMPETITIVE STRATEGIES
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
Adspend for unsecured loans rose by 20% in 2016/17
Figure 24: Total above-the line, online display and direct mail advertising expenditure on loans, 2012/13-2016/17*
QuickQuid spends most on advertising
Figure 25: Top 20 spenders on advertising for unsecured and payday loans, 2014/15-2016/17**
TV is the major media platform
Figure 26: Advertising spend for loans, by media type, 2016/17*
Nielsen Ad Intel coverage
BRAND RESEARCH
What you need to know
Figure 27: Attitudes towards and usage of selected brands, November 2017
Key brand metrics
Figure 28: Key metrics for selected brands, November 2017
Brand attitudes: Tesco Bank stands out for rewarding loyalty
Figure 29: Attitudes, by brand, November 2017
Brand personality: Nationwide and The AA seen as most accessible
Figure 30: Brand personality – Macro image, November 2017
Payday lenders seen as irresponsible
Figure 31: Brand personality – Micro image, November 2017
BRAND ANALYSIS
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
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
Majority of consumers owe money on a loan or credit product
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
Figure 33: Repertoire of loan and credit ownership, October 2017
TYPE OF PERSONAL LOAN
Consumers most likely to borrow from a bank, building society or major retailer
Figure 34: Type of personal loan, October 2017
Young people have more high cost credit
RATES PAID ON UNSECURED LOANS
Majority of borrowers do not know what their interest rate is
Figure 35: Rates paid on recent loans, October 2017
Aggregation can help consumers to keep track
Figure 36: Rates paid on recent loans, October 2017
More young people arrange borrowing online
Figure 37: Loan arrangement methods, October 2017
TIMING OF MOST RECENT LOAN
Over half of borrowers took out their most recent loan within the last two years
Figure 38: Timing of most recent loan, October 2017
Structured loans market may have benefited from payday struggles
Figure 39: Type of personal loan, by timing of most recent loan, October 2017
BORROWING BEHAVIOURS
Acceptance can be more important than rate
Figure 40: Borrowing behaviours, October 2017
Being accepted is even more important for 18-44s
AI could engage young borrowers
ATTITUDES TOWARDS BORROWING
60% of consumers want to view all their borrowing/debts in one place
Consumers look for convenience
Figure 41: Attitudes towards borrowing, October 2017
Millennials have the most to gain from Open Banking
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
Only 7% of people pay to receive a regular credit report
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
Figure 44: Attitudes towards credit reports, October 2017
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Additional best/ worst forecast table
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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