Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Insights and Opportunities
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- Making more of loans with a purpose
- Increasing penetration amongst ABs and C2s
- Selling loans in a difficult environment
- Targeting the new borrower
Market in Brief
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- Economic conditions stifle market
- Secured borrowing is a real alternative to a loan
- Gross lending on unsecured loans to 20% in 2008
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- Figure 1: Estimated gross lending for unsecured personal loans, 2003-08
- Lloyds TSB is the market leader
- Adspend on personal loans has declined markedly
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- Figure 2: Personal loan advertising expenditure, by sector, 2005/06-2007/08
- One in twelve people has an unsecured personal loan
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- Figure 3: Outstanding consumer credit ownership, Sep’ 2008
- People are cutting back in the wake of economic downturn
Fast Forward Trends
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- Trend 1: Boom Comes To An End
- Consumers are cutting back…
- …which is bad news for the economy and lenders?
- Trend 2: Finance In Flux
- Consumers are to blame as much as lenders
- Every cloud has a silver lining
Internal Market Environment
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- Key points
- A more cautious approach towards lending
- The new Banking Code
- Revenue from PPI sales is likely to be hit
- Liquidity issues are still a problem…
- …although the government has intervened
- Lenders have increased rates on personal loans…
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- Figure 4: Average personal loan rates, Oct 2007 and Oct 2008
- …and some have exited the market altogether
- Bad debts are likely to rise…
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- Figure 5: Individual insolvencies in England and Wales (seasonally adjusted), Q1 2002-Q3 2008
- …causing providers to tighten their lending criteria
Broader Market Environment
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- Key points
- Economic conditions are worsening…
- …and some families are starting to struggle
- House prices continue to fall
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- Figure 6: Average UK house prices, Jan 2007-Sep 2008
- The Bank of England has slashed interest rates
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- Figure 7: Base rate, Jan 2000-Jul 2008
- Unemployment concerns are starting to mount
- An ageing population is not good news for lenders
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- Figure 8: UK population, by lifestage, 2003-13
- Increasing regulation and consumer education
Competitive Context
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- Key points
- Overdraft lending has remained flat since 2005
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- Figure 9: Overdraft advances to individuals and individual trusts (MBBG only), 2002-07
- Borrowing on credit cards may start to rise
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- Figure 10: Total gross lending and net amounts outstanding on credit card lending (seasonally adjusted), Jan 2003-Sep 2008
- Housing equity withdrawal has declined sharply
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- Figure 11: Housing equity withdrawal (seasonally adjusted), Q1 2003-Q2 2008
- Secured loans and further advances are other alternatives
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- Figure 12: Size of the secured lending market, by sector and gross advances, 2003-07
Strengths and Weaknesses in the Market
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- Market strengths
- A relatively simple product
- Margins are good at present
- The dawn of an era of more responsible lending
- Safer than secured borrowing
- Market weaknesses
- Stricter lending criteria
- Potential loss of revenue from PPI sales
- Consumers are tightening their belts
- Bad debts are likely to rise
Who’s Innovating?
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- Key points
- A low-innovation market…
- …centred around convenience and flexibility
- An interesting slant from Lloyds TSB
- Community lending – the birth of Zopa
Trade Perspective
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- Consumers are more value-orientated now…
- …which is partly because of aggregators
- The lending market has dried up…
- …which has polarised the market
- Loan rates have increased
- Feelings are mixed on the subject of PPI
- Despite the current turmoil in the market, it does have a future
Market Size and Forecast
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- Key points
- Total unsecured lending has declined since 2004
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- Figure 13: Total unsecured gross lending (monthly data, seasonally adjusted), Jan 2003-Sep 2008
- Non-credit card lending has decreased sharply since mid-2007
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- Figure 14: Total gross lending and net amounts outstanding of non-credit card consumer credit lending* (monthly data, seasonally adjusted), Jan 2003-Sep 2008
- Lending on unsecured personal loans is declining…
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- Figure 15: Gross lending on structured personal loans (monthly data, seasonally adjusted) (MBBG only), 2007 vs 2008
- …with total gross lending expected to fall sharply in 2008
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- Figure 16: Estimated gross lending for unsecured personal loans, 2003-08
- Market forecast
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- Figure 17: Forecast of gross lending on unsecured personal loans, 2003-13
- Factors used in the forecast
Market Share
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- Key points
- Lloyds TSB is the market leader
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- Figure 18: Unsecured personal loan market share, by provider, August 2007 and September 2008
- The ‘big five’ dominate the market
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- Figure 19: Unsecured personal loan market share, by type of provider, September 2008
Companies and Products
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- Key points
- High street banks don’t offer the best rates
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- Figure 20: Top ten rates on unsecured personal loans, by value of loan, November 2008
- PPI and other fees supplement interest income
- A win-lose business model
- An extremely diverse marketplace
- Recent developments in the market
Brand Communication and Promotion
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- Key points
- Personal loan adspend has declined markedly…
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- Figure 21: Financial services advertising expenditure, by sub-category, 2005/06-2007/08
- …in both the secured and unsecured sectors
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- Figure 22: Personal loan advertising expenditure, by sector, 2005/06-2007/08
- Lloyds TSB has the highest advertising expenditure
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- Figure 23: Top 20 advertisers of unsecured personal loans, 2005/06-2007/08
- Direct mail is the most popular advertising media
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- Figure 24: Unsecured personal loan advertising expenditure, by media type, 2007/08
Brand Elements
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- Brand map
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- Figure 25: Attitudes towards and usage of unsecured personal loan brands, October 2008
- Lloyds TSB
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 26: Attitudes towards the Lloyds TSB brand, October 2008
- NatWest
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 27: Attitudes towards the NatWest brand, October 2008
- Sainsbury’s Bank
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 28: Attitudes towards the Sainsbury’s Bank brand, October 2008
- Lombard Direct
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 29: Attitudes towards the Lombard Direct brand, October 2008
- Freedom Finance
- What the brand is trying to achieve
- What the consumer thinks
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- Figure 30: Attitudes towards the Freedom Finance brand, October 2008
- Brand Qualities of Unsecured Personal Loan Brands
- High street banks fare well compared to smaller lenders
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- Figure 31: Consumer usage of various unsecured persoanl loan brands, October 2008
- Many people have never heard of Freedom Finance or Yes Loans
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- Figure 32: Consumer usage of various unsecured personal loan brands, October 2008
- The big banks score highly on consideration…
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- Figure 33: Consideration of various unsecured personal loan brands, October 2008
- …and are also seen to be gaining the most ground
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- Figure 34: Momentum of various unsecured personal loans brands, October 2008
- Three fifths of borrowers are satisfied with their loan provider
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- Figure 35: Satisfaction of various unsecured personal loans brands, October 2008
- Round up
Channels to Market
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- Key points
- People are likely to source a loan through their bank
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- Figure 36: Likelihood of potential customers to source a loan through their current account provider, Sep’ 2008
- A quarter of internet shoppers have bought a financial product online…
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- Figure 37: Tendency of internet shoppers to purchase vrious products online in the last three months, by product category, Oct 2003-Jul 2008
- …but only one in ten internet users has bought a loan online recently
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- Figure 38: Websites actually purchased from in the last three months (financial products only), Oct 2003-Jul 2008
The Consumer – Product Ownership
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- Key points
- One in twelve people have an unsecured personal loan
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- Figure 39: Outstanding consumer credit ownership, September 2008
- BMRB data suggest one in five people has a loan
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- Figure 40: Type of loan held, June 2008
- Men are more likely to have an unsecured loan
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- Figure 41: Outstanding consumer credit ownership, by type of credit owned (excluding student loans), by gender, age, socio-economic group, marital status and age of children in household, September 2008
- Ds and C1s more likely to have a loan…
- …as are those with children
- Two fifths of loan owners have it with their main bank
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- Figure 42: Proportion of product holders who hold financial products with their main current account provider, April 2008
- The most common amount borrowed is £2,000-5,999
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- Figure 43: Value of loan, June 2008
- Car purchase is the most common loan purpose
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- Figure 44: Purpose of loan, June 2008
The Consumer – Attitudes Towards Borrowing
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- Key points
- Consumers are tightening their belts
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- Figure 45: Spending and saving intentions, September 2008
- Most people would go to their current account provider for a loan
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- Figure 46: Likelihood of potential borrowers to enquirie with their current account provider about a loan, September 2008
- Opinions are split on the impact on the credit crunch
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- Figure 47: Perceived effect of the credit crunch on peoples’ ability to get a loan, September 2008
- Low earners are less likely to make cut-backs
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- Figure 48: Consumer spending and saving intentions, by gross annual household income, September 2008
- Older people also look to carry on as they are
- Larger households will tighten their belts more
- Younger people more likely to enquire at their bank for a loan…
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- Figure 49: Likelihood of potential borrowers to enquire at their main bank to take out a loan, by gender, age, working status, gross annual household income and TV recieved, September 2008
- …as are less educated people
- ABs don’t think the credit crunch will affect their lendability…
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- Figure 50: Attitudes of consumers towards lending and the current economic environment, by gender, age, socio-economic group, marital status, lifestage and ACORN group, September 2008
- …the same case for Wealthy Achievers
- Existing holders of debt are tightening their belts more
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- Figure 51: Attitudes towards borrowing, by types of consumer-credit owned, September 2008
- People that are cutting back are a better cross-sell target
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- Figure 52: Attitudes towards borrowing, crossed with itself, September 2008
The Consumer – Borrowing Trends
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- Key points
- Half of people don’t think they’ll need a loan in the near future
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- Figure 53: Consumer borrowing trends, September 2008
- Men are more in touch with the personal loans market
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- Figure 54: Consumer borrowing trends, by gender, age, socio-economic group, lifestage, newspaper readership and household size, September 2008
- ABs are more rate-sensitive
- Large households are a good target group
- Evidence of the debt cycle…
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- Figure 55: Consumer borrowing trends, by types of consumer credit owned, September 2008
- …as unsecured loan holders are more stretched
- People that are cutting back are more rate-sensitive…
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- Figure 56: Consumer borrowing trends, by attitudes towards borrowing, September 2008
- …and are generally more confident in their financial position
- People who recognise the impact of the crunch seem more savvy
- Rate tarts are not in the market for a loan
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- Figure 57: Spread of attitudes towards borrowing, September 2008
- Low-risk borrowers are savvy… but also unprofitable
The Consumer: Further Analysis
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- Key points
- People go for easily accessible forms of borrowing first
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- Figure 58: Number of different consumer credit products held, by type, September 2008
- Consumer credit is the domain of the young adult
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- Figure 59: Number of different consumer credit products held, by gender, age, own children in household, working status and gross annual houshold income, September 2008
- Children are expensive creatures
- Analysis of attitudinal groups
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- Figure 60: Summary of attitudinal groups identified, September 2008
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- Figure 61: Size of attitudinal groups, September 2008
- It’s business as usual for debt-frees…
- …who aren’t worried about the economic downturn
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- Figure 62: Proportion of people that don’t think the credit crunch will make any difference to them getting a loan, by attitudinal group, September 2008
- Average Joes are tightening their belts…
- …and are split on their views of the credit crunch
- Savvies are playing it safe…
- …and have the highest level of debt
- Super confidents are not likely to need a loan
- … but are a low-risk group
- Retirees are more or less excluded from the market
- …evidenced by their low debt ownership profile
Appendix – Market Size and Forecast
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- Figure 63: Total gross unsecured consumer lending split, by product category, 2002-08
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Appendix – The Consumer: Product Ownership
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- Figure 64: Outstanding consumer credit ownership, by type of credit owned, by demographic sub-group, September 2008, (Table 1 of 2)
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- Figure 65: Outstanding consumer credit ownership, by type of credit owned, by demographic sub-group, September 2008 (Table 2 of 2)
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Appendix – The Consumer: Attitudes towards Borrowing
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- Figure 66: Attitudes of consumers towards lending and the current economic environment, by demographic sub-group, September 2008
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Appendix – The Consumer: Borrowing Trends
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- Figure 67: Consumer borrowing trends, by demographic sub-group, September 2008, (Table 1 of 2)
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- Figure 68: Consumer borrowing trends, by demographic sub-group, September 2008, (Table 2 of 2)
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Appendix – The Consumer: Further Analysis
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- Figure 69: Number of different consumer credit products held, by demographic sub-group, September 2008
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- Figure 70: Attitudes towards borrowing, by attitudinal group, September 2008
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- Figure 71: Number of outstanding consumer credit debts, by attitudinal group, September 2008
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- Figure 72: Attitudinal groups, by demographic sub-group, September 2008
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