Table of Contents
Issues in the Market
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- Mintel asks…
- Market definitions
- Abbreviations
Future Opportunities
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- Adjusting to the new economic realities
- Support customers through the bad times
- Build trust through open discourse
- Tap into customer wants through greater customisation
Market in Brief
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- Steep drop in new unsecured loan advances
- Most other related sectors are similarly faring poorly
- New business to remain flat in 2010
- As competitive pressures ease, loan rates increase
- Recent industry developments
- Branch-based sales still dominate, but the online channel is gaining ground
- Loan providers cut back on advertising to help control costs
- Summary of loan purchasing trends
- Around five million UK adults have an unsecured loan…
- …many of whom sourced it from their current account provider
- A significant minority are struggling to keep up with their repayments
- New business potential
Internal Market Environment
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- Key points
- A slimmer market post-crunch…
- …raising competition fears
- Lending remains restricted despite measures to improve liquidity
- Margins increase as competitive pressures ease
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- Figure 1: Average advertised rates versus actual interest rate on personal loans, three-month LIBOR and base rate, May 2007-October 2009
- OFT reviews high cost of consumer credit
- Competition Commission forced to review PPI ban
- PPI is the most complained about financial product
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- Figure 2: Number of new complaints cases, by financial product or service, 2008 and 2009
Broader Market Environment
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- Key points
- Summary of the main macroeconomic indicators impacting on the consumer credit market
- Improving consumer sentiment could increase demand for credit
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- Figure 3: GfK Consumer Confidence Barometer – UK, January 1988-October 2009
- Spending confidence starting to return
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- Figure 4: Spending and savings confidence: March 2001-October 2009
- More moderate consumer spending growth going forward
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- Figure 5: Total PDI, consumer expenditure and savings ratio, at current prices, 2004-13
- Household debt stabilises
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- Figure 6: The value of personal sector debt (mortgages and consumer credit) and as a proportion of total PDI, at current prices, 2000-09
- Most consumer debt write-offs relate to unsecured lending
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- Figure 7: Quarterly write-offs of lending to individuals, by sector, 2004-09
Competitive Context
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- Key points
- Rival products
- Increased demand for buy-now-pay-later deals
- Pawnbrokers are thriving in the downturn
- More people turning to loan sharks as legitimate credit sources dry up
- New consumer credit lending declines by 13% in 2009…
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- Figure 8: Gross consumer credit lending, by type, 2004-09
- Figure 9: Net consumer credit lending, 2004-08
- …helping loan and credit card balances to shrink further
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- Figure 10: Amounts outstanding on personal loans, credit cards and overdrafts (MBBG only), 2004-09
- Steep decline in housing equity withdrawal
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- Figure 11: Housing equity withdrawal, Q1 2004-Q2 2009
- Contraction in the secured loan market is most acute
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- Figure 12: Value of new further advances and secured personal loans, 2004-09
Strengths and Weaknesses in the Market
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- Figure 13: Unsecured personal loans – summary of strengths, weaknesses, opportunities and threats, 2009
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Who’s Innovating?
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- Key points
- Regulatory controls and reduced competition restrict innovation
- Most differentiation revolves around price
- Best deals only available to existing customers
- Rising popularity of payday loans
Market Size and Forecast
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- Key points
- Demand for unsecured loans continues to wane
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- Figure 14: New gross unsecured loan advances – MBBG and total market, 2004-09
- The market is not expected to see significant improvement until 2011
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- Figure 15: Forecast of gross lending on unsecured personal loans, 2004-14
- Factors incorporated
Market Share
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- Key points
- Market contracts…
- …but high street banks continue to lead the way
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- Figure 16: Type of company obtained loan from, September 2009
- Lloyds TSB is the largest loan provider
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- Figure 17: Estimated customer share of the unsecured personal loan market, by brand, September 2009
- Big five banking groups control nearly two thirds of the market
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- Figure 18: Big five share of the unsecured personal loans market, September 2009
- RBS, Lloyds and Northern Rock to be broken up
- Alliance & Leicester punches above its weight
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- Figure 19: Personal loan customer share versus current account customer share, September 2009
Companies and Products
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- Barclays
- HSBC
- Lloyds Banking Group
- RBS Group
- Grupo Santander
Brand Communication and Promotion
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- Key points
- Loan providers cut adspend again in 2009
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- Figure 20: Total advertising expenditure on loan products, by type, 2005-09
- Loan advertisers must adhere to a new social responsibility code
- Direct mail accounts for the majority of loan adspend
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- Figure 21: Advertising expenditure on unsecured loans, by media type, 2007-09
- High street brands top the list of loan advertisers
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- Figure 22: Top 15 advertisers of unsecured loan products, 2007-09
Channels to Market
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- Key points
- More people turning to bank branches to source loans since the credit crunch
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- Figure 23: Method used for arranging loans, 2006-09
- Motor and home insurance are the most frequently bought finance products online…
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- Figure 24: Financial products arranged or bought online within the past three months, 2007-09
- …although loan applicants are increasingly turning to the web
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- Figure 25: Methods of sourcing and arranging loan by existing loan holders, September 2009
The Consumer – Ownership and Motivation
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- Key points
- Loan penetration stabilises
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- Figure 26: Personal loan ownership, 2008 and 2009
- New loan holders account for a declining share of the overall customer base
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- Figure 27: Length of time ago loan was taken out, 2008 and 2009
- Loan terms of four to five years are the most common
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- Figure 28: Length of loan term, 2009
- Loan holders typically borrow between £4K and £15K
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- Figure 29: Loan amount borrowed, 2009
- The top reason people take out a loan is to buy a car
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- Figure 30: Purpose of loan, 2008 and 2009
The Consumer – Identifying the Target Market
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- Key points
- About Mintel’s consumer survey
- One in seven internet users have an unsecured loan
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- Figure 31: Financial products owned, September 2009
- The typical loan customer is a young, working mortgage holder
The Consumer – Buying Behaviour and Attitudes Towards PPI
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- Key points
- At least one in three customers obtained their loan from their current account provider
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- Figure 32: Experience of arranging loans and PPI, September 2009
- One in seven used a web aggregator to source a loan
- Over a quarter refused PPI
- One in ten regret taking out their loan
- Scope for web aggregators to improve targeting of women
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- Figure 33: Experience of arranging loans and PPI, by gender and age, September 2009
- C2DEs are much more likely to take out PPI than ABC1s
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- Figure 34: Experience of arranging loans and PPI, by socio-economic group and gross annual household income, September 2009
- Online applicants are less likely to take out PPI
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- Figure 35: Experience of arranging loans and PPI, by selected experiences, September 2009
The Consumer – Repayment Experience
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- Key points
- Around one in six loan holders are struggling with their repayments
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- Figure 36: Agreement with statements relating to customer satisfaction and repayment experience, September 2009
- Those with multiple debts are more likely to default on their loan
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- Figure 37: Agreement with statements relating to customer satisfaction and repayment experience, by satisfaction and repayment experience, September 2009
- Men pose more of a credit risk than women
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- Figure 38: Agreement with statements relating to customer satisfaction and repayment experience, by gender and age, September 2009
- C2DEs also have an above-average tendency to default
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- Figure 39: Agreement with statements relating to customer satisfaction and repayment experience, by socio-economic group and gross annual household income, September 2009
The Consumer – Targeting Opportunities
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- Key points
- There are 880,000 potential new loan customers
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- Figure 40: Financial plans and priorities, and concerns relating to loan acceptance, September 2009
- Around one in 13 new loan targets have been turned down for credit in the past year
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- Figure 41: Financial plans and priorities, and concerns relating to loan acceptance, by potential targets, September 2009
- Further analysis
Appendix – Loan and Credit Card Ownership by Demographics
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- Figure 42: Financial products or services in own name or jointly with a partner, by demographics, September 2009
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Appendix – Demographic Profile of Unsecured Loan Customers
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- Figure 43: Profile of unsecured personal loan holders versus the total sample, by demographics, September 2009
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Appendix – Financial Plans and Priorities by Key Demographics
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- Figure 44: Financial plans and priorities, and concerns relating to loan acceptance, by gender and socio-economic group, September 2009
- Figure 45: Financial plans and priorities, and concerns relating to loan acceptance, by age, September 2009
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