Ajouter aux favoris   Ajouter cette page à mon bookmark --- SOCIAL BOOKMARKING --- Digg Furl del.icio.us Netscape

Introduction
 
Despite several interest rate increases and the general uncertainty about the state of the housing market, the consumer credit market has done remarkably well in 2004. This report examines key market trends, provides detailed consumer and competitor data and presents scenario based forecasts to give readers a detailed view of the current state of the UK consumer credit market.
 

 
Scope
 
Provides a wealth of data from a range of primary and secondary sources, including a series of in-depth interviews with industry experts
 
Draws on MORI Financial Services data to detail major consumer trends, expectations and preferences in the unsecured personal loans market
 
Estimates the market share of leading personal loan providers in terms of outstanding balances and gross advances for 2003 and 2004 H1
 
Presents three forecasting scenarios for gross advances in the consumer credit market to 2009
 
Highlights
 
While the consumer credit market as a whole has shown surprising resilience over the past year, the same cannot be said about some individual product lines. Credit cards still dominate the market and personal loans have recovered from the slump of 2003. However, point of sale retail finance has continued to lose ground in the market
 

 
The UK unsecured personal loan market has become highly commoditized in recent years as a result of tough competition and favourable economic indicators. Even as interest rates have risen, average loan prices have continued to move in the opposite direction, thus squeezing lenders' margins on both sides
 

 
The large high-street lenders still account for the bulk of the market, both in terms of balances outstanding and new business. Big banks have cemented their position at the top largely as a result of their successful response to the price challenge issued by smaller and direct providers
 

 
Reasons to Purchase
 
Detailed analysis of the unsecured personal loan market helps you to plan your business strategy with confidence
 
In-depth analysis of customer acquisition and retention strategies allows you to successfully target specific consumer segments
 
Datamonitor's five-year forecasts provide you with invaluable insight into the future potential of the consumer credit market

TABLE OF CONTENTS
 
CHAPTER 1 EXECUTIVE SUMMARY 3
 
Introduction 3
 
Market context 3
 
Customer focus 5
 
Competitive dynamics 6
 
The future decoded 10
 
CHAPTER 2 INTRODUCTION 26
 
What is this report about? 26
 
Who is the target reader? 26
 
How to use this report 27
 
CHAPTER 3 MARKET CONTEXT 28
 
Introduction 28
 
Notes on the sizing methodology used 28
 
The consumer credit market has continued to grow in 2004 29
 
Key economic drivers contributing to the growth of the consumer credit market have remained strong 30
 
The performance of individual products in the consumer credit market 34
 
Consumer credit: outstanding balances 34
 
Consumer credit: gross advances 38
 
Gross advances in unsecured personal loans return to growth in 2004 42
 
Credit cards: another exceptional year of growth 44
 
Overdrafts cement their position as the third most popular consumer credit product in terms of gross advances 46
 
Motor finance: difficult market conditions lead to the diminishing share of the consumer credit market 47
 
Point of sale retail finance – increasing competitive pressure and regulatory attention means the market is being squeezed on both sides 55
 
Personal overindebtedness is an ever-present issue for the UK consumer credit industry 61
 
Over the past year the media has been explicitly focusing its attention on this issue 62
 
However, according to some industry sources, the situation is not as dramatic as it suggested 63
 
While largely rejecting the accusations of irresponsible lending, providers are nevertheless worried about increasing bad debt 64
 
Some providers are opting for more stringent credit scoring techniques 66
 
CHAPTER 4 CUSTOMER FOCUS 68
 
Introduction 68
 
MORI Financial Services data 68
 
Profiling unsecured personal loan customers 69
 
Unsecured personal loan customers in 2004 69
 
Examining unsecured personal loan usage in 2004 73
 
Car purchase remains the most common reason for taking out a loan 73
 
Customer acquisition: why and how customers choose their unsecured personal loan provider 81
 
Customers’ choice of a lender – current account providers are still in the driving seat 81
 
Customers’ choice of a distribution channel 88
 
Customer retention – levels of satisfaction and attitudes to cross-selling 93
 
Customers are generally satisfied with their existing loan providers 94
 
Customers’ attitudes to cross-selling 95
 
CHAPTER 5 COMPETITIVE DYNAMICS 102
 
Introduction 102
 
Large high-street lenders continue to dominate the unsecured personal loan market 102
 
Big banks have successfully responded to the price challenge from direct providers 102
 
The end of 2003 saw the big banks cementing their domination of the unsecured personal loan market 105
 
The situation changed little in 2004 110
 
Customer acquisition tactics – pricing, advertising and product differentiation 114
 
Pricing war shows no signs of abating 114
 
Promotional tactics 126
 
Cross-selling strategies 137
 
Despite recent bad publicity, PPI remains relatively popular among consumers 137
 
CHAPTER 6 THE FUTURE DECODED 144
 
Introduction 144
 
Datamonitor’s forecasting model 144
 
The growth of the consumer credit market will slow down over the next five years under a “neutral” view of the economy 145
 
Under this scenario, the consumer credit market will grow at 2.8 per cent on average each year over the next five years 148
 
Credit cards and overdrafts will grow at a faster rate than the total consumer credit market 149
 
Forecasting the performance of the consumer credit market under the pessimistic scenario 156
 
Under the pessimistic scenario, the consumer credit market will grow by an average of just 2.7 per cent a year to 2009 159
 
The majority of individual product lines will struggle under this scenario 159
 
The performance of the consumer credit market under the optimistic scenario 165
 
Under the optimistic scenario, the consumer credit market will grow on average by six per cent each year to 2009 168
 
The majority of individual products are forecast to put in a strong performance under the optimistic scenario. 168
 
Conclusion 174
 
CHAPTER 7 APPENDIX 175
 
Supplementary data tables 175
 
Data tables relating to Chapter 3 Market Context 175
 
Data tables relating to Chapter 3 Customer Focus 178
 
Data tables relating to Chapter 4 Competitive Dynamics 186
 
Further information 196
 
Datamonitor’s research methodology 196
 
MORI Financial Services data 197
 
Datamonitor’s loans and credit forecasting methodology 197
 
Definitions of point of sale motor and retail finance products 199
 
Useful links 203
 
Datamonitor’s custom research capabilities 206
 
The retail banking team 207
 

 

 
LIST OF TABLES
 
Table 1: Gross written premiums for non-mortgage PPI, 1999-2004e 10
 
Table 1: Total consumer credit gross advances and outstanding balances, 1995-2004e 30
 
Table 2: Consumer credit outstanding balances by product, 2000-2004e 35
 
Table 3: Market share of outstanding balances in consumer credit by product, 2000-2004e 37
 
Table 4: Consumer credit gross advances by product, 2000-2004e 39
 
Table 5: Market share of consumer credit gross advances, 2000-2004e 41
 
Table 6: Gross advances for secured and unsecured personal loans, 2000-2004e 43
 
Table 7: Value of motor finance arranged at the point of sale for private new car purchases by product, 2000-2004e 52
 
Table 8: Value of motor finance arranged at the point of sale for private used car purchases by product, 2000-2004e 54
 
Table 9: Retail finance outstanding balances by product, 2000-2004e 56
 
Table 10: Retail finance gross advances by product, 2000-2004e 58
 
Table 11: Gross advances in unsecured personal loans by loan usage, 1999-2004e 75
 
Table 12: Why do customers choose their personal loan providers, 1999-2004 82
 
Table 13: Gross advances by loan distribution channel, 1999-2004 89
 
Table 14: The main reasons for not taking out PPI, 1999 & 2004 98
 
Table 15: The “big four” have cut their rates heavily, 2001 & 2004 119
 
Table 16: Competitors’ unsecured personal loans pricing strategy, Oct-04 123
 
Table 17: Competitors’ unsecured personal loan product offerings, Oct-04 125
 
Table 1: The change in advertising expenditure between 2002 and 2003 126
 
Table 18: Advertising spend by product for the leading market competitors, 2003 128
 
Table 19: The percentage of advertising spend by product for the leading competitors, 2003 129
 
Table 20: The top four providers by their advertising expenditure on personal loans, 2002-2003 130
 
Table 21: Gross written premiums for non-mortgage PPI, 1999-2004e 138
 
Table 22: PPI premiums and typical APRs of the leading personal loan providers, Oct-04 140
 
Table 23: Forecasted performance of the consumer credit market drivers under the ‘neutral’ scenario, 2004e-2009f 148
 
Table 24: Forecasted gross advances in the consumer credit market (neutral scenario), 2000-2009f 149
 
Table 25: Forecasted consumer credit gross advances by product (neutral scenario), 2004e-2009f 151
 
Table 26: Forecasted performance of the consumer credit market drivers under pessimistic scenario, 2004e-2009f 158
 
Table 27: Forecasted consumer credit gross advances by product under pessimistic scenario, 2004e-2009f 161
 
Table 28: Forecasted performance of the consumer credit market drivers under optimistic scenario, 2004e-2009f 167
 
Table 29: The performance of individual product lines within the consumer credit market under optimistic scenario, 2004e-2009f 170
 
Table 30: Average house price in the UK, 1995-2004e 176
 
Table 31: Value of motor finance for private new and used cars purchases at the point of sales, 2000-2004e 176
 
Table 32: Market share of the four main product lines in the new car finance market (gross advances), 2000-2004e 176
 
Table 33: Market share of the four main product lines in the used car finance market (gross advances), 2000-2004e 177
 
Table 34: Market share of the three main product lines in the point of sale retail finance (balances outstanding), 2000-2004e 177
 
Table 35: Market share of the three main product lines in the point of sale retail finance (gross advances), 2000-2004e 177
 
Table 36: Consumer credit balances outstanding per UK adult, 1995-2004e 178
 
Table 37: The type of loans held by respondents according to their age and income groups, 2003-2004 178
 
Table 38: The number of loans held by respondents according to their age and income groups, 2003-2004 179
 
Table 39: Unsecured personal loan usage expressed as a percentage of the total loan customer base across the leading providers, 1999-2004 180
 
Table 40: Unsecured personal loan usage across the three main categories by age and income groups of respondents, 2003-2004 181
 
Table 41: Main reasons for choosing an unsecured personal loan provider across customers’ gender, age and income groups, 2003-2004 182
 
Table 42: Main loan distribution channels across customers’ age and income groups, 2003-2004 183
 
Table 43: Financial products arranged online across respondents’ age and income groups (indexed, 100=average population), 2003-2004 184
 
Table 44: The level of satisfaction with their loan provider across respondents’ age and income groups, 2003-2004 185
 
Table 45: Customers’ uptake of PPI, by age and income groups, 2004 185
 
Table 46: The popularity of the three main reasons for not taking out PPI across customers’ age and income groups, 2004 186
 
Table 47: Estimated market share of the leading providers by balances outstanding, 2003 187
 
Table 48: Estimated market share of the leading providers by gross advances, 2003 188
 
Table 49: Estimated market share of the leading providers by balances outstanding, H1 2004 189
 
Table 50: Estimated market share of the leading providers by gross advances, H1 2004 190
 
Table 51: Frequency of distribution of APRs for £5,000 loan, Oct-02 – Oct-04 191
 
Table 52: Unsecured personal loan rates for the leading UK loan providers, Oct-03 – Oct-04 192
 
Table 53: Standard APRs of the “big four” for unsecured personal loans, Oct 2002 – Oct 2004 193
 
Table 54: Advertising spending on unsecured personal loans by channel, 2002-2003 193
 
Table 55: Various promotional strategies employed by the leading unsecured personal loan providers, 2003 194
 
Table 56: Percentage of internet advertising spend out of the total advertising expenditure, 2003 195
 
Table 57: Frequency distribution of PPI premiums, October 2003-October 2004 196
 
Table 58: PPI premiums for the four least competitive and the four cheapest loan providers, October 2004 196
 

 

 
LIST OF FIGURES
 
Figure 1: Male customers tend to see a competitive interest rate as a more important reason for choosing a loan provider than female customers, 2004 6
 
Figure 2: The number of providers offering APRs of less than 8 per cent has increased considerably since 2002, 2002-2004 8
 
Figure 3: Advertising spending on unsecured personal loans by channel, 2002-2003 9
 
Figure 1: The consumer credit market has been growing strongly over the past ten years, both in terms of new business and balances outstanding, 1995-2004e 29
 
Figure 2: The UK GDP growth has been strong, reaching 3.2 per cent in 2004, 1995-2004e 31
 
Figure 3: Unemployment claimant count reached a record low in 2004, 1995-2004e 32
 
Figure 4: The price of an average house in the UK has increased by 145 per cent over the last ten years, 1995-2004e 33
 
Figure 5: Unsecured personal loans and credit cards account for the bulk of the total outstanding balances, 2000-2004e 35
 
Figure 6: Unsecured personal loans and credit cards continue to dominate the market in terms of balances outstanding, 2000-2004e 37
 
Figure 7: Credit cards is the dominant product category in the market in terms of new business, 2000-2004e 39
 
Figure 8: Credit cards and unsecured personal loans now account for 81.3 per cent of total new business in the consumer credit market, 2000-2004e 41
 
Figure 9: The growth of secured personal loans is estimated to have slowed down considerably in 2004, 2000-2004e 43
 
Figure 10: Outstanding balances in used car finance cemented their dominance of the market in 2004, 2000-2004e 48
 
Figure 11: Gross advances in new car finance fell sharply in 2004, 2000-2004e 49
 
Figure 12: Hire purchase has slightly increased its share of new business in the new car finance market over the last five years, 2000-2004e 51
 
Figure 13: Hire purchase continues to dominate the used car finance market, 2000-2004e 53
 
Figure 14: In terms of outstanding balances, store cards have increased their share of the retail finance market over the past five years, 2000-2004e 56
 
Figure 15: Following a promising 2003, store cards experienced a terrible year in 2004 in terms of new business, 2000-2004e 58
 
Figure 16: The average UK adult now owes £4,004 in unsecured personal debt, 1995-2004e 62
 
Figure 17: Customers between 25 and 34 years of age and those earning between £25,000 and £39,000 are the group most like to hold a personal loan, 2004 70
 
Figure 18: Customers in the most affluent income group are the most likely to hold multiple personal loans, 2004 72
 
Figure 19: Car/motorbike purchase remains the main reason why customers take out a personal loan, 1999 - 2004e 74
 
Figure 20: Debt consolidation has increased in popularity as a loan usage across all the examined providers, 1999-2004 77
 
Figure 21: Older and more affluent customers are more likely to use their loans for home improvement, 2004 79
 
Figure 22: Male customers tend to see competitive interest rate as more important reason for choosing a loan provider than female customers, 2004 83
 
Figure 23: While being high on the list across all age and income groups, existing bank account is most important for younger customers and those on low income, 2004 85
 
Figure 24: 57 per cent of all unsecured personal loans were arranged face-to-face in 2004, 1999-2004 88
 
Figure 25: Customers in the lowest income group are more likely to arrange their loan face-to-face, 2004 90
 
Figure 26: When it comes to arranging personal loans online, customers aged 25-34 and those in mid-income groups are most likely to do so, 2004 92
 
Figure 27: The overwhelming majority of the respondents are either very or fairly satisfied with their loan providers, 2004 94
 
Figure 28: Older and more affluent customers are less likely to take out PPI with their loans, 2004 97
 
Figure 29: The price is the major obstacle to taking out PPI for less affluent and younger customers, 2004 100
 
Figure 30: Lloyds TSB heads the market in terms of outstanding balances, though where group market share is concerned, HSBC is the leader, 2003 107
 
Figure 31: Barclays Bank and Lloyds TSB share the top spot when it comes to the highest share of new unsecured personal loan business, 2003 109
 
Figure 32: Tesco has put in the best performance in terms of a percentage increase in its balances outstanding between December 2003 and June 2004 111
 
Figure 33: Lloyds TSB heads the market yet again in terms of gross advances, H1 2004 113
 
Figure 34: The number of providers offering APRs of less than 8 per cent has increased considerably since 2002, 2002-2004 115
 
Figure 35: Some of the biggest falls in average APRs have occurred among the least competitive lenders, Oct-03 – Oct-04 116
 
Figure 36: Three out of the ‘big four’ have implemented price cuts over the last two years, October 2002 – October 2004 118
 
Figure 37: Two out of three providers with above the average relative market share were also at the most competitive end of the market, June 2004 120
 
Figure 38: Advertising spending on unsecured personal loans by channel, 2002-2003 132
 
Figure 39: The majority of the leading unsecured personal loan providers employ a targeted marketing strategy, 2003 134
 
Figure 40: Leading unsecured personal loans providers spend on average 3.2 per cent of their advertising budget on Internet promotions, 2003 136
 
Figure 41: There were less lenders offering cheapest PPI premiums in 2004 than in 2003, October 2003- October 2004 139
 
Figure 42: The least competitive providers also tend to charge higher PPI premiums, October 2004 141
 
Figure 43: Performance of the key economic drivers will result in a slower growth of the consumer credit market over the next five years 146
 
Figure 44: The consumer credit market is forecast to grow by 4.7 per cent on average each year to 2009 according to the neutral scenario, 2004e-2009f 149
 
Figure 45: Credit cards are forecast to continue dominating the consumer credit market according to the neutral scenario, 2004e-2009f 150
 
Figure 46: Used car finance is forecast to overtake new car finance in terms of gross advances under the neutral scenario, 2004e-2009f 154
 
Figure 47: Installment credit will face the biggest decreases in gross advances over the next five years according to the neutral scenario, 2004e-2009f 155
 
Figure 48: Under the pessimistic scenario, below the par performance of the key economic drivers will have a negative impact on the growth of the consumer credit market over the next five years 157
 
Figure 49: The consumer credit market will grow on average by 2.5 per cent each year to 2009 under the pessimistic scenario, 2004e-2009f 159
 
Figure 50: While suffering from slower growth, credit cards will continue to be dominant in the consumer credit market under the pessimistic scenario, 2004e-2009f 160
 
Figure 51: Under pessimistic scenario, used car finance will fare slightly better than new car finance, 2004e-2009f 163
 
Figure 52: Under the pessimistic scenario, gross advances in point of sale retail finance products are forecast to decline considerably over the next five years, 2004e-2009f 164
 
Figure 53: Under optimistic scenario the performance of key economic drivers will have a positive impact on the growth of the consumer credit market over the next five years 166
 
Figure 54: Under optimistic scenario, the consumer credit market is forecast to grow on average by 6 per cent each year to 2009, 2004e-2009f 168
 
Figure 55: Under the optimistic scenario, the dominance of credit cards as the most popular consumer credit product is forecast to become even more pronounced, 2004e-2009f 169
 
Figure 56: Under the optimistic forecasting scenario, gross advances in both new and used car finance will register strong growth levels, 2004e-2009f 172
 
Figure 57: Under the optimistic scenario, gross advances in retail finance products are still forecast to decline, albeit at gentler pace, 2004e-2009f 173
 
Figure 58: Point of sale product aggregations used within this report 200
 
Figure 59: Datamonitor’s core consulting capabilities 207