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Loans - UK - January 2015

Published By :

Mintel

Published Date : Jan 2015

Category :

Banking

No. of Pages : 107 Pages

Customers are seeking a greater level of transparency with loan products – as is reflected in the surge in usage of price comparison websites when applying for loans. However, it would be a mistake to overstate a trend towards digital as Mintel data suggests that face to face is undergoing somewhat of a revival – especially when looking at loans taken out more recently.

Introduction

Report scope
Abbreviations

Executive Summary

The market
Personal loans market grew by 13% in 2014
Figure 1: Forecast of personal loans industry revenue – Fan chart, 2009-19
Gross unsecured lending grows by 3%
Figure 2: Gross unsecured lending, by product type, 2011-14
Market factors
Despite a retrenchment in 2014, financial consumer confidence is still strong
Figure 3: Financial confidence, January 2009-September 2014
Below-inflation level rises of weekly income are creating an income squeeze
Figure 4: Single-month changes in weekly earnings, and CPI, September 2010-September 2014
Regulators clamp down on the payday loan sector
Brands and trust
Figure 5: Attitudes towards and usage of selected brands, December 2014
Companies, products and innovations
Eight out of the top 10 spenders on adverts were high-cost short-term credit lenders
Figure 6: Top 10 lenders’ spend, 2014 (est)
High street banks continue to dominate market share, but supermarket banks are on the rise
Figure 7: Top seven providers in terms of value of outstanding unsecured consumer lending (UK), 2013
The consumer
Roughly one in five people have some form of unsecured structured loan
Figure 8: Types of loans and credit currently owned, September 2014
Over one in 10 people currently owe money or have used a payday loan
Figure 9: Payday loan usage and consideration, September 2014
Payday loan usage spans income groups
Figure 10: Payday loan ownership, by gross household income, September 2014
Payday lenders are more appreciated among younger people
Figure 11: Agreement with the statement “payday lenders offer a valuable service”, by age, September 2014
Paying for a new car and debt consolidation were the most popular reasons for credit use
Figure 12: Reasons for loan ownership, September 2014
Over one in 10 people are considering taking a loan out in the next year
Figure 13: Likelihood of taking out a loan product in the next 12 months, September 2014
Loan holders are much more likely to consider taking out another loan in the next 12 months
40% of all loans are applied for digitally
Figure 14: Method of loan application, September 2014
Most people would prefer to go to a high street bank for a loan
Figure 15: Attitudes towards credit, by likelihood to withdraw a loan within the next 12 months, September 2014
What we think

Issues and Insights

Regulations in the payday loans industry: The impacts on the lenders and borrowers
The issues
The implications
How are people applying for loans, and the future
The issues
The implications
The continued rise of peer-to-peer lending
The issues
The implications

Trend Application

Middle class shows demand for high-cost short-term credit
Streamlining credit check procedure leads to more loan applications
The bar has been raised for lenders’ responsibility

Market Drivers

Key points
Consumer financial confidence has stabilised following a retrenchment in 2014
Figure 16: Financial confidence, January 2009-September 2014
Little change in the proportion who plan to take out a loan product within the next 12 months
Figure 17: Comparison of likelihood of taking a loan product in the next 12 months, 2013 and 2014
Weekly income earnings are increasing but at a below-inflation level
Figure 18: Single-month changes in weekly earnings, and CPI, September 2010-September 2014
Employment levels
Figure 19: Employment rate (aged 16-64), seasonally adjusted, November 2011-July 2014
Employment continues to rise…
Figure 20: Credit ownership, by working situation, September 2014
…and borrowing rates continue to decline
Figure 21: £5,000 and £10,000 loan interest rates, three-month LIBOR, and base rate, August 2009-September 2014
Major hike in write-offs in unsecured lending in mid-2014
Figure 22: Quarterly write-offs of lending to individuals, by lending type, September 2011-September 2014
Regulators focus on the payday loan sector

Market SWOT Analysis

Figure 23: Personal loans 2015 – Market SWOT analysis

Who’s Innovating?

Innovation amongst traditional lenders is limited, but necessary
Halifax and Lloyds offer flexible loans
Sainsbury’s Bank increases maximum loan amount to £35,000

Market Size and Forecast

Key points
Credit is growing rapidly…
Figure 24: Gross credit card lending and other consumer credit, 2010-14
and the value of unsecured personal loans is expected to have hit £26 billion
Figure 25: Other consumer credit, 2010-14
Market forecast
Figure 26: Forecast of the value of unsecured personal loans, by gross advances, fan chart, 2009-19
Forecast methodology
Fan chart explanation

Market Share

Key points
Lloyds is still the market leader
Figure 27: Value of outstanding unsecured consumer lending (UK), by selected providers, 2012 and 2013
Growing competition and presence from flexible supermarket banks

Companies and Products

Barclays
Company background
Relevant brands and subsidiaries
Loan product range
Recent financial performance
Figure 28: Barclays financial performance, Q1-Q3 2013 and 2014
Recent activity
Grupo Santander
Company background
Relevant brands and subsidiaries
Loan product range
Recent financial performance
Figure 29: Santander UK financial performance, Q1-Q3 2013 and 2014
Recent activity
HSBC
Company background
Relevant brands and subsidiaries
Loan product range
Recent financial performance
Figure 30: Interim for HSBC Bank financial performance, Q1-Q2 2013 and 2014
Recent activity
Lloyds Bank
Company background
Relevant brands and subsidiaries
Loan product range
Recent financial performance
Figure 31: Lloyds Interim financial performance, Q1-Q3 2013 and 2014
Recent activity
TSB
Company background
Loan product range
Recent financial performance
Figure 32: TSB financial performance, Q2 2013 and Q3 2014
Recent activity
Nationwide
Company background
Relevant brands and subsidiaries
Loan product range
Recent financial performance
Figure 33: Nationwide financial performance, Q1-Q2 2013 and 2014
Recent activity
RBS Group
Company background
Relevant brands and subsidiaries
Loan product range
Recent financial performance
Figure 34: RBS interim financial results, Q3 2013 and Q3 2014
Recent activity
Wonga
Company background
Loan product range
Recent financial performance
Figure 35: Wonga financial performance, FY 2012 and FY 2013
Recent activity
Zopa
Company background
Loan product range
Recent activity
Sainsbury’s Bank
Company background
Loan product range
Recent financial performance
Figure 36: Sainsbury’s Bank annual report, FY 2013 and FY 2014
Recent activity
Tesco Bank
Company background
Loan product range
Recent financial performance
Figure 37: Tesco Bank, FY 2013 and FY 2014
Recent activity

Brand Research

Brand map
High street brands enjoy considerably higher levels of trust
Figure 38: Attitudes towards and usage of selected financial services brands, December 2014
Correspondence analysis
Brand attitudes
Figure 39: Attitudes, by brand, December 2014
Brand personality
Figure 40: Brand personality – Macro image, December 2014
Figure 41: Brand personality – Micro image, December 2014
Brand experience
Figure 42: Selected brand usage, December 2014
Figure 43: Satisfaction with selected brands, December 2014
Figure 44: Consideration of selected brands, December 2014
Figure 45: Consumer perceptions of selected brand performance, December 2014
Brand recommendation
Figure 46: Recommendation of selected brands, December 2014

Brand Communication and Promotion

Key points
Overall adspend for structured loans falls 9.2% year on year
Figure 47: Advertising expenditure on structured loan products, 2010-14
Payday lenders ramp up adspend operations, while Wonga scales back
Figure 48: Top 20 spenders on advertising in the personal loans market, 2011-14
Payday lenders could face pre-watershed advert ban
Television adverts continue to dominate the adspend space
Figure 49: Advertising expenditure on unsecured loans (inc. payday loans), by media type, 2011-14
Lenders continue prudent spending on internet advertising

Loan and Credit Product Ownership

Key points
70% owe money on at least one kind of credit
Figure 50: Loan and credit product ownership, September 2014
Smart use of credit cards continues to dominate the credit market
Personal loans are the fifth most popular form of credit
25-34-year-olds have most appetite for borrowing
Figure 51: Credit product ownership, by age, September 2014
People new to credit are hesitant about other forms of credit than credit cards
Figure 52: Number of different types of credit owed, by types of credit, September 2014
Personal loans were owned by only 4% of people with one type of credit…
…but ownership increases to 45% for people who have at least four types of credit

Reasons for Loan Ownership

Key points
A quarter of personal loan owners had borrowed to buy a new car
Figure 53: Reasons for loan ownership, September 2014
Large one-off payments were more common in larger households
Consolidating existing debt is the second most common reason for people taking out a loan product
Figure 54: Reasons for taking out most recent loan product, by credit ownership and payday loan ownership, September 2014
Payday and personal loan ownership was high for debt consolidators

Methods of Loan Application

Key points
Digital leads the way
Figure 55: Method of loan application, September 2014
Face-to-face sales still account for roughly a third of sales
Digital methods are more commonly used by younger people
Figure 56: Method of application, by age, September 2014
Rise in the popularity of price comparison websites
Figure 57: Method of loan application, by length of time borrowers have held their loan for, September 2014
Face-to-face applications still an important channel

Likelihood of Taking Out a Loan in the Next 12 Months

Key points
The majority of people are not considering a loan in the next year
Figure 58: Likelihood of taking out a loan product in the next 12 months, September 2014
14% of respondents are considering a loan product in the next year
Loan usage is habitual
Figure 59: Likelihood of taking out a loan product in the next 12 months, by types of loans and credit currently owned, September 2014
Unsecured structured loan users are much more likely to consider a loan
Over one in five personal loan holders are considering taking out a loan in the next year
53% of people who have used or currently owe money on a payday loan are likely to take out a loan in the next year
People who took a loan out one or two years ago are the most likely to take another out in the next year
Figure 60: Likelihood of taking out a loan product in the next 12 months, by period of time that loan owners have held their most recent loan for, September 2014

Payday Loans – Usage and Consideration

Key points
There is still a negative association surrounding high-cost short-term credit.
Figure 61: Payday loan usage and consideration, September 2014
However, there is still an appreciable market that is open to the idea of using payday loans…
…particularly amongst Millennials
Payday loans are not just for the below-average earner
Figure 62: People who have used/currently owe money on a payday loan, by gross annual household income, September 2014

Attitudes towards Payday Loans

Key points
Perceptions of payday loans as a useful product suggest there is room for growth…
Figure 63: Attitudes towards payday loans and lenders, September 2014
…even among the higher-income households
Figure 64: Agreement with the statement “A payday loan can be a useful product as long as it is used responsibly”, by gross annual household income, September 2014
However, perceptions of payday loan lenders are less positive
The younger generations are more positive
Figure 65: Agreement with the statement “Payday lenders offer a valuable service”, by age, September 2014
Overdrafts are still viewed as a better option than using a payday loan

Attitudes towards Credit

Key points
Most people would rather deal with a high street bank
Figure 66: Attitudes towards credit, September 2014
Figure 67: Attitudes towards credit, September 2014
Price is the most important factor
Nearly a quarter of respondents were worried whether they would pass a credit check
Lenders are not solely responsible for credit victims

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