subject: UK Personal Lending 2010: Competitive Dynamics in the UK Unsecured Lending Market [print this page] Introduction Introduction
Competition in the unsecured personal loan market remained flat in 2009 as lenders cautiously focused their attention on selling to existing customers. There were minor competitive developments but the overriding focus of lenders was ensuring that bad debt levels remained under control. In addition, preparation for the implementation of new regulatory measures remains an ongoing concern.
Scope
*Provides market share data for gross advances and balances outstanding for the largest UK personal loan providers.
*Analyzes developments in the channels used to arrange a loan and considers different lender profiles in terms of borrower loan size and term.
*Includes data on advertising expenditure such as how much providers are willing to spend to promote their products and via which channels.
Highlights
Under an uncertain economic outlook, lenders have continued to focus on their core business. There is a need to find business where they can write a good margin yet avoid taking on potential bad debt. On the demand side, concern about the future is leading borrowers to postpone purchases, while on the supply side there is a liquidity drive.
The overall level of advertising expenditure on unsecured personal loans has decreased over the last couple of years, which is consistent with the overall decrease in the level of competition from lenders pulling out and restricting lending. Advertising expenditure for unsecured personal loans has declined from 51.6m in 2007 to 18.9m in 2009.
Borrowers with RBS tend to take out larger loans and for a longer period of time. In general the biggest players in the market have a greater proportion of large loans in their portfolio whereas the smaller lenders have a larger proportion of smaller loans and a larger share of short term loans.
Reasons to Purchase
*Gain an understanding of the performance of your competitors.
*Comprehend how conditions in the market are developing and what opportunities might present themselves as a result.
*Understand how the latest regulatory developments will impact on your business.
Table of Contents :
OVERVIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Lloyds Banking Group has the largest market share of new lending 2
Lloyds Banking Group has a dominant position in the market for unsecured personal loans 2
Gross advances in unsecured personal loans have declined since prior to 2005 3
Balances outstanding on unsecured personal loans fell in 2009 4
Although competitive pressure is weak, elements of competition remain in the market 5
Margins on unsecured personal loans remain high 6
Some of the best rates in the market are only available to existing customers 7
First Directs and M&S Moneys cashback offers set them aside from most other providers 9
Sainsburys Finance and the Co-operative Bank are offering points on membership cards 9
Lenders are shying away from the mainstream market at the moment 9
Lender websites are reflecting a return to a greater degree of competition 10
Lending Wizard uses soft search techniques as a key way to attract customers 11
Peer-to-peer lending is being challenged by social networking lending 12
Advertising spend is increasing for the large lenders in the market 12
Advertising expenditure grew in 2009 for the largest providers although it remained down on 2007 levels 12
Direct mail remained the largest advertising channel for unsecured personal loans 13
Credit scoring conditions are beginning to improve 14
Competition is unlikely to improve significantly for another year 15
Renewed focus on face-to-face reflects lenders focus on existing customers 15
Aggregator websites continue to play a role in unsecured personal lending 16
Aggregators are seen as a key channel for acquiring customers in the future 17
The branch maintains its place as an important area for face-to-face transactions 17
The popularity of the phone as a channel of arrangement is likely to have peaked 17
The intermediary channel is unpopular and is expected to remain this way as the market recovers 17
There are some key differences among the nature of custom picked up by each lender 18
Borrowers tend to take out loans for a longer period with RBS and Northern Rock 18
Borrowers are more likely to take out a small loan with NatWest and a large loan with Northern Rock 19
RBS has the largest customer base in social grades A to C1 20
NatWest and RBS have the largest proportion of business from under 35 year olds 21
Lenders face various hurdles such as regulation which are subduing competitive pressure 22
The level of write-offs in unsecured personal lending dropped below credit cards in Q1 2010 22
Competition is set to intensify in the PPI market 24
The Consumer Credit Directive could have a big impact on the market 25
The Introduction of full or early repayments will result in quite a technical change for lenders 26
The OFT has decided not to cap interest payments on payday loans, which will avoid market distortions 26
