UK Personal Lending 2009: Competitive Dynamics in the UK Unsecured Personal Loan Market

Published by: Datamonitor

Published: Jul. 10, 2009 - 16 Pages

Table of Contents

DATAMONITOR VIEW

CATALYST

SUMMARY

ANALYSIS

Unsecured personal lending levels contracted in 2008 as the market remained tough

The unsecured personal lending market had five larger players and a fringe of smaller players in 2008

Lloyds Banking Group was the market leader in terms of balances outstanding

Competitive pressures remain low as loan providers direct their focus internally

The number of unsecured personal lenders has declined further over the last year

Financial institutions are adopting a prudent approach to their lending policy

For the largest lenders in particular, cross-selling to existing customers is a favored practice, used in order to avoid taking on more risk

The average interest rate for a £5,000 loan has increased despite the plummeting base rates

Advertising expenditure has also dropped as a result of the credit crunch

Innovation in the UK personal lending market remains fairly minimal

High levels of bad debt and the new PPI ruling are hurdles that lenders need to overcome

Bad debt levels remain high but are now at a manageable level

The level of impairments has increased, which may in part come as a result of borrowers prioritizing secured debt repayment

The ban on the selling of single premium PPI will lead to lenders finding other ways to recoup their outlay

The current market conditions are impacting on the dynamics of other players in the market

Aggregators have been an important player in the market but they are losing their influence under current market conditions

Consumers trust online price comparison sites more than banks and building societies

Nevertheless, the internal focus of most loan providers may serve to cull the number of aggregators in the market

The payday loan industry has taken advantage of the current market conditions

APPENDIX

Supplementary data

Definitions

Balances outstanding

Bank of England base rate

CAGR

Gross advances

PPI

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Unsecured personal lenders in the UK, Moneyfacts June 2009

Table 2: Advertising spend for major providers, 2007-08

Table 3: Comparison of monthly interest rates on a £5,000 loan compared with the Bank of England base rate

Table 4: Write-offs on consumer lending from UK banks and building societies

Table 5: Average unsecured personal lending gross advances per person (over 18)

Table 6: Extent to which consumers trust financial services companies

List of Figures

Figure 1: The newly formed Lloyds Banking Group had a market leading share of the gross advances in 2008

Figure 2: Lloyds Banking Group has the largest share of balances outstanding

Figure 3: Personal lending interest rates have increased significantly since June 2008 despite sharp cuts in the Bank of England's base rate

Figure 4: Across most banking groups, advertising expenditure shrank between 2007 and 2008

Figure 5: A fall in the level of write-offs in other unsecured lending counteracted the increase in write-offs for credit cards and secured loans

Figure 6: Despite strong performance in the credit card market, total unsecured lending dropped continuously between 2004 and 2008

Figure 7: Moneysupermarket.com lists all loans providers, but it does not link to products where the provider has not paid a fee

Figure 8: Online price comparison sites are more trusted than building societies and banks

Figure 9: The Wonga website emphasizes the convenience of the product

Abstract

• Provides market shares of balances outstanding and gross advances for major UK personal loan players
• Provides advertising spend for the top personal loan providers.
• Analyzes the key competitive developments in the UK market over the last 12 months.

• Gain an insight into the performance of your competitors.
• Understand how the market is changing and evaluate what opportunities might arise from these changes.
• Learn how your competitors are adapting their strategies to the current economic climate.

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