Table of Contents
Introduction
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- Report scope
- Abbreviations
Executive Summary
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- The market
- Confidence builds in the unsecured lending market
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- Figure 1: Forecast of the value of unsecured personal loans, by gross advances, 2007-17
- Unsecured lending increases in 2012
- Secured lending market contracts
- Market factors
- Government stimulus driving the lending market
- Payday lending market faces tighter regulation
- Household finances improving
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- Figure 2: Annual change in Average Weekly Earnings, CPI and RPI, 2005-12
- Companies, products and innovations
- Market dominated by high street banks sees smaller players enter
- A market keen for innovation
- SmartSearch on Moneysupermarket
- Majority of loans arranged directly with lender
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- Figure 3: Type of provider used to arrange loan, 2008-12
- The consumer
- Two thirds have some type of debt
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- Figure 4: Ownership of consumer credit, October 2012
- Interest rates are key when it comes to loan choice
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- Figure 5: Influencing factors on loan selection, October 2012
- Most loan research is conducted online
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- Figure 6: Loan research methods, October 2012
- Product suitability is a key concern for borrowers
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- Figure 7: Loan application process, October 2012
- Majority of people have ruled out using a payday lender
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- Figure 8: Payday loan usage, October 2012
- Positive attitudes towards payday loans are thin on the ground
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- Figure 9: Attitudes towards payday loans, October 2012
- What we think
Issues in the Market
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- Can payday loans shake off the negative connotations?
- Is a lack of product innovation bad news for traditional lenders?
- Are the days of in-branch loan arrangement dead?
- Are the days of selling to an existing client base over?
- Is consumer appetite for credit returning?
Trend Application
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- People are valuing brands on their ability to show moral responsibility
- Big brands need a small brand mentality to gain consumer trust
- Government intervention needed to address fears around cowboy lenders
Market Drivers
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- Key points
- Household unsecured debt continues to decline
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- Figure 10: Value of personal sector debt (mortgages and consumer credit) and as a proportion of total PDI, at current prices, 2003-12
- Weekly earnings grow just below inflation
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- Figure 11: Annual change in Average Weekly Earnings, CPI and RPI, 2005-12
- Increasing consumer confidence is good news for lenders…
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- Figure 12: Consumer confidence barometer trend – UK, January 2010 – December 2012
- … as is the decline in unemployment
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- Figure 13: UK unemployment rate, 2007-12
- Debt write-offs continue to decline
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- Figure 14: Quarterly write-offs of lending to individuals, by sector, 2007-12
- Increasing competition set to put pressure on margins
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- Figure 15: Effective rate on personal loans, three-month LIBOR and base rate, 2005-12 (monthly)
- Lending market boosted by fall in loan rates
- Funding for lending
- A word about PPI compensation
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- Figure 16: Total PPI Provisions as of 5 November 2012, by lender
- FCA to be given power to cap payday loan rates
- Moves to protect vulnerable customers from hidden payday loan charges
- Peer-to-peer lending market attracts lenders
Competitor Products
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- Key points
- 5% increase in gross unsecured lending in 2012
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- Figure 17: Gross consumer credit lending, by type, 2007-12
- Big jump in total unsecured net lending
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- Figure 18: Net consumer credit lending, 2007-12
- Acute contraction of the secured lending market
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- Figure 19: Value of new further advances and secured/homeowner loans, 2006-11
Market SWOT Analysis
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- Figure 20: SWOT analysis for loans market, January 2013
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Who’s Innovating
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- Key points
- Innovation needed but unwanted in a contracting lending market
- Halifax offers additional extras
- SmartSearch on Moneysupermarket
- Peer-to-peer payday lending company launched
- Wonga innovation
Market Size and Forecast
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- Key points
- Unsecured personal lending levels expected to show notable increase
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- Figure 21: New gross unsecured loan advances – MBBG and total market, 2006-12
- Peer-to-peer lending market growing
- Payday lending market will grow but interest cap will halt stellar growth
- A bumpy but resilient recovery expected
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- Figure 22: Forecast of the value of unsecured personal loans, by gross advances, 2007-17
- Figure 23: Forecast of gross lending on unsecured personal loans 2007 -17
- Forecast methodology
Market Share
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- Key points
- Lenders expected to increase lending levels
- Lloyds Banking Group is the largest loan provider
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- Figure 24: Value of unsecured consumer lending business outstanding (UK), by selected providers, 2010-11
- Payday lending – overview of leading providers
- Wonga
- Enova –QuickQuid and Pounds to Pocket
- PayDay UK
- Peer-to-peer lender market share
- Zopa
- RateSetter
Companies and Products
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- Barclays
- Description
- Relevant brands and subsidiaries
- Loan product range
- Other related products
- Distribution channels
- Recent financial performance
- Recent activity
- Grupo Santander
- Description
- Loan product range
- Other related products
- Distribution channels
- Recent financial performance
- Recent activity
- HSBC
- Description
- Relevant brands and subsidiaries
- Loan product range
- Other related products
- Distribution channels
- Recent financial performance
- Recent activity
- Lloyds Banking Group
- Description
- Relevant brands and subsidiaries
- Loan product range
- Other related products
- Distribution channels
- Recent financial performance
- Recent activity
- Nationwide Building Society
- Description
- Relevant brands and subsidiaries
- Loan product range
- Other related products
- Distribution channels
- Recent financial performance
- Recent activity
- RBS Group
- Description
- Relevant brands and subsidiaries
- Loan product range
- Other related products
- Distribution channels
- Recent financial performance
- Recent activity
- Wonga.com
- Description
- Relevant brands and subsidiaries
- Loan product range
- Other related products
- Distribution channels
- Recent financial performance
- Recent activity
- Zopa
- Description
- Loan product range
- Distribution channels
- Recent financial performance
- Recent activity
Brand Communication and Promotion
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- Key points
- Advertising on structured loan products sees large growth in 2012
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- Figure 25: Advertising expenditure on structured loan products, 2008-12
- Wonga is the largest unsecured lending advertiser
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- Figure 26: Top ten brands in the unsecured loans category, 2010-12
- Sainsbury’s Bank and Santander increase loan adspend
- TV is the most popular medium to advertise unsecured lending
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- Figure 27: Advertising expenditure on unsecured loans, by media type, 2010-12
- A note on adspend
Channels to Market
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- Key points
- Majority of people arrange loan directly with a bank or building society
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- Figure 28: Type of provider used to arrange loan , 2008-12
- Banks target existing customers
- Web aggregators and their use in personal loan distribution
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- Figure 29: Banking products researched/purchased through aggregator sites, March 2012
Loan and Credit Product Ownership
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- Key points
- Two thirds of people have some kind of debt
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- Figure 30: Ownership of consumer credit and other lending products, October 2012
- Above-average credit ownership for 35-44-year-olds
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- Figure 31: Loan and lending product ownership, by age, October 2012
- Personal loan owners have above-average ownership of credit products
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- Figure 32: Cross-analysis of credit ownership, October 2012
- Loan ownership levels remain stable
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- Figure 33: Ownership of loan, 2008-12
- Car purchase and home loans are the most popular reasons to take out a loan
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- Figure 34: Purpose of the most recent loan taken, 2008-12
Influencing Factors on Loan Choice
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- Key points
- Interest rates are the most important customer consideration
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- Figure 35: Influencing factors on loan selection, October 2012
- Interest rates and loan term significantly more important for over-45s
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- Figure 36: Influencing factors on loan choice, by age, October 2012
- Shorter term loans have grown in popularity
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- Figure 37: Length of the most recent loan arrangement, 2008-12
Loan Product Research
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- Key points
- The internet is the most popular loan research tool…
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- Figure 38: Loan research methods, October 2012
- … price comparison sites have scope to increase role in loan market
- Search engine users are hunting a low interest rate
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- Figure 39: Influencing factors on loan selection, by loan research methods, October 2012
Impact of Loan Application Process on Provider Choice
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- Key points
- Product suitability assurance at application stage is key
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- Figure 40: Loan application process, October 2012
- Personal loan owners look for quick approvals
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- Figure 41: Loan application process, by ownership of consumer credit and other lending products, October 2012
- Internet researchers are interested in speed and efficiency
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- Figure 42: Loan application process, by loan research methods, October 2012
Payday Loan Ownership
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- Key points
- Just over one in ten people have used a payday loan
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- Figure 43: Payday loan usage, October 2012
- Young men and those aged 25-34 most likely to use a payday loan
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- Figure 44: Payday loan usage, by gender and age
- Personal loan owners more likely to have used a payday loan
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- Figure 45: Payday loan usage, by ownership of consumer credit, October 2012
Attitudes Towards Payday Loans
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- Key points
- Payday loans are viewed with negativity
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- Figure 46: Attitudes towards payday loans, October 2012
- People with gaps in their finances value the quick decision from payday lenders
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- Figure 47: Loan application process, by selected attitudes towards payday loans, October 2012
- Target market exists for payday lenders
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- Figure 48: Attitudes towards payday loans, by payday loan usage, October 2012
Appendix – Market Size
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- Figure 49: Forecast of value sales for loans , best and worst case scenarios, 2006 - 17
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Appendix – Loan Product Ownership
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- Figure 50: Ownership of consumer credit, by demographics, October 2012
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Appendix – Influencing Factors on Loan Choice
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- Figure 51: Influencing factors on loan selection, by demographics, October 2012
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Appendix – Loan Product Research
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- Figure 52: Loan research methods, by demographics, October 2012
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Appendix – Impact of Loan Application Process on Provider Choice
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- Figure 53: Most popular loan application process, by demographics, October 2012
- Figure 54: Next most popular loan application process, by demographics, October 2012
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Appendix – Payday Loan Ownership
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- Figure 55: Payday loan usage, by demographics, October 2012
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Appendix – Attitudes Towards Payday Loans
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- Figure 56: Most popular attitudes towards payday loans, by demographics, October 2012
- Figure 57: Next most popular attitudes towards payday loans, by demographics, October 2012
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