Personal Lending: Successful Entry Strategies in Western Europe

Published by: Datamonitor

Published: Mar. 9, 2007 - 19 Pages

Table of Contents

DATAMONITOR VIEW

CATALYST

SUMMARY

ANALYSIS

Lenders are increasingly coming up against a saturated UK consumer credit market

The UK consumer credit market is contracting

The UK consumer credit market is also highly competitive

Unsurprisingly, lenders' margins are falling in the saturated consumer credit market

Indeed, the UK consumer credit market is the most mature of all of Western Europe

Consumer credit plays a more important role in the UK economy than it does in any other Western European market

Moreover, in terms of new lending, the UK has performed poorly in comparison to the majority of the Western European markets

Consequently, UK lenders should look into higher growth European markets to expand

A number of international players have further expanded their operations in Western Europe

In particular, there remain opportunities in the Spanish consumer credit market

The Spanish consumer credit market continues to expand

A number of foreign lenders have become involved

The market continues to hold potential

As an example, Barclaycard is taking advantage of this growing market

Barclaycard is growing successfully in Spain

Barclaycard entered the Spanish market directly

Barclaycard's product range is designed to appeal to a range of customer segments

Barclaycard is likely to expand further in Spain by offering a wider range of products

In addition, the Turkish consumer credit market remains attractive to foreign acquisition

Turkey is the fastest growing consumer credit market in Western Europe

A number of reasons can explain Turkey's phenomenal growth

A number of international players have developed a significant presence in the market

As an example, GE Money now has a 25.5 per cent stake in Garanti Bank

Garanti Bank is a major player in the Turkish consumer credit market

By making such an acquisition, GE Money now has claim to a growing business in this market

But there are inherent risks in entering such a market

APPENDIX

Supplementary data

Definitions

Balances outstanding

CAGR

Consumer credit

Gross advances

Methodology

Further reading

European consumer credit reports

UK consumer credit reports

Forthcoming consumer credit briefings

Relevant links

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Western European markets' consumer credit balances outstanding as a proportion of their GDP, 2005

Table 2: Growth in consumer credit gross advances in Western European countries, 2001-2005

Table 3: Consumer credit gross advances in Spain, 2001-2005

Table 4: Number of credit cards in Spain in issue by competitor, 2005

Table 5: Consumer credit gross advances in Turkey, 2001-2005

List of Figures

Figure 1: The UK is the most mature of Western European consumer credit markets as a proportion of GDP, 2005

Figure 2: From 2001 to 2005, new lending in the UK has been slower than most European consumer credit markets, 2001-2005

Figure 3: Consumer credit in Spain has witnessed a solid expansion, 2001-2005

Figure 4: La Caixa and BBVA dominate the Spanish credit card market, but Barclaycard is now fourth in terms of number of cards in issue, 2005

Figure 5: Barclaycard Spain now offers a range of credit cards in order to appeal to different customer segments, October 2006

Figure 6: Consumer credit gross advances are rising rapidly in Turkey, 2001-2005

Abstract

Introduction

As the UK market has become increasingly saturated and competitive, lenders are finding less space to grow and achieve high margins. One option is for lenders to look for new opportunities in foreign consumer credit markets. Yet entering a new market is never straightforward and does come with a number of risks. Still, for some lenders, taking the risk can be significantly worthwhile.

Scope

• Provides a number of case studies where UK lenders have gone into new markets abroad and have succeeded, analyzing their strategy and strengths.
• Discusses how the UK consumer credit market is performing against its Western European counterparts and the reasons why.
• Presents insight on which new markets lenders are venturing into and how they are doing it.

Highlights

The UK consumer credit market is the most mature in Europe, with the highest penetration of consumer credit balances outstanding as a proportion of GDP. In addition, new lending in the UK consumer credit market has performed poorly in comparison to the majority of other Western European markets over the past few years. Many Western European markets remain less penetrated and less competitive than the UK. Indeed, a number of international players such as the Royal Bank of Scotland, MBNA, and Barclaycard have expanded their operations to new Western European markets, where they have taken advantage of their experience in a younger and faster growing market. Turkey's consumer credit market has much potential. An increasing number of foreign players are becoming involved in the Turkish consumer credit market, and with indication that at some point Turkey will gain accession to the EU this market could be a great boon to those lenders that penetrate the market.

Reasons to Purchase

• Gain a thorough understanding of the dynamics facing lenders in the UK consumer credit market and what they can do about it.
• Understand where the new opportunities lie for UK lenders.
• Incorporates primary interviews from industry experts and secondary data from a wide range of sources.

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