News
UK Personal Lending 2008 - Nationwide Saw The Biggest Drop In Advertising Expenditure With Just GBP 287,232 Spent In 2007, Compared To GBP 3.2m In 2006
DUBLIN, Ireland-(Business Wire)-September 5, 2008 - Research and Markets (http://www.researchandmarkets.com/research/cda855/uk_personal_lendin) has announced the addition of the "UK Personal Lending 2008" report to their offering.
The UK consumer credit market has been a different beast since 2005. Indeed, the years prior to 2005 were characterized by a rampant housing market, a sound economy, lenders’ willingness to increase their customer base, and consumers’ borrow and spend culture. However, since 2005 there has been a marked change in lending patterns. So, what lies ahead for this sector?
Scope
- Covers unsecured personal loans, credit cards, overdrafts, motor finance and retail finance in the UK. Focus is on unsecured personal loans.
- Provides forecasts under 3 different scenarios for the consumer credit market as a whole as well as for individual product lines.
- Includes market share data for 2007 for major personal loan providers and examines the latest competitor developments shaping the market.
Highlights of this title
Gross advances in the UK consumer credit market contracted by a further 0.9% in 2007 to amount to £205.5 billion. However, after rising by only 0.8% over 2005-06, balances increased by a relatively significant 5.5% over 2006-07 to reach £224.4 billion, suggesting that consumers are finding it more difficult to repay their debts.
While rising bad debts was the trigger for a shift away from mass customer acquisition, the credit crunch has further contributed to this trend. Indeed, with less available funding and the resulting higher rates charged to consumers, lenders are looking more closely at affordability of consumers.
Nationwide saw the biggest drop in advertising expenditure with just £287,232 spent in 2007, compared to £3.2m in 2006.
Key reasons to purchase this title
- Gain access to the latest market sizing and forecasting data for the UK consumer credit market to place your performance in context to the markets.
- Gain insight into how your competitors are responding to the various issues facing the unsecured lending sector.
- Receive updated market share data to tell you how your company compares to your closest rivals.
| Key Topics Covered: |
| Â |
| Overview |
| Catalyst |
| Summary |
| The UK Consumer Credit Market in 2007 and Future Outlook |
| The UK consumer credit market has continued to decline in |
| Gross lending fell by a further 0.9% in 2007 while balances grew by 5.5% |
| More of the same in |
| Economic growth is forecasted to slow in 2008 and |
| House prices are now falling |
| Analysis by product lines highlights mixed results |
| With the exception of overdrafts and retail finance, all products grew in balances over 2006- |
| The market share of consumer credit balances taken up by unsecured personal loans grew over the last five years |
| New lending analysis highlights that retail finance and unsecured personal loans were the biggest losers |
| Credit cards consolidated its share of consumer credit gross advances while unsecured loans market share continues to decline |
| POS finance has continued to struggle in 2007 |
| Motor finance saw a revival in 2007 |
| Retail finance continues to fade away |
| The UK consumer credit market will remain subdued going forward |
| Our forecasting model assesses the relationship of macroeconomic factors with respect to consumer credit products |
| Under the Datamonitor view new lending in the UK consumer credit will fall in 2008 to total GBP 199.0 billion |
| All individual product lines will contract in 2008 |
| Under the optimistic scenario, the UK consumer credit sector will expand at a CAGR of 4.1% over 2008-12 |
| In terms of individual product lines, retail finance will be the only struggling product line |
| Under the pessimistic scenario, the UK consumer credit market will dip to a low GBP 186.7 billion in 2009 |
| All individual product lines will struggle, with retail and motor finance the worst hit |
| Competitive Dynamics in the UK Personal Loan Market |
| A contracting market in 2007 saw major personal loan providers reach lower lending levels |
| Major lenders new personal loan business levels in 2007 were below 2006 levels |
| Many of the major personal loan providers also experienced a contraction in balances outstanding in 2007 |
| Competitive intensity in the UK personal loan market has eased somewhat |
| There are significantly fewer players now operating in this sector |
| Most lenders are focusing on their own customer database to sell personal loans |
| The credit crunch is forcing lenders to review their lending strategies |
| Advertising spend has declined in 2007, as a result of more focus on cross-selling |
| The credit crunch is making the personal loan market less price sensitive |
| Personal loan providers have increased their rate significantly in the space of a year |
| Going forward, bad debt and PPI issues remain a threat to lenders profitability |
| Bad debt still remains an issue for lenders, although lenders seem to have learnt from their recent experience |
| Nonetheless, overindebtedness continues to remain a concern |
| The future of the PPI sector is still undecided |
| Personal loan providers profitability will be adversely affected |
| The Rise of Online Aggregators in the UK Consumer Credit Market |
| Online aggregators are a growing phenomenon in the UK |
| Online aggregators generally earn a fee by linking consumers to financial services providers |
| Aggregators earn the core of their revenue in three ways, depending on their business model |
| As the number of Internet users has risen, online aggregators have become increasingly popular |
| Confused.com and moneysupermarket.com are two of the largest aggregators for consumer credit products |
| moneysupermarket.com focused on consumer credit products when entering the market |
| Confused.com looks to become a significant player in consumer credit, following its success in insurance |
| Aggregators offer a number of acquisition advantages to lenders, but are not problem-free |
| Online aggregators chiefly allow for low-cost and large-scale acquisition |
| But lenders are concerned by aggregators focus on price and the inability to know their applicants |
| Aggregators orientation on price means many lenders are unable to portray products in the way they want |
| Lenders can receive too many applications from the wrong kind of customer |
| Customers acquired via this channel yield low profits and offer little cross-sell opportunity |
| Online aggregators have changed the competitive dynamics of the consumer credit market |
| Price competition has increased, giving rise to lower margins for lenders |
| The Big Four players, although reluctant at first, have become active players in this channel too |
| Consumer credit product innovation for aggregator-only distribution is gradually becoming more common |
| In order to stay ahead, lenders have no choice but to embrace this form of distribution |
| It is ultimately in lenders own interest to work with, rather than against, online aggregators |
| Even in the current difficult consumer credit environment, lenders still need to work with aggregators |
| The online aggregator space still has significant room to grow unless consumer skepticism gets in the way |
| A large number of other players, such as Tesco Personal Finance, have moved into this space |
| Only considerable consumer skepticism can really hamper this channels growth, but this is unlikely |
| Some aggregators are going into the editorial space and becoming opinion-makers within the industry |
| Aggregators are becoming more sophisticated comparers and need help from lenders to take this further |
| A number of aggregators allow for product differentiation by credit rating, but this is at a beginning stage |
| There is discussion around using customer feedback as a way to rate lenders, but this is a long way off |
| Aggregators are keen to draw up a code of conduct for transparency, which can only be good for lenders |
| Personal Lending Innovations from Abroad |
| Product design: the rest of the world has strived to make the unsecured personal loan a more dynamic product |
| Banks in Dubai offer customers leveraged investment products |
| The Retail Banking Team view |
| Dubai loan products are Shariah compliant |
| The Retail Banking Team view |
| Loan providers are offering a plethora of products that profess to care for the environment |
| The Retail Banking Team view |
| Pricing structure: some French banks charge different interest rates depending on region |
| Credit Agricole offers a simulation facility for loan payback that accounts for regional differences |
| The Retail Banking Team view |
| Repayment options: lenders from abroad tend to offer much more flexibility with their loan repayment options |
| In Singapore, GE Moneys James personal loans offers flexible repayment options |
| The Retail Banking Team view |
| Loan Trimmer provides borrowers with tax savings |
| The Retail Banking Team view |
| Many banks allow customers to redraw their funds |
| The Retail Banking Team view |
| Bundling: unlike their foreign counterparts, UK banks do not tend to bundle products, instead they favor standard cross-selling techniques |
| Bundling products to existing customers is common in Dubai and Australia |
| The Retail Banking Team view |
| Customer segmentation: loan providers are expanding their loan offerings to take account of different consumer segments |
| Loan providers in the French market have a strong focus on providing loans to the young |
| The Retail Banking Team view |
| Loans for RRSP in Canada |
| The Retail Banking Team view |
| Distribution: the use of SMS messages to apply for loans is more advanced abroad than in the UK |
| Turkish banks are offering customers the chance to apply for a loan through their mobile phone |
| Swedish SMS message loan providers have proved popular among the young |
| The Retail Banking Team view |
| New technology: loan providers are gravitating towards social networking sites as the next stage for selling loans |
| Social lending has emerged with the popularity of social networking sites |
| The Retail Banking Team view |
| Financial institutions have started advertising financial products on social networking sites |
| The Retail Banking Team view |
| An Analysis of Consumer Trends in UK Online Personal Lending |
| The Financial Services Consumer Megatrend Framework is a vital tool for analyzing and structuring consumer attitudes and behaviors |
| A Megatrend framework is vital for financial services |
| 10 Megatrends that impact the actions and attitudes of financial services customers have been defined |
| Authenticity |
| Comfort |
| Connectivity |
| Convenience |
| Individualism |
| Wellbeing |
| Demographic Complexity |
| Financial Intelligence Complexity |
| Lifestage Complexity |
| Wealth Complexity |
| Lenders are covering most trends to a certain extent; however, there is still plenty of capacity for greater innovation in UK online personal lending |
| Lenders are most commonly targeting Convenience and Financial Intelligence Complexity |
| Despite Convenience being the focus for most loan sites, there are huge missed opportunities |
| There are many ways to target the Convenience Megatrend |
| Financial Intelligence is an important trend, but appears to lack any deliberate targeting |
| More can be done to target Financial Intelligence |
| Lenders use images to convey a sense of Comfort, but they could do more |
| Providers can improve the manner in which they target the Comfort trend |
| Like the Comfort trend, lenders are using images to appeal to the Wellbeing Megatrend |
| The Wellbeing trend can be targeted in a variety of ways |
| Few providers are successfully hitting the Lifestage Megatrend |
| Changes in the traditional Lifestage boundaries are presenting lenders with new opportunities |
| Despite being a strong focus for some sites, Authenticity is another area where improvements can be made |
| There are at least two ways in which lenders can strengthen their focus on Authenticity |
| Most providers are not focusing on Wealth Complexity, but there are ways to rectify this |
| There are other methods that lenders could use to target their offering to Wealth Complexity |
| Lenders offer some coverage of the Individualism Megatrend, but there is room for improvement |
| There are elements of Individualism that lenders have so far failed to exploit |
| There is a disparity in the extent to which lenders cover the Connectivity Megatrend |
| Encouraging consumers to connect with a loan product is difficult, but can be achieved |
| UK lenders do not currently offer products that appeal to Demographic Complexity |
| Overall, HSBC, NatWest and RBS target a wide range of consumer attitudes through the messages on their websites, whereas Abbey has a message that is more focused on the key trends of Convenience and Wellbeing |
| Abbeys functional website places importance on the convenience of its rapid application process and the environment |
| Abbey is targeting customers who place a high value on convenience |
| Abbey is targeting consumers who are seeking higher levels of wellbeing by promoting its rates offering |
| Surprisingly, the bank is one of the few UK lenders to promote a green message through its banking operations |
| Abbey is looking to encourage greater financial intelligence |
| Abbeys efforts to provide comfort for its customers are embodied by its PPI offering |
| The principal message from Alliance & Leicesters website is cheaper loans |
| By promoting its rates, Alliance & Leicester is targeting consumers who fall within the Wealth Complexity trend |
| Alliance & Leicester is also pushing the simplicity and convenience of its offering |
| In order to appeal to the Connectivity trend, Alliance & Leicester uses a panel showing the financial products that other borrowers have taken out |
| Alliance & Leicester promotes a feeling of wellbeing to its customers through claiming that its loans can save money and improve lifestyle |
| Alliance & Leicesters loan calculator may improve financial intelligence |
| A more subtle message is that consumers can take comfort from the banks PPI |
| Barclayss website is informing consumers of the freedom a personal loan could afford them |
| Convenience is the key message on Barclayss personal loans website |
| Freedom to be individual is another of the websites clear messages |
| Barclays is promoting authenticity by focusing on its achievements |
| The banks loan matching and PPI provide comfort to consumers |
| Those with greater financial intelligence may be able to get an improved deal with Barclays |
| Barclays targets Wealth Complexity through its repayment matching facility and premier loans offer |
| Connectivity is an advantage for existing Barclays customers because the loan application process is quicker |
| Barclayss suggestions for loan purpose promote the wellbeing aspect of a personal loan |
| The first message that visitors to Halifaxs loans website see regards improved management of their finances |
| Improving financial intelligence is the principal message on the Halifax loans website |
| Halifaxs message also strongly promotes a sense of wellbeing |
| The Comfort trend is covered by a portfolio of PPI products |
| Convenience is still a fairly strong message for the provider |
| Halifaxs rate clarity appeals to the Authenticity trend |
| Halifax targets individualism through its offer of a web dialogue |
| Halifaxs smaller loan offer touches upon Wealth Complexity |
| HSBC has a functional website emphasizing convenience for its standard loan offering, but the more interesting layout for its non-standard products reflects their innovation |
| Convenience is the key message from HSBC |
| HSBC is experimenting with innovative ideas which appeal to the Authenticity trend |
| HSBCs four-part PPI offer may appeal to the consumers desire for comfort |
| The bank appeals to individualism through its professional studies loan |
| HSBCs Professional Studies Loan also targets consumers within the Lifestage Complexity trend |
| Repayment holidays target financial intelligence |
| HSBC suggests what consumers might do to improve their wellbeing |
| The trend towards a sense of connectivity is targeted more in other areas of the HSBC product portfolio |
| Flexiloan hits the Wealth trend |
| Lloyds TSBs use of illustrations gives the personal loans website a more cheerful and colorful feel, which reflects its focus on comfort and wellbeing |
| The Lloyds TSB loans site offers a feeling of comfort |
| Wellbeing is another clear message from Lloyds TSB |
| Convenience and flexibility are also key themes coming from the website |
| Lloyds TSB refers to its achievements in order to appeal to the Authenticity trend |
| The loan repayment holidays offered by Lloyds TSB meet the Financial Intelligence Complexity |
| Lloyds TSB pushes the idea of individualism through its personalized quotes |
| Connectivity is not a key message on the website |
| Nationwides site is fairly functional and has clear messages on speed and convenience of arrangement |
| The Nationwide websites key message is convenience |
| Nationwide is keen to promote its authenticity credentials |
| Nationwide is targeting improving financial intelligence |
| Nationwide caters for changing wealth through its loan top-up facility |
| The clarity of the website promotes wellbeing |
| NatWests message focuses on the ease and convenience of getting a loan, although it also hits other messages such as informing consumers |
| Convenience is the principal message of NatWests website |
| NatWests website highlights its strength in covering the Comfort trend |
| NatWest appeals to the Connectivity trend by offering favorable terms for existing customers |
| The bank offers favorable terms for those seeking to improve their house, tapping into the Wellbeing trend |
| NatWests exotic offers tie in with the desire for authenticity |
| The loans website promotes financial intelligence |
| NatWests products demonstrate some flexibility over lifestage |
| NatWest encourages individualism |
| RBS shares much of the look, feel and focus of its website with NatWest |
| Convenience is the key message from the RBS website |
| RBS is also promoting the comfort factor of its offering |
| RBS appeals to the Connectivity trend through favorable offers to existing customers |
| RBS is appealing to consumers by hinting at how a loan may improve wellbeing |
| RBS promotes its award winning PPI to appeal to the Authenticity trend |
| RBSs private banking website appeals to the other side of Wealth Complexity |
| RBS encourages financial intelligence through its loans calculator |
| RBS does not discriminate on lifestage in its loan offering |
| Chatting with an expert appeals to the need for individualism |
| Â |
| APPENDIX |
| Â |
| List of Tables |
| List of Figures |
| Â |
| Companies Mentioned: |
| Â |
| - Credit Agricole |
| - HSBC |
| - NatWest |
| - RBS |
| - Abbey |
| - Halifax |
| - Barclays |
| - Alliance & Leicester |
| - Lloyds TSB |
| - Nationwide |
| - NatWest |
| - RBS |
For more information visit http://www.researchandmarkets.com/research/cda855/uk_personal_lendin
Source: Datamonitor
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