Debt Markets

Part
01
of nineteen
Part
01

UK Debt Markets - Personal Loans Market Leaders

Lloyds Bank has the largest share (16.2%) of the personal loans market in the UK. It targets 25-54 year olds B,C1, and C2 customers. Barclays (12.8%) and Royal Bank of Scotland (7.5%) are also among the top three banks in the personal loans space and like Lloyds they too are centuries old. Santander Bank (6.5%) was founded in 2013, but has become fourth largest bank in the personal loan category in a very short time.

LLOYDS BANK

  • Market share: 16.2%
  • Target customer: Consumers aged 25-54 and in social grades B, C1, and C2 who have bank accounts.
  • Founding date: Jun 3, 1765
  • Description: Lloyds Banking Group is a UK-focused bank that offers a comprehensive list of retail and commercial banking services. It has the largest market share in mortgages and current accounts in the UK, and its share in the SME and the personal lending segment is growing.

BARCLAYS

  • Market share: 12.8%
  • Target customer: Unlike in the case of Lloyd, we were not able to find any information specific to the age and social grade of Barclay’s target consumer. Based on the age of the models on its website, its advertisement, and the personal loan advertised on its web page (£7,500 — £15,000), it is likely that the target consumers are millennials.
  • Founding date: Nov 17, 1690
  • Description: Barclays is a global banking company that offers retail banking, corporate and investment banking, credit card, and wealth management services. It operates in over 50 countries and its main markets are the UK and the US. The bank has around 48 million customers and employs 147,500 people.

ROYAL BANK OF SCOTLAND (RBS)

  • Market share: 7.5%
  • Target consumer: Royal Bank of Scotland offers loans ranging from £1,000 — £50,000 for tenures ranging from 2-10 years. RBS structures loans based on specific needs. It offers different types of personal loans: car loans, home improvement loans, debt consolidation loans, wedding loans, and holiday loans. Based on the types of loans it offers, its target customers mainly comprise millennials and Gen Xers.
  • Founding date: 1772
  • Description: RBS is headquartered in Scotland and is a UK-focused bank. It is a leading bank in the UK and provides retail banking, commercial, and investment banking services.

SANTANDER BANK

  • Market share: 6.5%
  • Target consumer: To be eligible for a Santander Bank loan, consumers need to be over 21 years of age and have an income above £6,000. The loans are available for terms of 1-5 years. Personal loans are offered for consolidating debt, buying a car, home improvement, and special occasions like a wedding or a holiday of a lifetime. Based on the use of the loans, the target group is likely to be from the millennial or Gen X generation.
  • Founding date: Oct 2013
  • Description: Santander Bank operates in the retail, commercial, and global corporate banking and corporate center segments. It is a wholly owned subsidiary of Banco Santander and has 15 million active customers, out of which 5.5 million are digital customers.

RESEARCH STRATEGY

We were able to obtain all the required information except the target customers for some banks. Our first strategy to find the target customers was to search the company website and the annual report. None of these sources defined the customers specifically by age or socioeconomic class. However, in a couple of cases, we were able to determine the target group based on the application for which the loans were structured. Next, we searched advertising and marketing portals like WARC for case studies that define the target audience of the banks. While we succeeded in finding this information for one bank, we did not find any information pertaining to the other banks. Following this, we searched research reports by agencies like Nielsen and Credit Suisse but did not meet with any success. The reports did not provide any insights on who the target groups were; they largely contained information on the financials or marketing metrics.

Part
02
of nineteen
Part
02

UK Debt Markets - Car Finance Market Leaders

While there is no publicly available information to fully answer your question, we have used the available data to pull together key findings. Some of the leaders in the UK car finance market include HSBC Holdings, Lloyds Banking Group, Carfinance247, Zuto, and Carfinance 4U. Below you will find an outline of our research methodology to better understand why the information you have requested is publicly unavailable, as well as a deep dive into our findings.

RESEARCH STRATEGY 1

A search for articles published by FCA, UK Finance, Equifax, Business Insider, UK-based banks, and other publications did not provide any pre-compiled lists of market leaders in the car finance market in the UK. Only some of the largest car finance companies, banks, asset finance companies in the UK could be identified. However, information related to their market share is not publicly available.

RESEARCH STRATEGY 2

An examination of the free version of market reports for the car finance industry in the UK published by Mintel, Market Research, and other research companies did not provide the required information. Based on their content pages, the paid version of the reports are likely to provide information such as market share and growth in specific segments and geographies that could identify the leaders in the UK car finance market. The reports published by Mintel and Market Research are available for £1,995 ($2,610) and $460 respectively.

RESEARCH STRATEGY 3

As the exact market share for specific companies in the car finance market are not available, we examined the revenue of selected companies identified from the articles/reports discovered while conducting the first two research strategies. They include HSBC Holdings, Lloyds Banking Group, Royal Bank of Scotland Group, Standard Chartered, Carfinance247, Zuto, Trusted Car Credit, Carfinance 4U, and My Car Credit. Out of these companies, five of them were chosen as their revenue for the car finance market only or part of the segment is publicly available.
The information for Carfinance247, Zuto, and Carfinance 4U have been provided as their revenues are the highest among companies that focused on car financing only or car financing accounts for a large part of their operations. HSBC’s annual report has provided the revenue for “wholesale and retail trade, repair of motor vehicles and motorcycles.” Lloyds Banking Group’s annual report has provided the revenue for the Consumer Finance segment which includes credit cards, motor finance, and unsecured personal loans. Please note the companies’ specific target customers or customers’ success stories could not be identified after examining their websites, annual reports, social media profiles, business database profiles (CrunchBase, Hoovers, ZoomInfo, Craft.Co, Bloomberg), and the articles/reports in the first two strategies mentioned above.

Carfinance247

  • Revenue: $48.24 million
  • Founding date: 2006
  • Business description: Carfinance247 is one of the top car financing companies in the UK. The company is located in Manchester and provides car finance products and services only. It specializes in providing car finance, car loans, market leading rates, and finance help & advice.

Zuto

  • Revenue: $47.76 million
  • Founding date: 2006
  • Business description: Zuto Limited is a credit broker lender and is authorized and regulated by the Financial Conduct Authority. The company is located in Macclesfield. It uses predictive algorithms to help customers find the most affordable finance package from over 80 lender products.

Car Finance 4U

  • Revenue: $50.18 million
  • Founding date: 1996
  • Business description: Carfinance 4U supply both cars and financing package. Its financing package includes hire and personal contract purchases. The company helps customers find the most competitive rate available for their scenario.

HSBC Holdings

  • Revenue for wholesale and retail trade, repair of motor vehicles and motorcycles: $12.973 billion (£9.917 billion)
  • Founding date: 1865
  • Business description: HSBC is the largest bank in the UK by the asset and seventh largest in Europe. It offers car loans and other financial services in the UK and other parts of the world.

Lloyds Banking Group

  • Revenues for Consumer Finance segment: $53.24 billion (£40.7b)
  • Founding date: 1765
  • Business description: Lloyds Banking Group plc provides financial services to individual and business customers in the U.K. Its Consumer Finance segment includes credit cards, motor finance, and unsecured personal loans. Black Horse, a brand under the bank, also offers auto finance loans.

Part
03
of nineteen
Part
03

UK Debt Markets - Credit Cards Market Leaders

Four market leaders in the UK credit card market are Barclaycard, Lloyds Banking Group, HSBC, and the Royal Bank of Scotland. Below is an overview of the information found.

MARKET LEADERS


Barclayscard (Barclay Bank UK PLC)

  • Market share: 27% share of the UK's credit card market.
  • Founding Date: 1966
Target Customer:
  • The brand is currently focused on targeting youths, a demographic that is typically less trusting of financial brands.
  • The brand launched a campaign in 2016 targeting youths interested in music.
Business description:
  • Barclaycard is a multinational credit card and payment services provider, and a division of Barclays Bank UK PLC.
  • The brand has 30 million customers including retailers around the world.
  • Barclaycard is limited to Barclays clients, but available to everyone.
  • Their focus is on making payments faster, more convenient, and more secure than using cash or checks.

Lloyds Bank

  • Market shares: 26% share of the UK's credit card market
  • Founding Date: June 3, 1765.
  • Target customer: Not Available
Business description:
  • Lloyds Bank serves the households, businesses and communities of Britain.
  • It offers a range of financial products and services, among which are included current accounts, savings, mortgages, loans and credit cards.
Other information:
  • Lloyds Bank uses Fresco to segment their customers and understand them holistically.

HSBC UK

  • Market share: Not Available
  • Founding Date: July 1, 2018.
  • Target customer: Not available
Business description:
Additional information:
  • HSBC uses segmentation methods to divide their broad market into subsets of smaller markets.
  • They use demographic segmentation to separate their market by age, gender, income, ethnicity or religion and the family life cycle.
  • HSBC offered cards like smart card and no frills credit cards to students segment and targeted high-value customers with special “Premium Centers” ban branches.

Royal Bank of Scotland (RBS)

  • Market share: Not Available
  • Founding Date: 1727
  • Target Customer: Not Available
Business description:
  • The Royal Bank of Scotland offers banking services to personal, commercial and large corporate and institutional customers.

Leaders in the UK credit cards market in 2012

⦁ The United Kingdom credit cards market was highly fragmented.
⦁ Barclays, accounted for 13% of the total value of transactions and followed by the Royal Bank of Scotland with 11%.
⦁ Behind the two leading players was HSBC (8%).
⦁ MBNA and Lloyds TSB both had a value share of 7% each.

Research Strategy

While the information on the market share for Barclaycard and Lloyds Bank was readily available, the information on their target market specifically for credit cards was limited. In the case of Barclays we found that the Bank was creating campaigns to target youths and those interested in music for their credit cards. Hence, this was taken as a target market for Barclaycard in the UK.
We commenced our research by looking for readily available data from industry experts (such as FCA, the UK Card Association, UK Finance, the Bank of England, UK Credit Card) in industry reports on credit market in UK. From these sources we were hoping to find a list of the UK credit card market leaders along with their market shares. We were able to find two such market leaders along with their market shares.

Upon further search, we found a paid report where the names of RBS and HSBC were mentioned as some major companies in the industry, but their market share was not available. We then researched RBS and HSBC individually for their market shares. We looked into their official websites and scanned through annual reports, press releases, blogs, but no mention was made of their market share in the credit card market UK.
Next, we searched for alternate data to provide the share in terms of any other specific means rather than the overall market capture. Here we sought metrics such as the leaders in the market by the overall credit balances as of 2018, by overall POS finance, by overall online finance, by overall payments received; however, this did not provide insight in the market leaders. Instead, it provided insight on the overall market condition of the credit card industry and the figures in the UK where the figures were not specific to credit card providers.
Last, we expanded the scope and looked for data on the market leaders in all the banking products in the UK. We were looking for overall banking services and hoping to find information on the market shares of at least three such banks on any available metric. When the data was available, it did not provide measurable alternate data that could be used to calculate the market share. The information found was for overall market shares and given by statistics databases (such as Statista, Oliverman). The information found could not be related to credit cards as it did not have any backup source claiming that this was the general market share of most of the banking segments.
Target Market:
To determine the target market for the market leaders found, we first searched for readily available information on the official websites of each bank. We expected to find information on the type of customers targeted for credit cards. We also looked into industry reports (from sources such as the Bank of England, Bain, McKinsey) that we thought might have information on this topic. However, we could find no information on the target market for credit cards.
Next, we searched for customer success stories for each bank identified via the paid report found (from IBIS). We searched for industry reports from industry experts (such as UK Finance, UK Credit Card); however these reports only provided general statistics on the UK credit card industry, but provided no information on the general target market for credit cards or the specific markets for each bank.


Part
04
of nineteen
Part
04

UK Debt Markets - Credit Cards New Entrants

Three new entrants in the UK credit cards market who are innovating and disrupting the space include Tandem, Jaja, and Curve.

TANDEM

  • Business Description: Tandem is a challenger bank with a mission to help free customers from unfair and unnecessary charges.
  • Innovation and Impact on The Market: The Cashback Credit Card allows customers to receive 0.5% unlimited cashback without any fees on purchases or cash withdrawals in other currencies, while the Journey Credit Card enables users to build a credit profile without any fees on purchases or cash withdrawals. Both cards are designed to be integrated with Tandem innovative mobile banking app so that customers can access features such as data aggregation, budgeting tools, and credit score monitoring. Since its launch, the company has served 100,000 customers, facilitated over £100 million (over $130.6 million) spent by customers, handled 2 million transactions, and rewarded £500,000 ($653,000) of cashback.
  • Customers: In general, Tandem’s credit cards are targeted at millennials. The Cashback Credit Card targets consumers looking for cash rewards while the Journey Credit Card is intended to facilitate those who want to build up a strong credit profile.
  • Time Entered the Market: Tandem launched Cashback Credit Card and Journey Credit Card in 2018.
  • Competition: The competitors for Tandem’s Cashback Credit Card faced include Santander All in One Credit Card and the Aqua Reward Credit Card. Tandem’s Journey Credit Card challenges the established credit building card players such as Aqua Classic, Barclaycard Forward, and Vanquis Classic credit cards.

JAJA

  • Business Description: Jaja claims to be The Next Generation Credit Card and offers "mobile-first" credit that promises instant issuing within minutes.
  • Innovation and impact on the market: Jaja promises to remove complexity for credit card application, and new customers will be granted credit cards within minutes simply by scanning driving license or passport. The card also provides real-time views of transactions, intelligent notifications, and payment reminders. There are over 6,000 people on the company’s waiting list for its "mobile-first" credit card.
  • Customers: Jaja Credit Card customers have been described as tech forward, financially confident, and having busy lives.
  • Time entered the market: As of February 2019, Jaja was still running beta testing and the product is expected to be launched to the public in March/April 2019.
  • Competition: Jaja expected to disrupt the digital credit card market in the UK with competitors such as Tandem.

CURVE

  • Business Description: Curve is a card that manages all financial transaction from debit and credit cards in one place.
  • Innovation and impact on the market: Curve allows customers to use only a single Curve smart card that connects with all the cards they have. Curve smart card is integrated into the company’s mobile app to allow customers to manage money easily with real-time notifications of spending activity. In 2018, the company had reached 300,000 cardholders in the UK and announced plans to expand to the US Market.
  • Customers: Curve targets multi-cardholders in the UK and Europe.
  • Time entered the market: The product received a soft-launch in 2016, and the Curve Card was introduced to the UK market in 2018.
  • Competition: Curve’s competitors in this space with mobile apps include N26, Revolut, Starling Bank, and Monese.

RESEARCH STRATEGY

Reputable publications such as Forbes, TechCrunch, TechWorld, others were examined to provide new entrants in the UK credit cards market who are innovating and disrupting the space. We have defined “new” entrants as companies that have launched over the past three years. The types of “disruption” include offering relatively unique or novel values/solutions and being a pioneer of a certain segment.

Part
05
of nineteen
Part
05

UK Debt Markets - Personal Loans New Entrants

Three new entrants in the UK personal loans market who are innovating and disrupting the space include RateSetter, Lendy, and Zopa. Their platforms provide streamlining investment opportunities and micro investment strategies for investors.

RATE SETTER

  • Business Description: RateSetter is a peer-to-peer (P2P) online investing and funding platform operating in the United Kingdom. It was founded on the principle that "...your money should be working harder for you, not someone else." The company is Financial Conduct Authority (FCA) authorized and regulated and boasts over 600,000 investors and borrowers.
  • Impacts: The company has a 100% track record of ensuring every investor made positive returns on their investment over the past eight years and has facilitated the investment of £3 billion to date. It offers the safest, most popular, and most liquid peer-to-peer lending platform in the UK. Borrowers and investors are matched individually, but investor’s returns are based on the performance of their entire £850 million portfolio.
  • Customers: The company targets borrowers who require £3,000 to £24,000 in funding. It provides them with low rate personal loans of 3.9% and also flexible loan terms of one to five years.
  • Year entered: RateSetter entered the United Kingdom market in 2010.
  • Competitors: The company’s top competitors include traditional banks such as HSBC and crowdfunding platforms such as Lending Crowd.

LENDY

ZOPA

  • Business Description: Zopa is a peer-to-peer investing company. It is built on transparency, honesty, and trust, and seeks to offer better-value loans and investments.
  • Impacts: Zopa has accumulated around 50,000 investors. The company charges a 0% to 2% fee on loans to borrowers and attracts an average return of 5%. It offers microloans in loan amounts of £1,000 to £25,000 and does not charge early repayment fees.
  • Customers: Zopa targets borrowers with a good credit history and looking for transparent loans. Its customers include investors looking for £1,000 initial investment, and Individual Savings Accounts (ISA) so that returns can be tax-free.
  • Year entered: Zopa entered the market in 2005 as an alternative to traditional banks.
  • Competitors: Zopa's top competitors are traditional banks as well as non-traditional banking options, other peer-to-peer lending institutions, microloan financers, and crowdfunding platforms.

Part
06
of nineteen
Part
06

UK Debt Markets - Car Finance New Entrants

Three new entrants in the UK car finance market who are innovating and disrupting the space include Oodle Car Finance, Blue Motor Finance, and Divido.

Oodle Car Finance

  • Business description: Oodle provides car financing to customers and links them up with the best car dealers in the UK with one procedure.
  • Impacts: Oodle provides an end-to-end service for getting the car and financing for it. The company only work with a select number of leading UK car retailers so that they can provide the best outcomes for their customers. Its loan technology uses machine learning with a Big Data infrastructure.
  • Target customers: Oodle’s target customers include those looking for financing to buy a car and also car buyers.
  • Year entered: Oodle entered the market in 2016.
  • Competitors: Oodle’s competitors include Zuto, Carfinance247, and Blue Motor Finance.

Blue Motor Finance

  • Business description: Blue Motor Finance is a fast-growing UK car financing company that focuses on technological innovation, risk management, and high standards of regulatory compliance.
  • Impacts: Blue Motor Finance has been ranked as Europe's fastest growing company. Its innovations include automated decision-making that enables 60% of application’s decision-making process to be completed within 60 seconds.
  • Target customers: Blue Motor Finance targets customers and dealers who do not want to work with banks for car financing.
  • Year entered: Blue Motor Finance entered the market in 2014.
  • Competitors: Blue Motor Finance’s competitors include LeadInvest, Business Loan Network Limited, and MarketInvoice.

Divido

  • Business description: Divido is a retail finance platform that enables companies to give customers instant customer finance. The company’s partnership with BMW allows its platform to provide car financing.
  • Impacts: Divido makes the process of retail financing paperless. The company provides a technology that makes car after-sales repairs or services simple, transparent, and quick, and allows payments to be spread monthly from 6 to 12 months. Apart from BMW, Divido is also inking deals with Volkswagen and Ford.
  • Target customers: Divido’s target customers include those who find themselves with unexpected repair costs and seeking financing to pay for their vehicle servicing.
  • Year entered: Divido entered the car financing market in 2017 when they inked a deal with BMW.
  • Competitors: Divido’s competitors include Pounds to Pocket, Smart-Pig, and Lendbox.

RESEARCH STRATEGY

Reputable financial publications such as The Financial Times and automotive magazines such as Car Dealer Magazine were examined to provide new entrants in the UK car finance market who are innovating and disrupting the space. We have defined “new” entrants as companies that have launched over the past five years. The companies provided above are considered “disruptors” as they offer alternative solutions to companies in the traditional automotive financing market, fast-growing, and/or have been recognized by the Auto Finance Excellence award.

Part
07
of nineteen
Part
07

UK Debt Markets - Forms of Debt

56% of UK borrowers prefer to get loan online, while 40% borrowers still use offline methods. Currently in UK, the household debt-to-income ratio stood at 133% in Q3 2018. Household debt is money borrowed by individuals, usually from banks or financial institutions including mortgages, personal loans, student loans and credit card balances. It is known today in the UK that only 9% of those aged 18-24 have a balance on a credit card, and 30% of the 35-44 age group do. About 7% of all adults say they have borrowed from friends and family, while 6% (3 million people) has been involved in high cost loan. Here is detailed report of forms of debt taken by UK people, please note that one person could have more than one debt at the same time:

UK adults who have consumer credit products — forms of debt

  • Any credit/loan (excl. transactors): 26.3 million of people or equal to 51% of UK adults.
  • Overdraft (i.e. overdrawn): 12.9 million of people or equal to 25% of UK adults.
  • Credit Card (excl. transactors): 9.6 million of people or equal to 19% of UK adults.
  • Personal Loan: 6.3 million of people or equal to 12% of UK adults.
  • Retail finance (excl. transactors): 5.9 million of people or equal to 12% of UK adults.
  • Student Loans Company Loan: 5.8 million of people or equal to 11% of UK adults.
  • Motor Finance: 5.1 million of people or equal to 10% of UK adults.
  • Loan from friends and family: 3.6 million of people or equal to 7% of UK adults.
  • High Cost Loan: 3.1 million of people or equal to 6% of UK adults.
  • Residential mortgage: 15.7 million people or equal to 31% of UK adults.
  • Buy-to-let mortgage: 1.5 million people or equal to 3% of UK adults.

Methods in applying debt

  • Mintel research reveals that 56% of UK borrowers arranged their last loan online, while 40% borrowers still choose to arrange their personal loan using offline methods. Online usage rises to almost two-thirds (64%) for borrowers aged 18-44.
  • There is an increased prevalence of people leasing their cars via PCPs or Personal Contract Purchase plans in 2016 but in recent months in 2017-2018 there has been an increased contribution to credit growth from other forms of unsecured lending, such as personal loans".

Interest rates paid

Research Strategy:

From the request asking the interest rate of personal loans, car finance, and credit cards we were unable to get solid information regarding the average interest rate of car finance, however we found this information as complementary to the available information above:
  • A staggering 74% of Brits aged 45-64 with structured personal loans say they do not know the rates they are paying.
  • Women (70%) are considerably more likely than men (51%) to be unaware of the rate.
  • 58% of consumers spent time trying to find the best deal possible when they took out their last unsecured loan. Hence, assumed that the Brits care more for being accepted than the rate itself.
  • 54% of Brits age 18-44s say that it is more important to be accepted for the loan than the rate of interest charged; this compares to 41% of consumers over the age of 45, and 48% of consumers in total.

We have tried broadening our search by:
  • Checking the reports by Bank of England as they quoted household interest rates, but no details regarding interest rate for car finance. The only information we had from the site is that there is an increased prevalence of people leasing their cars via PCPs or Personal Contract Purchase and this happens in 2016.
  • Checking the UK Loan Industry Report but information about interest rate on car finance was not existed.
  • Checking news report in relation to interest rate of car finance.

We were also able to find only limited information about how the British apply for various forms of debt; 56% of British prefer apply loan online, while 40% still doing it offline. The more in-depth information is not acknowledged though we have done things as follows:
  • Check preexisting UK Loan Industry Report from various research bodies.
  • Check the UK's economic statistics from credible sources by government and private companies.
  • Check infographics, and news reports regarding to the preference of debt application by British.

Part
08
of nineteen
Part
08

UK Debt Markets - Personal Loan Providers

Banks as lenders of personal loan in the UK were found to be charging much fewer interest rates (2.9% — 3.5%) than some non-bank providers such as Credit Unions (18.9% — 19.0%).

For the purpose of the research, we identified 15 personal loan providers in the UK Market, who fall into diverse categories of lenders as highlighted below (Source 1: First 15 providers of the list)

Personal Loan from Banks

Personal Loans from Peer-to-Peer Lending Company

Personal Loans from Credit Unions

Personal Loans from Credit Brokers

Personal Loans from Online Market Place or Online lending platforms

Personal loan from Non-banking financial services/capital services company

INTEREST RATES FOR EACH CATEGORY:

The representative Annual Percentage Rate or APR of the banks on personal loans are as follows:
Inference: Therefore it can be seen that barring the example of Shawbrook Bank which appears to be an outlier, personal loans from banks have an annual percentage rate in the range of 2.9% — 3.5%.

The representative Annual Percentage Rate or APR of the Peer-to-Peer Lending Companies are as follows:
Inference: P2P lending companies have a wide range of APR that dwells from 2.9% to 6.9%

Credit Unions
  • My Community Bank (trading name of Brent Shrine Credit Union Ltd): 19.0%
  • Besavvi : 18.9%
Inference : Credit Unions have a very high APR in the range of 18.9-19.0%

Credit Brokers
  • AA Financial Services Limited: 3.1%
  • Post Office Limited, UK: 3.1%
  • Simplymoney.com : 14.9%
Inference: Credit brokers generally have a low rate of interest as similar to Banks. However, some online loan brokers such as simplymoney.com charge as high as 14.9%

Personal Loans from Online Market Place or Online lending platforms
  • Avant Credit: 11.8%
  • Inference The interest rate charge is in the middle zone with Banks and Credit unions at the lower end and Credit Unions at the higher end.
Personal loan from Non banking financial services/capital services company
  • Hitachi Personal Finance: 3.3% APR
  • Citrus Loans: 16.9% (trading style of Aspire Money Limited Company)
Inference: Non-banking financial services charge a wide range of interest rates from as low as banks to as high as Credit Unions

LOAN APPLICATION AND UNDERWRITING PROCESS

  • The process of application varies from institutions to institutions, however, one notable similarity seen across all financial institutions providing personal loans is that those taking loans have necessarily to be a citizen of UK.
  • While all banks ask for 'Good' credit rating as a necessary application criterion, some non-bank lenders, such as Online Marketplace/ Lending platform Avant Credit accepts 'Poor' Credit rating, Non-Banking Financial Services Citrus Loans accept 'Poor'.
  • There is not much variance noted among minimum income as an application criterion, as, in all types of institutions, including the banks, the desired minimum income range hovers from £10,000 to £15,000.

HOW THEY ADVERTISE AND TARGET CUSTOMERS

All Institutions advertised their products mainly through digital avenues, social media channels. For example:
  • P2P lender Zopa had profiles on Facebook, Instagram and Twitter. Also, had blogs and featured in Financial Times and The Times, UK
  • Credit Broker AA was also found to have profiles on Facebook, Twitter and Instagram. Also, had a featured news section on their website.
  • Another Credit Broker post office had profiles on Facebook, Twitter and YouTube. Also, had a separate Media centre on their website
  • Hitachi Personal Finance used tools like Feefo to feature customer reviews in their website and also had profiles on Facebook, Twitter, YouTube and Google+.
  • Banking institution Halifax had profiles on Facebook, Twitter and YouTube.
  • P2P lender rate-setter have a presence on Facebook, LinkedIn and Twitter. Also ran blogs on their website.
  • Citrus Loans ran a blog on their website and used tools like Feefo to feature customer reviews on their website.
  • As far as the target audience is concerned, Overall, 61% of adults owed money on a loan or credit product, of which 12% belonged to the category of personal loans.
  • According to the Guardian, almost one in 10 people in the UK have a personal loan.
  • According to Mintel, 74% of Brits aged 45-64 with structured personal loans say they do not know the rates they are paying.
  • In the UK, two in five (40%) borrowers still choose to arrange their personal loan using offline methods. However, online usage rises to almost two-thirds (64%) for borrowers aged 18-44.

PROS AND CONS:

PROS of Non-Bank Lending such as P2Plending

PROS of Credit Unions:

  • As a lender, the advantages of a credit union over a banking institution is seen in enhanced customer focus, better service, fewer complications, increased flexibility etc.

Cons of Non-Bank Lending such as P2P lending

Cons of Credit Unions:

  • As a lender, the disadvantages of a credit union compared to a banking institution is seen in Fewer Options, Fewer locations, Poor online services etc.

RESEARCH methodology

We started by looking at articles comparing different aspects of banks and non-bank institutions as lenders of personal loans from sites such as money.co.uk, moneysavingexpert.com, moneyadviceservice.org.uk etc. However, these sources, owing to the diversity of non-bank lenders could not provide a clear-cut comparison between categories, however, what they did provide detailed on the type of loans, type of application criteria across various financial institutions.

Then, we grouped 15 such institutions across categories such as banks peer-to-peer lending company, credit unions, credit brokers, online market place or online lending platforms, non-banking financial services/capital services company etc.

For each of these categories, we combed through their sites to look into aspects such as interest rates, application process etc. while rates could be compared, loan application and underwriting had numerous varieties as each institution had its own competitive strategies. Therefore, some common aspects were chosen and compared.

For advertisements and target audience, we looked into reputed avenues for advertising personal loans including publications such as Financial Times, The Times, Guardian, BBC etc. a search was then carried out on the company's websites, their social media profiles, and blogs. From all these, we could gather that financial institutions depended more on their own digital and social avenues than advertising on third-party platforms. It was also found that many of the companies used customer reviews as marketing tools through tools like Feefo.

However, details relating to the target audience were available from sites like Mintel and articles published in sites like Guardian and Sunday Mail.

For Pros and Cons, we picked up comparisons between the diverse type of providers (P2p lending, Credit Unions) and Online Platforms (Source 15) with that of banks from sources such as Lendingworks, Moneycreashers and Fernovo.
Part
09
of nineteen
Part
09

UK Debt Markets - Car Finance Providers

The major types of finance providers in the UK include car financing companies, automotive manufacturers' financing arms, and banks. All these companies are subject to the regulatory body called the ASA. The car financing companies advertise themselves as credit brokers that have agreements with larger financial institutions such as Hitachi, Experion, and Santander Consumer Finance, and their credit rates are determined by the credit score. More information on the topic has been presented below.

1. Car Financing Companies

TYPES

  • After researching the top finance companies in the UK by going through financial websites and multiple lists of top ten auto lenders, we selected the car financing companies from the top, middle, and unrated companies to provide a range of information.

RaTES

  • All car financing companies advertise themselves as credit brokers that have agreements with larger financial institutions such as Hitachi, Experion, and Santander Consumer Finance.
  • Their credit rates are determined by credit score. Some lenders are transparent about this, and some are not.
  • For example, CarFinance247, one of the top-rated lenders, clearly states its rates: Excellent Credit 6.9%, Good Credit 9.2%, Fair Credit 13.2%, and Bad Credit 19.1%.
  • UK Finance, a middle-tier company, provides a single rate of 7.9%. However, it states that better rates are available over the phone.
  • BuyACar provides no information on its credit rates. The company sells cars online and delivers cars to the customers' houses.
  • It appears that the financing companies that they are fronting do the underwriting as all three types of companies are brokers.

ADVERTISING

  • Car financing companies have TV ads that emphasize how easy it is to apply. The actors or narrators are usually in their 20s.
  • We found one bus ad for an auto financing company, but we were unable to confirm any magazine ads in our search.

PROS AND CONS

  • In general, the pros of auto financing companies include the ease of use and speed of decision-making. As brokers, their ability to shop at different rates and buy and have a car delivered to the customer's door is highly appreciated.
  • The financial rates such as interest rates are included in the cons. The interest rates are significantly higher than the other options, especially for the borrowers who do not have excellent credit rates.

2. Auto manufacturers

TYPES

  • We assessed three different car manufacturers in the UK to determine how they do business. We found information for Audi, Mitsubishi, and Ford.

RATES

  • The financing arms of auto manufacturers advertise their rates based on two different factors.
  • Audi advertises its rates based on the price of the car. Lower-priced models are rated at 5.9% while higher-priced models are rated at 3.9%.
  • Mitsubishi advertises its rates based on the length of the loan. A 12-month loan has no interests, but a 4-year loan has a 5.9% interest.
  • Interestingly, the Ford dealerships do not offer financing of any kind. Borrowers complete the loan application process at the dealership.

ADVERTISING

  • Auto manufacturers advertise through TV, magazines, newspapers, and car shows.
  • Their ads are created to appeal to people who are in the market for a new car.

PROS and CONS

  • When the auto manufacturer finances the purchase of an automobile, there a number of pros for the buyers. Such pros include the ability to negotiate a lower price and the range of lower interests rates that manufacturers can negotiate.
  • However, that only applies to new and unused cars. Buyers can also build their automotive maintenance plan into their total loan amount, which means that they can get regular maintenance and maintain the value of the vehicle.

3. BANKS

TYPES

  • Large banks in the UK such as HSBC UK and Barclays have been chosen for this research. We researched their car loan policies and processes.

RATES

  • HSBC UK advertises its car loan service at a 6.7% interest. Similarly, Barclays Bank advertises a 5.5% interest rate.
  • Banks are skilled at assessing risk and underwriting their own loans in conjunction with their insurance companies. Borrowers must complete the loan application at their bank branch.

ADVERTISING

  • Bank Advertising is often based on ideas and how the banks want to make the viewers feel. They are less focused on policies and numbers.
  • A selection of Bank TV advertisement videos is available here.

PROS and CONS

  • For loyal bank customers, there are multiple advantages in working with a bank. With a healthy net worth on file, borrowers can negotiate lower interest rates.
  • Banks also allow loan consolidation, which often makes money management easier for consumers.


Part
10
of nineteen
Part
10

UK Debt Markets - Credit Card Providers

Bank credit card providers offer higher credit limits and more features, benefits, and rewards when compared to non-bank credit card providers. However, banks charge higher fees and annual percentage rate on average when compared to non-bank credit card providers. Both types of providers advertise their products through online and offline channels.

BANKS

A) RATES

  • The interest rates offered by banks such as Barclaycard, Capital One, HSBC, and others range from Representative 6.4% annual percentage rate (APR) variable up to Representative 57.6% APR variable, depending on the credit card chosen by consumers.

B) LOAN APPLICATION AND UNDERWRITING PROCESS

  • Bank credit card providers each have their own credit card application and underwriting processes.
  • Some factors that affect the approval of credit card and loan applications include current level of borrowing and financial commitments, employment status, residential status, up-to-date credit card or loan payments, and duration history of current accounts held.

C) HOW THEY ADVERTISE AND TARGET CUSTOMERS

  • The online channels include price comparison websites, internet search, online marketing strategies, social media channels, and their own websites.
  • Offline channels include direct mail, face-to-face marketing, and telephone calls.
  • Online channels accounted for 56% of the total new credit cards opened in 2014.

D) PROS

  • Banks offer higher credit limits compared to non-bank credit card providers, by just reaching certain conditions such as on-time monthly payments.
  • Banks also provide more features, benefits, and rewards when compared to non-bank credit card providers, such as shopping and travel perks, cashbacks, and others.

E) CONS

  • Around 45% of traditional bank credit cards charge higher fees than non-bank credit card providers, in terms of annual fees, late fees, foreign transaction fees, and balance transfer fees.
  • Traditional bank credit card providers also offer high APR.

NON-BANKS

A) RATES

  • Non-bank credit card providers in the UK include building societies and monolines.
  • Interest rates offered by monoline credit card providers such as NewDay UK, and building societies such as Nationwide Building Society, range from Representative 15.9% APR variable up to Representative 39.9% APR variable.

B) LOAN APPLICATION AND UNDERWRITING PROCESS

  • Similar to traditional bank credit card providers, monolines and building societies have their own loan application and underwriting process.
  • Some factors that affect credit card application and underwriting process for non-bank credit card providers include currently having mortgage account, current account or savings account with them, aged 18 years and older, having a UK permanent address, no bankruptcy registration in the past 18 months, current UK bank account information and status, and no record from County Court for the past 12 months.

C) HOW THEY ADVERTISE AND TARGET CUSTOMERS

  • The online channels used include price comparison websites, internet search, online marketing strategies, own firm's social media channels, own websites of the non-bank credit card providers, and also their co-brand partner's websites and email channels.
  • The offline channels include direct mail, face-to-face marketing, telephones, and their co-brand partner's physical retail stores.

D) PROS

  • They provide lower fees when compared to bank credit card providers, such as no annual fees, low late and foreign transaction fees, and also 0% balance transfer fees.
  • They also provide a lower APR.
  • Consumers may also trust monolines more due to their greater knowledge, skills and expertise offerings compared to traditional banks with multiple different financial services or products, aside from credit cards.

E) CONS

  • They provide lower credit limit offerings such as rewards, perks, and benefits.
  • The use of cross-collateralization also meant that users’ collateral with other loans could be used to back other loans such as their credit card.

Part
11
of nineteen
Part
11

UK Debt Markets - Personal Loan Trends

The four major trends in the personal loans market in the UK are opting for the most convenient option and overlooking interesting rates, the rise of the online lending, increase in the value of outstanding loans, and lending falling at the fastest rate since 2007.

1. Opting for the most convenient option

  • When it comes to loan borrowing in the UK, the majority of people are living in ignorance when it comes to their interest rates being changed. As of 2018, over 60% of Brits say they are unaware of the interest rate being charged in general.
  • It gets worse the higher the age is, with staggering 74% of Brits aged 45-64 admitting they do not know the rates they are paying on their personal loans. Moreover, women (70%) are way more likely than men (51%) to be completely ignorant of the rate.
  • The reasons for this come from the fact that even though 58% of consumers try to find the best deal, they think that the acceptance for a loan is more important that the loan rate. Therefore, the interest charged gets overlooked from the start.
  • 54% of those aged 18 to 44 say that getting accepted for a loan is more important than the rate of interest charged. In comparison, 41% of those age 45 and over think the same.
  • 50% of consumers explain admit that they did not have enough time to consider all the options available to them.

2. The rise of the ONLINE LOANS

  • In 2018, 56% of borrowers organized their last loan online. When it comes to those aged 18 to 44, the online usage rises to 64%.
  • In the UK, the rising trend of loans is also based on the fact that 26% of consumers who apply online managed to get a rate of 4-7% lower than those who applied in a branch.
  • The main reason why arranging loans online is on the rise is due to the easiness of getting a price comparison via a multitude of different websites.
  • However, despite the increasing popularity of online loans, traditional channels are very much still in use and will continue to stay so.

3. Increase in the value of outstanding loans

  • The value of outstanding personal loans in United Kingdom has grown four times quicker than wages in the last three years (since 2016) according to UK Finance. UK households are currently holding £37 billion in outstanding loans.
  • The value of outstanding loans has grown by 25% since the tax year 2013/14. UK households amassed £37 billion in unpaid personals loans in 2017 which is an increase of £7 billion compared to 2014.
  • The main reason people are not paying off loans are the increasing living costs and very small increases in pay which lead to some people having to borrow money to survive.

4. Lending falls at fastest rate since 2007

  • According to the Bank of England, unsecured consumer loans have seen a drop of 38.7% in January to March 2018. This is the biggest fall since 2007.
  • The Bank of England specified that this is a trend that has been present throughout 2017 and spilled into 2018, reaching a high in March 2018.
  • This very steep fall was partly due to a decrease in approvals by lenders. Moreover, successful credit card applications also decreased by 26.2% while other forms of unsecured lending decreased by 13.2%.
Part
12
of nineteen
Part
12

UK Debt Markets - Car Finance Trends

Four car finance trends in the United Kingdom include personal contract purchase, personal contract hire, all-in-one subscription models, and low interest car credit. Companies such as a Volvo and Jaguar have both launched all-in-one subscription models. Furthermore, it is noteworthy that personal contract purchase is among the most popular car finance options in the United Kingdom.

trend 1: personal contract purchase

  • The common financing options for cars include hire purchase (HP), leasing or contract hire, personal contract purchase (PCP), and lease purchase.
  • According to KPMG, PCP penetration in the UK stands at 35%.
  • Organizations, such as the British Vehicle Rental and Leasing Association, Choicequote, and Zenith Auto have acknowledged PCP as the fastest growing car finance trend in the UK.
  • PCP's growth as a car finance option is expected to disrupt the car finance market in the UK.

trend 2: all in one subscription model

  • All-in-one subscription models have been launched by companies such as Volvo and Jaguar Land Rover. In this model, a monthly flat subscription fee without any down payment is required. Care by Volvo starts from £799 a month while Jaguar’s InMotion Carpe starts from £910.
  • Eighty-nine percent of car buyers in the UK are confident in financing their car purchases online.
  • According to industry professionals such as Spencer Halil, director of Alphera Financial Services, the all-in-one subscription model is a great trend for car consumers in the UK.
  • The model is expected to grow in popularity since automotive industry leaders such as Volvo and Jaguar have adopted it as part of their car finance options.

trend 3: personal contract hire

  • Personal contract hire services (PCH) are offered by the top 10 largest leasing companies in the UK. PCH is different from PCP in that the car user does not get to own the vehicle when the contract ends.
  • An example of a company that offers PCH services to the public is Zen Auto.
  • Zenith anticipates that many of its customers will primarily use PCH instead of PCP in the next 10 years.
  • Because of its growing popularity among millennials, PCH is going to disrupt several car financing options in the UK.

trend 4: low interest car credit

  • Many financial services are offering low interests on credit used to purchase cars.
  • There is widespread use of models that allow brokers to set interest rates as a way of increasing their commissions. The Financial Conduct Authority (FCA) has revealed that there are efforts being made towards banning such models.
  • Lower interest rates will result in more people buying new cars in the UK.

Research Strategy:

To find the information required for this request, we looked through UK debt market reports and car financial reports from organizations such as the Financial Conduct Authority and the Society of Motor Manufacturers & Traders of UK. We further examined news platforms that focused on the car finance industry in the UK, such as the Financial Times, Mintel, and Car Finance Plus. In addition, we collected and analyzed information from sites that have published reports on the car finance market in the UK, such as Verdict, Deloitte, and Apex Insight. Using these sources, we found four trends in the UK car finance market.

Part
13
of nineteen
Part
13

UK Debt Markets - Credit Card Trends

Five trends in the credit cards market in the UK include increasing credit card spending, increasing interest rates, decreasing terms of 0% balance transfers, increasing consumer preference on premium credit cards, and proliferation of contactless credit cards. More information on the topic has been presented below.

UK credit card market statistics

  • According to statistics, there are 32.3 million credit card holders in the UK.
  • The average credit card spending in the UK is £53.55.
  • The total credit card debt in the UK as of February 2018 was £70.8 billion, which translates to £2,604 credit card debt per household.
  • 66% of the credit cards in the UK are powered by Visa, 31% by MasterCard, 3% by American Express, and less than one percent by Diners.

Trends in the UK credit card market

Trend #1: increasing monthly credit card spending

  • According to data, the amount spent by the consumers in the UK on their credit card has been increasing steadily since 1993. In November 1993, the amount spent using a credit card in a month was £3.3 billion, and this amount was steadily climbing with its highest peak recorded in November 2017 at £17.3 billion.
  • The amount increased by more than five times within the said timeframe. Additionally, the spending pattern increases on months leading up to Christmas and declines around February.

Trend #2: increasing interest rates/ APR rates

  • Along with the increased spending on credit cards in the UK, the interest rates of the credit cards are also steadily growing. According to the Financial Times, the interest on credit cards has been consistently increasing in the last 11 years.
  • In 2006, the average interest rate on credit cards was 15.9%, and in 2017, this number had risen to 23%.
  • Based on the MoneyFacts report, this increasing trend in interest/APR rates continued in 2018 wherein the "industry average purchase APR rate" from January-June 2018 had shown a steady increase from 22.8% to 23.1%.
  • This trend is further driven by the increase in interest rate in the entities such as Halifax, Bank of Scotland, HSBC, and Lloyds Bank. These entities have increased their interest rates on a standard purchase by 1%.

Trend #3: contactless credit cards are increasing in numbers

  • According to data from the UK Cards Association, the number of contactless cards in the UK has been increasing over the years, and a 20.6% increase was seen in 2018.
  • In 2018, the number of contactless credit cards in the UK was 35.8 million.
  • Based on April 2017 figures from the UK Cards Association, 51.8 million contactless credit card transactions were done within the month of April 2017.

Trend #4: consumer preference on premium cards, affinity cards, and co-branded credit cards

  • The UK Card Payments 2017 report indicates the increasing preference of consumers for premium credit cards. Based on the records, the credit card market penetration fell in 2016.
  • However, in 2016, the number of premium cards increased by 20% and was observed to be 21 million.
  • Meanwhile, affinity credit cards saw a sharp decline of 21% and only accounted for one million cards. A sharp increase of co-branded credit cards was also seen, which increased by 67% or 5.6 million.

Trend #5: decreasing terms of 0% balance transfers

  • The credit card market in the UK is experiencing a downward trend in the balance transfer terms, according to MoneyFacts.
  • The "32 months on average 0% balance transfer term" in February was reduced to just "29 months on average" across market leaders.
  • This downward trend is illustrated by how market leaders such as Barclays, Virgin Money, and Sainsbury's bank have cut down their transfer terms by one month from their previous offerings.

Research Strategy:

your research team applied the following research strategy:

We started by searching for information on trends in the credit cards market in the UK across multiple industry reports, press releases, and news articles from industry leading sources and market leaders' websites. The aforementioned databases provided us with a number of resources regarding the credit card market and its current state in the UK. However, none of the sources contained any sort of trends in the market. Since the preexisting information was unavailable, we used the available industry reports and analyzed various trends related to consumer preferences, credit company strategies, and factors affecting the overall landscape of the credit card market. From the available information, we built a list of five related trends in the UK credit cards market.

We selected trends based on multiple criteria. The trends have affected the credit cards market in terms of market penetration and presence. These trends have also changed the landscape of the market segments (contactless credit cards and premium credit cards segments). These segments contribute to the overall presence of credit cards in the market. The selected trends show the increasing presence of credit card in the payment system of the UK. Similarly, the trends showing the increase of interest rates/APR rates and the decreasing terms of 0% balance transfer terms are negative trends impacting the credit card industry in the UK. We found that the trends are under the regulation of the Financial Conduct Authority (FCA), the UK's regulatory body of financial services firms. In this way, our research team was able to successfully complete the research.

Our research team also found a quarterly report on the state of the UK credit cards market called "Moneyfacts UK Credit Card Trends Treasury Report." It provides a meta-analysis of the UK credit cards market including key market indicators, historical data, current developments in the credit card market, and trends and insights into the industry. However, the report is subscription-based and one has to establish direct contact with the website to get a subscription.



Part
14
of nineteen
Part
14

UK Debt Markets - Credit Card Channels

The different channels for credit card usage in the United Kingdom are in-store, e-commerce & m-commerce, banks, and credit card payment aggregators or facilitators.

credit card usage overview

  • There are currently around 30 million credit cardholders in the United Kingdom. Approximately 60% of the adult population in the United Kingdom owns at least one credit card.
  • In 2016, the total number of credit card transactions increased by 5.0% to 3.3 billion.
  • Out of the total number of credit card transactions in 2016, 3.2 billion were purchases that amounted to £179 billion.
  • An estimated 80% of credit card spending was attributed to full payers in 2016, who in turn account for around 56% of the credit card holding population.
  • Credit card payment volumes are forecast to increase to 3.9 billion by 2027 as a result of macroeconomic conditions which determine consumer appetite for taking on unsecured debt.

Channel #1: In-store

  • Consumers make new purchases and intend to pay off over a number of months. The purchase could either be a large purchase such as a holiday or furniture or regular spending on utilities.
  • Consumers also want to use their credit cards for everyday spending. Purchase and/or payment rewards, the flexibility of the balances, or the legal protection in purchasing on a credit card are some factors that make its use in everyday spending more attractive.
  • In 2016, retailers in the United Kingdom invested more than £1 billion to accept card payments.
  • In 2017, 3.1 billion payments were made using credit cards, an increase of 13% over the previous year.
  • Credit cards accounted for 24% of all retail spending in 2016.

channel #2: E-commerce & M-commerce

  • Online spending has been growing in prominence in recent years, driven by the proliferation of smartphones and tablets.
  • Consumers in the United Kingdom are constantly seeking convenience as mobile continues its growth towards dominance. Mobile is the most popular shopping channel with 16% annual growth in the United Kingdom. According to the Global Payments Report from Worldpay, m-commerce will be worth £88.1 billion by 2022.
  • The United Kingdom is the largest European market in terms of the total e-commerce transaction value in 2015 which amounted to $141.3 billion.

Channel #3: Bank

  • As a channel, bank includes money transfer when you transfer money from your credit card and pay it into your bank or building society account.
  • Other transactions involved in the bank channel is overseas spending where credit card payment is made abroad but each transaction made is affected by the exchange rate.
  • In October 2018, borrowing on bank-issued credit cards grew by 5.7% totaling £11.3 billion over a 12-month period.

Channel #4: Credit Card Payment Aggregator or Facilitator

  • This channel can be described as master merchants that process credit and debit card transactions for sub-merchants within their payment ecosystem.
  • Some well-known aggregators include PayPal, Stripe, and Square.
  • Aggregators underwrite and provide for merchant accounts and fund their sub-merchants payments.
  • More importantly, aggregators take over the risks involved in payment processing; fraud loss, chargebacks and non-payment.

Research Strategy

We started our research by searching through transparency reports from government websites such as UK Finance. This search provides us with two reports; the UK Card Payments Summary in 2017 and the UK Payment Markets Summary in 2018. Both reports provided information for the whole card industry but summarized or presented information specific to credit cards. Upon thorough examination, the only information presented was credit card usage channels such as in-store, e-commerce, and m-commerce. Both reports were not able to provide the percentage breakdowns of the said channels.

Next we searched for interviews from relevant executives or officials in the United Kingdom finance industry hoping to find any insights or statements of the percentage breakdown of the channels in credit card usage. Though we were able to find some comments from executives such as Andrew Cregan, a BRC policy adviser, Eric Leenders of UK Finance, Rachel Springall of Moneyfacts, the statements only provided broad overviews of the credit card industry in the United Kingdom.

Subsequently, we searched through Statista, a well-known source of credible statistical data from different industries across different countries. The information found within the database was the number of transactions in the credit card market in the United Kingdom but we were unable to find percentage breakdowns for the identified credit card channels.

We then expanded our research by searching industry and news reports we searched through sources such as CNBC, BBC, Business Insider, Forbes, and The Guardian.com. However, this search was also futile. Finally, we attempted to find data that would enable us to triangulate the percentage breakdown of each channel. However, this not possible because our search for data that could be used such as the total transactions in each channel did not produce the desired results.

Following our extensive search and attempts to triangulate the information proved abortive, we concluded that the information about the percentage breakdown of credit card channels was not publicly available.
Part
15
of nineteen
Part
15

UK Debt Markets - Personal Loan Channels

The primary channels available to UK personal loan borrowers are traditional banks, fintech providers, and peer-to-peer lenders. While traditional banks still dominate the UK market with an approximate 66% market share, alternative sources for personal loans are growing increasingly popular among consumers.

CHANNEL DESCRIPTIONS

TRADITIONAL BANKS
  • Traditional banks still dominate the UK personal loan market, benefiting from "brand awareness and incumbency."
  • Consumers trust traditional banks, giving them an edge over competitors.
  • According to an EQ consumer report, 53% of UK consumers would borrow exclusively from established lenders, while 47% said they would consider an unfamiliar lender.
FINTECHS
  • Fintech providers can often offer consumers better prices than traditional banks.
  • Consumers are drawn to the convenience and no-pressure atmosphere of fintech's online offerings.
  • Some 56% of UK borrowers seek out loans via online channels, led by younger borrowers in the 18-44 age range.
PEER-TO-PEER LENDING
  • Peer-to-peer lenders are increasing in popularity in the UK because they offer great values without some of the hassles of traditional banks.
  • UK peer-to-peer lenders, such as "Zopa, Funding Circle, RateSetter, and LendingClub," allow lenders and borrowers access to each other without traditional banking institutions being involved, giving them increased control over the process.

CHANNELS BY MARKET SHARE

  • The big six banks in the UK hold approximately 66% (two-thirds) of the personal loan market.
  • Fintech lenders are posing a threat to traditional banks in the UK's personal loan market with 43% of borrowers saying they would consider getting a personal loan from a fintech provider.
  • Peer-to-peer lending sources currently make up only "0.5% of total unsecured borrowing," according to a PwC industry report.


RESEARCH STRATEGY

To unearth data on the personal loan channels in the UK, we searched for market reports for the consumer lending and unsecured loans markets. We encountered several potentially useful reports, but their data was largely paywalled. Reports by Mintel, Euromonitor, and L.E.K. offer subtle hints about the structure of the lending market, such as high-level references to provider types, but much of the data is paywalled or focuses on the types of loans procured rather than the sources of the loans.

We then searched for consumer surveys with the hope of finding data on consumer preferences for personal loan providers. This strategy led to some useful data on market share for traditional and peer-to-peer lending, as well as consumer interest in fintech providers.

Finally, we searched lending aggregators, such as Finder, which provides consumers with comparative data on personal loan providers. This strategy confirmed the primary lender categories previously identified in our research.

Part
16
of nineteen
Part
16

UK Debt Markets - Car Finance Channels

The different channels for car finance in the UK include banks, auto-car dealers and online dealers such as P2P lending, online auto dealers and digital aggregators.

Car Financing/Loan Providers and Financing Statistics

Banks

  • Banks offer loans that can be paid back over a set period and require a director's guarantee who is personally liable for the debt.
  • According to BOE, approximately 50% of financing for car loans originates from banks and lenders that are outside of the automobile industry.
  • Banks have contributed approximately £24 billion in loans, while finance arms of manufacturers contribute approximately £34 billion into the market.

Auto Car Dealers

  • After negotiating a price, a purchase is made. The dealer often chooses the most profitable option, ensuring that the consumer's minimum requirements are met.
  • About 85% of car financing in the UK is from auto car dealerships, with a majority from PCP.
  • FLA states that in 2018, a total of 175,948 cars were bought on finance by consumers through dealerships at a value of £1.4 billion while a total of 28,820 cars were purchased by businesses.

Online dealers

  • When addressing online dealers, it includes are referring to P2P (peer-to-peer) lending, online auto dealers and digital aggregators.
  • Fintech and P2P lending is a car purchase option whereby the subscriber has personalized terms and conditions.
  • The high-street dealerships, as well as the online platform, depends on PCP because they play a critical role, financing for almost all their sales in the tune of £41 billion in loans.
  • Innovators in the online and digital platforms are disrupting the car purchase and financing industry.
  • Justin Benson, the current head of automotive at KPMG in the UK, stated that the entire purchase has been moved to an online platform such as chats, discussions, and comments.
  • FSCS (Financial Services Compensation Scheme) protects individuals from such fraud.
  • The most critical and important source of funding is the year's (P2P) has become an increasingly important source of funding for businesses as well as individuals.
  • According to a survey, 75% of the total automotive executives in the UK think that 20-50% of the physical location for retailers will become unnecessary by 2025.

Part
17
of nineteen
Part
17

UK Debt Markets - Personal Loans Growth

After conducting extensive research, we were unable to establish the growth of personal loans in the UK, over the next five years, in terms of numbers and $ value. However, we calculated the total unsecured lending (personal loans are a type of unsecured lending) for a ten-year period as 1.29%, and with a value of £12,969,723,378 by 2024.


UK Debt Markets — Growth of Personal Loans

  • In 2017, the British households amassed £37bn in unpaid personals loans with an increase of £7bn from three years earlier.
  • Personal loans are a type of unsecured loans, and the latter are loans approved without the need for collateral.
  • In 2007, the total unsecured lending in the UK amounted to £168 billion, and £191 billion in 2017.
  • One out of 10 people in the UK is estimated to hold personal loans.
  • Personal debt rose by nearly 11% in the past year alone, according to recent data from the Bank of England.
  • Every year the UK's unsecured personal loans market contributes £23 billion to its economy.
  • In 2017, almost 40 million individuals in the UK received some form of loan or credit.
  • In 2017, there were 3.6 million adults in the United Kingdom that had taken money from a friend or family member.

Research Strategy:

As a strategy to find the growth of personal loans for the next five years, both in terms numbers and $ value, your research team began by carrying out a direct search for actual data that would fulfill the request. The team searched for industry reports, financial publications, business publications, etc., from sites such as Trading Economics, Finder, BBC, Apex Insight, Forbes, Statista, The Balance, Apex Market Research, and other related websites. However, the team did not arrive at any information regarding the growth of personal loans over the next five years identified in terms of both numbers and the $ value.
Next, the team searched for top personal loan or loan providers and checked their annual reports, to see if they stated the future rates of the personal loans they give out. However, like the previous strategy, the team was unable to find the requested information. The info for the growth rate located through this strategy was not relevant to outcomes.
As a last resort, your research team searched for personal loan market sizes and related values in consumer loan databases and government sites to get some personal loan data points which could serve as a proxy to carry out calculations. The team was unable to find the requested information but located the loan growth information of the past ten years regarding total unsecured lending.
In trying to calculate the growth of total unsecured lending for the next five years, the team used the data found on Finder (A decade in personal loans: yearly figures 2007-2017 — Total unsecured lending), shown below,

CALCULATIONS

TOTAL UNSECURED LENDING
Using the data found on Finder;
2007: £168 billion
2017: £191 billion
number of years: 10
CAGR = 1.29% (got this rate by using a CAGR calculation)
To find the growth for the next five years, we used the formula;
[Next Year data = Previous Year data + (Previous Year data X CAGR)]
2018 = £191 billion + (£191 billion X 0.0129)
2018 = £191 billion + 2,463,900,000
2018: £193,463,900,000
2019 = £193,463,900,000 + (£193,463,900,000 X 0.0129)
2019 = £193,463,900,000 + 2,495,684,310
2019: £195,959,584,310
2020 = £195,959,584,310 + (£195,959,584,310 X 0.0129)
2020 = £195,959,584,310 + 2,527,878,638
2020: £198,487,462,948
2021 = £198,487,462,948 + (£198,487,462,948 X 0.0129)
2021 = £198,487,462,948 + 2,560,488,272
2021: £201,047,951,220
2022 = £201,047,951,220 + (£201,047,951,220 X 0.0129)
2022 = £201,047,951,220 + 2,593,518,571
2022: £203,641,469,791
2023 = £203,641,469,791 + (£203,641,469,791 X 0.0129)
2023 = £203,641,469,791 + 2,626,974,960
2023: £206,268,444,751
2024 = £206,268,444,751 + (£206,268,444,751 X 0.0129)
2024 = £206,268,444,751 + 2,660,862,937
2024: £208,929,307,688
Total Growth for the next 5 years:
Total Growth = 2024 amount — 2019 amount
Total Growth = £208,929,307,688 — £195,959,584,310
Total Growth: £12,969,723,378

Given this, the team decided to estimate the future rate using the past rate, since this is the only data available.

The reason why the growth of personal loans during the next five years identified in terms of both numbers and $ value is not available can be because it is highly specific information, and the topic requested has limited published information and no study has been initiated for it.
Part
18
of nineteen
Part
18

UK Debt Markets - Car Finance Growth

According to FLA, the consumer car finance value for 2018 in UK is 48.30 Billion USD. The estimated Car Finance Value for 2019 is 52.20 Billion USD and 71.24 Billion USD by 2023.

2016-2018 Car Finance Value and Number of Cars

Growth Rate (2016-2018)

  • The growth rate from 2016 to 2018 of Car Finance Value is 8.08%. (calculated)
  • The growth rate from 2016 to 2018 Number of Cars is 2.58%. (calculated)

Car Finance Value (2019-2023)

  • The estimated Car Finance Value for 2019 is 52.20 Billion USD. (calculated)
  • The estimated Car Finance Value for 2020 is 56.42 Billion USD. (calculated)
  • The estimated Car Finance Value for 2021 is 60.98 Billion USD. (calculated)
  • The estimated Car Finance Value for 2022 is 65.91 Billion USD. (calculated)
  • The estimated Car Finance Value for 2023 is 71.24 Billion USD. (calculated)

Number of Cars (2019-2023)

  • The estimated number of cars that will be financed in 2019 is 2,481,272. (calculated)
  • The estimated number of cars that will be financed in 2020 is 2,545,289. (calculated)
  • The estimated number of cars that will be financed in 2021 is 2,610,957. (calculated)
  • The estimated number of cars that will be financed in 2022 is 2,678,320. (calculated)
  • The estimated number of cars that will be financed in 2023 is 2,747,421. (calculated)

Research Strategy:

We did an exhaustive search on market reports website such as Mintel, finance organization websites in UK such as FLA, and media website such as PR Newswire, but could not find the car finance growth in the next 5 years. What we found was both Car Finance numbers and value 2016 to 2018 using the report of FLA.
Since we have those data, we tried another approach. We triangulated the data for the Car Finance Growth by using the data from 2016-2018. Using the CAGR calculator, we determined the growth rate from 2016 to 2018 of Car Finance Value which is 8.08% and the growth rate for number of Cars and determine the numbers and value using the total 2018 Car Finance Value and Number of Cars. The calculations are as follows:

Car Finance Value

2018 Total Car Finance Value = $48.30 Billion US
2019 = (2018 Total Car Finance Value) + (8.08% of 2018 Total Car Finance Value)
2019 = 48.30 + (8.08% of 48.30) = 52.20 Billion USD
2020 = 52.20 + (8.08% of 52.20) = 56.42 Billion USD
2021 = 56.42 + (8.08% of 56.42) = 60.98 Billion USD
2022 = 60.98 + (8.08% of 60.98) = 65.91 Billion USD
2023 = 65.91 + (8.08% of 65.91) = 71.24 Billion USD

Number of Cars

2018 Total Number of Cars = 2,418,865
CAGR Total Number of Cars = 2.58%
2019 = (2018 Total Number of Cars) + (2.58% of 2018 Total Car Finance Value)
2019 = 2,418,865 + (2.58% of 2,418,865) = 2,481,272
2020 = 2,481,272 + (2.58% of 2,481,272) = 2,545,289
2021 = 2,545,289 + (2.58% of 2,545,289) = 2,610,957
2022 = 2,610,957 + (2.58% of 2,610,957) = 2,678,320
2023 = 2,678,320 + (2.58% of 2,678,320) = 2,747,421
Part
19
of nineteen
Part
19

UK Debt Markets - Credit Cards Growth

The transaction volume and value of credit cards in the UK will continue to grow at a CAGR of 2.8% and 2% respectively to 2026.

The UK credit card market

  • In 2018, there were 59,794,000 credit cards in circulation in the UK, however, only about 34,490,000 were active credit cards.
  • The total volume of successful credit card transactions in the UK is projected to hit 3.7 billion by 2026, from 2.8 billion in 2016.
  • The total value of successful credit card transactions in the UK was £154 billion in 2016. It is expected to rise to £189 billion by 2026.

Calculations

To determine the growth rate of credit cards in the UK, we utilized a simple CAGR formula [(FV/PV)^(1/n)] — 1. Where FV = final value, PV = present value (initial value in this case), and n = number of years.

TOTAL VOLUME
FV = 3.7 billion, PV = 2.8 billion, and n = 2026-2016 = 10.
Therefore, CAGR = [(3,700,000,000/2,800,000,000)^(1/10)] — 1 = 0.028 = 2.8%.

TOTAL VALUE
FV = 189 billion, PV = 154 billion, and n = 2026-2016 = 10.
Therefore, CAGR = [(189,000,000,000/154,000,000,000)^(1/10)] — 1 = 0.02 = 2%.
Sources
Sources

From Part 05
Quotes
  • "You’re protected by the RateSetter Provision Fund, our buffer against poorly performing loans, with a 100% track record since 2010"
  • "The Provision Fund buffer shows the Provision Fund cash and expected future inflows as a % of loans under management at each point in time. Investor returns show the average annualised % return to an investor in the month. Annualised net credit losses show the annualised net credit losses as a rolling six months’ average."
  • "With our flexible terms you can borrow from £3,000 to £24,000 over 1 to 5 years"
  • "Remember, while your investment is matched to an individual, your investment benefits from the scale and stability of the overall portfolio, currently £850 million. For an added layer of stability, we created the Provision Fund. The Provision Fund has a 100% track record over 8 years ensuring that no investor has lost a penny. "
Quotes
  • "For an investor with a high proclivity for success, choosing the best UK Peer to Peer lending service is essential. There are various peer to peer lending companies in the UK. Here are some of the leading peer investment sites in the UK to choose."
  • "Ratesetter Ratesetter is another leading investment site in the UK. Ratesetter has a default rate of 0.71% and a zero fee charged to lenders. The platform provides for 10 pounds as the minimum investment and has no maximum limit. It attracts an average of 4.5% for lenders."
  • "Funding circle Funding circle- This is a one of the best peer to peer lending investment site. Funding circle has a default rate of 1.5% with an average of 46,000 active lenders. The site charges 1% on the loan repayments made by borrowers. The site has an outstanding 7% average return for lenders. It has no maximum limit of investment."
  • "Rebuildingsociety rebuildingsociety.com is a peer-to-business lending platform with a difference. Lenders on rebuildingsociety.com are encouraged to engage with the business borrowers, and choose the rate at which they want to lend."
Quotes
  • "Lendy Ltd ("Lendy") is a company registered in England and Wales under number 8244913 with its registered office and principal place of business at Brankesmere House, Queens Crescent, Southsea, Portsmouth, PO5 3HT. Lendy Ltd is authorised and regulated by the Financial Conduct Authority (FCA), number 743416, and is registered with the Information Commissioner's Office (ICO), number Z3404040."
  • "All loans made through Lendy's platform are secured on UK property; however, with investing your capital is at risk. Funds lent through a peer-to-peer website are not covered by the Financial Services Compensation Scheme (FSCS). Remember, past performance is not a guarantee of future performance. With all investment, capital is at risk. Please obtain independent advice if you are in any doubt as to whether this platform is suitable for you or if you require tax advice."
Quotes
  • "Simply, development and refurbishment finance you can trust."
  • "Lendy offers a complete range of property development and refurbishment finance solutions for every type and stage of project."
  • "Over £392m lent to date"
Quotes
  • "The Lendy platform allows our investors to pool together their funds in order to finance development projects and property purchases. We ensure this process is fast, simple and efficient, and delivers a gross annual return of up to 12%, before tax, with all proposals fully assessed by our experienced credit committee before being made available for investment."
  • "endy was launched in 2012 by two young entrepreneurs who believed that property investing and borrowing should be easier, and more accessible and rewarding."
  • "The platform has grown dramatically, we now have over 20,000 registered users. Between them, they have invested £427,640,017, and earned a total of £47,517,281 in interest on loans to help build, buy and restore thousands of properties across the length and breadth of the UK."
Quotes
  • "When we started in 2005 our ambition was to create better solutions for everybody’s money needs. Since then we’ve helped hundreds of thousands of customers take the stress out of money by building our business on honesty, transparency and trust."
  • "Best Personal Loan Provider British Bank Awards 2019"
  • "We approve more than 300 loans each day to people with a good credit history"
  • "It's easy to pay extra towards your loan, and we don't charge early repayment fees"
  • "Invest in personal loans: competitive returns, well-managed risk, and that feel good moment of knowing you're helping people achieve their goals."
  • "Best of all, both our products are available as ISAs, so your returns can even be tax-free!"
From Part 06
Quotes
  • "Oodle Car Finance processed over £3 Billion of car finance applications last year, across its 168 car retailer partners and experienced a 600% growth in monthly sales."
  • "In 2017, Oodle processed nearly £1bn in finance applications from UK drivers, jumping to nearly £3bn in 2018 equating to an average of £18 Million per Oodle Retailer."
  • "Since launching in April 2016, fintech company Oodle has seen fantastic growth for its tech enabled car finance services. The actual number of applications rose from around 100k in 2017 to more than 300k in 2018. "
  • "Unlike traditional auto finance companies Oodle’s strategy is focused on working with a select number of leading UK car retailers to deliver amazing customer outcomes."
Quotes
  • "Oodle Car Finance is changing the way people buy cars, by putting our customers’ needs front and centre of the second biggest retail market in the UK. We are bringing the used-car market bang up to date by building modern, digital, retail processes around what the customer actually needs."
  • "Although we primarily provide loans for our customers and link them up with some of the UK’s best car dealers (in one rapid, blink-and-you-miss-it, digital procedure), that is just the start. Our ultimate goal is to make buying a car as easy as buying a t-shirt on Amazon. With a glove box full of powerful algorithms (and investment from some of the world’s most reputable financial institutions) we have been building and developing a customer-first, fully integrated digital retail experience inspired by Amazon’s one-click model. "
Quotes
  • "Blue started lending operations in early 2014 and has already become a recognised and impressive player in the market, winning a number of prestigious awards and accolades. "
  • "Blue strives to be the UK's premier consumer motor finance company offering best-in-class service with a focus on the latest technological innovation, risk management and the highest standards of regulatory compliance. "
  • "The driving force behind Blue’s success is their highly experienced management team who have built and managed some of the UK’s biggest financial services companies."
Quotes
  • "Based in Sevenoaks Kent, Blue Motor Finance works with over 3,700 dealers across the UK. In the last 12 months it has financed over 50,000 car purchases."
  • "CEO of Blue Motor Finance Bob Jones said: ‘UK car finance is a £106bn market that has been dominated by the banks for a long time. Blue’s aim is to transform the market, making car ownership simple, more transparent and flexible."
Quotes
  • "Divido is a multi-award winning consumer finance platform for retailers, lenders and payment intermediaries to offer instant finance to B2C and B2B customers at the checkout, online and instore."
  • "At Divido, we are changing that by making the process paperless, quick and easy. What makes us unique is that we are a technology platform that caters to the needs of retailers, as well as lenders and payment intermediaries. "
Quotes
  • "By partnering with BMW, one of the world’s leading car brands, Divido is changing the way customers can pay for their after-sales bill by enabling them to spread the cost up to 12 months, interest free."
  • "Divido’s technology provides a simple, transparent and secure way for customers to pay for after-sales repairs or services, in minutes, completely paperless. The BMW retailer gets paid in full, right away – it’s a win-win for everyone."
Quotes
  • ""Consumers want things straightaway, they have little brand loyalty, and they are very wary about how they’re going to spend their money,” Holloman said. “I believe this is opening the floodgates for disruption.”"
  • "Divido, for example, is poised to secure partnerships with Ford Motor Co. and Volkswagen, after inking a deal with BMW Financial Services U.K. less than a year ago, David Backshall, Divido’s commercial director, told Auto Finance News back in April."
From Part 07
Quotes
  • "three in five Brits (60%) admit they are unaware of the interest rate being charged. And while more often than not, age brings wisdom, a staggering 74% of Brits aged 45-64 with structured personal loans** say they do not know the rates they are paying. Similarly, women (70%) are considerably more likely than men (51%) to be unaware of the rate."
  • "lthough 58% of consumers spent time trying to find the best deal possible when they took out their last unsecured loan, it seems that for many Brits acceptance of a loan can be more important than the rate. Indeed, more than half (54%) of 18-44s say that it is more important to be accepted for the loan than the rate of interest charged; this compares to 41% of consumers over the age of 45, and 48% of consumers in total."
  • "While more than half (56%) of borrowers arranged their last loan online, two in five (40%) borrowers still choose to arrange their personal loan using offline methods. Online usage rises to almost two thirds (64%) for borrowers aged 18-44. But while traditional channels are still widely used, Mintel research reveals that face-to-face isn’t always the best option. In fact, 26% of consumers who applied online got a loan charging 2-5%, compared to only 9% of those who arranged loans face to face."
  • "Young Brits aged 18-34 (34%) are more likely to have high cost credit (which includes payday, doorstep and guarantor loans) than consumers aged 45+ (10%). Consumers aged 18-34 are also much more likely to have a guarantor loan (14%) than those aged 45+ (3%)."
Quotes
  • "Looking at specific products, while only 9% of those aged 18-24 have a balance on a credit card, 30% of the 35-44 age group do. Seven percent of all adults say they have borrowed from friends and family, while 6% (3 million people)"
  • "During the recession of 2008/09, banks were much more reluctant to lend money and consumers were less inclined to take on credit, with some focusing on paying off existing loans during difficult economic conditions. As a result, the household debt-to-income ratio fell to 127% by late 2015. Starting in early 2016, growth in household debt levels accelerated, leading to the debt-to-income ratio to increase from 127% in Q4 2015 to 133% in Q4 2017. It has since stabilised and stood at 133% in Q3 2018."
From Part 08
Quotes
  • "In 2005 we built the first ever peer-to-peer (P2P) lending company to give people access to simpler, better-value loans and investments. Since then we've helped hundreds of thousands of customers take the stress out of money by building our business on honesty, transparency and trust."
Quotes
  • "Provided by the Bank of Ireland UK. AA Financial Services Limited is a credit broker and not a lender."
Quotes
  • "Post Office Limited is a credit broker and not a lender. Post Office Limited is an appointed representative of Bank of Ireland (UK) plc which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority."
Quotes
  • "Hitachi Personal Finance is a trading style of Hitachi Capital (UK) PLC. Authorised and regulated by the Financial Conduct Authority. "
Quotes
  • "Banks make money by lending your money to borrowers. It’s an established system that keeps your money safe but doesn't necessarily offer good value to customers. We believe that your money should be working harder for you, not for someone else."
  • "In 2010, we founded RateSetter on that principle. We created our peer-to-peer investments platform and began connecting those who have money to invest with those who want to borrow it, providing better value to everyone. It’s as simple as that."
  • "We’re not a replacement for your bank, and we don’t pretend to offer the lounge service or marble foyer that you may experience elsewhere. We exist for people who want rewarding investments. Or a competitive loan. We are committed to being the UK’s safest and most liquid peer-to-peer platform. Perhaps that’s why we are also the UK’s most popular."
Quotes
  • "Avant, LLC develops and operates an online marketplace lending processing platform."
Quotes
  • "Citrus Loans is a trading style of Aspire Money Limited Company registered in England"
Quotes
  • "My Community Bank is the trading name of Brent Shrine Credit Union Ltd."
Quotes
  • "Today, the loans UK market is a different story altogether. The rise of Fintech in the UK, coupled with further advancements in technology have seen more advanced online lending replace the wild wild west lending of before and dominate an industry once the preserve of high street lenders only. "
  • "The big banks are still shackled (rightly so) by the regulation brought in following the 2008 crisis and getting a loan from your average high street bank is just as difficult now as it was nearly a decade ago. However, the whole lending sector has changed forever. You can get an online loan quote within seconds and regardless of your credit history or income verification, in some cases, have a small loan in your bank account within 24 hours."
  • "Today’s generation of online lenders in the loans UK market offer fast, transparent and regulated lending. The days of having to rely on high street banks for your everyday lending are long gone. They still serve a vital role in securing mortgages, larger personal and business loans, but the need for more flexible, faster and more convenient lending combined with the advancement of technology has changed the loans UK landscape forever and for the better of the consumer. The average man in the street has more choice than ever before, more lending options available to them than ever before, and now with strong government regulation behind them, there is more consumer protection than ever before."
From Part 10
From Part 12
Quotes
  • "The main financing options are HP (hire purchase), leasing or ‘contract hire’, PCP (personal contract purchase), and lease purchase. "
  • " A typical HP agreement require customers to pay an initial deposit, typically between 10% and 30% of the purchase price. They will then repay the outstanding balance with interest as fixed monthly repayments over a set period of time, typically one to five years."
  • "A PCP is a type of lease agreement which now dominates the car finance market. The customer is required to pay a deposit, followed by a series of monthly payments, typically lasting two to four years, which effectively cover the vehicle’s depreciation"
  • "Contract hire is essentially a leasing agreement, where the customer pays an initial down payment then monthly rental payments until the end of the contract period (usually lasting two to four years) when they hand the car back. "
  • "A lease purchase agreement is a cross between an HP plan and a PCP. The customer pays a deposit, then monthly payments over a fixed term (usually two to four years). At the end of the contract, the customer pays a larger balloon payment – which is agreed upfront – and takes ownership of the vehicle. "
  • "The number of car finance contracts for new cars decreased in 2017, in the first period of real struggle since the market exploded at the start of the decade. "
Quotes
  • "Volvo and Jaguar Land Rover have both launched all-in-one subscription models that offer car access rather than ownership, via a monthly flat-fee subscription with no down payment."
  • "Care by Volvo starts from £799 a month and this includes insurance, servicing, tyres, and breakdown cover. Jaguar’s InMotion Carpe starts from £910 and dealers get paid for aftersales work in the same way they currently do, with vehicles sold by JLR on leasing contracts."
  • "Spencer Halil, director of Alphera Financial Services, saluted companies such as Volvo and Jaguar for trying the idea. He said: “At launch, this option is too expensive for the majority of customers, but I think if one company can nail this package at an affordable level, it could be huge.”"
  • "Nearly nine in 10 customers (89%) are “confident” or “completely confident” about financing a car online, according to research from iVendi. However, 87% also said visiting the showroom is still an important part of the buying process."
  • "Tew said: “The car buyer appetite for moving more finance online exists, the technology exists and it is up to dealers to deliver. "
  • "Halil said the industry is in transition, with the technology already available, but with consumers still reluctant to complete finance applications away from the showroom. He said: “As the younger generation of buyers start to come through, we’ll see that shift towards more being completed and signed remotely."
Quotes
  • "Concern that saturation of new vehicles will fuel riskier loans in second-hand market"
  • "Guildford is not alone: other wealthy towns around the capital have seen a similar rise in personal debt — it is up 36 per cent in Hemel Hempstead, 39 per cent in St Albans and 31 per cent in Redhill."
  • "Overall, the FT analysis revealed a strong correlation between increased personal borrowing and car ownership, a result of the transformation of Britain’s car market through personal contract purchases over the past decade"
  • "Mr Trigo compared the borrowing boom to the rising popularity of subscriptions like Amazon Prime or Netflix. New forms of credit are “like having a subscription to driving a new Mercedes-Benz”, he said."
  • "Recent data from the Bank of England showed that the annual rate of consumer borrowing dropped to 6.4 per cent in December 2018, down from a peak of around 11.6 per cent in November 2016."
  • "Growth in the market was helped along by low interest rates but boosted by the adoption of new forms of debt that allowed drivers the use of a car without the high upfront costs of buying."
Quotes
  • "After five years of record growth, car sales in the UK seem to be flattening out, according to a report in the Guardian newspaper on the 5th of July 2017, quoting recent statistics released by the Society of Motor Manufacturers and Traders (SMMT) "
  • "So far, however, these figures have not quelled speculation in some parts of the press and, indeed, the Financial Conduct Authority (FCA) itself, that the availability of car financing solutions is somehow overheating the market for motor vehicles."
  • "In its report for 2016, for example, the Finance and Leasing Association (FLA) remarked on the concerns expressed by the FCA about measures used by lenders to test the affordability of finance that is made available."
  • "In its annual review, the FLA confirmed that some 80% of all new car sales are made via one of the many different types of car finance."
  • "The British motor car industry naturally relies on healthy sales of new and used cars. The demand for finance to facilitate those purchases is clearly very much alive and the motor finance industry continues to rise to meet the many and diverse challenges of supply."
Quotes
  • "Britain's markets watchdog said it may ban some methods used by lenders to reward car retailers that end up costing consumers 300 million pounds a year."
  • "The Financial Conduct Authority said it found that widespread use of commission models that allow brokers discretion to set the customer interest rate and thus earn higher commission."
  • "This can lead to customers paying significantly more for their motor finance," the FCA said in a statement on Monday."
  • "The watchdog said it was assessing options for intervening in the market, which could include strengthening existing FCA rules, banning certain types of commission model, or limiting broker discretion."
Quotes
  • "According to new figures released by the Finance and Leasing Association (FLA), which show that four percent fewer new cars were financed in the twelve months to October 2018 than during the previous 12 months."
  • "However, despite the reduction in new car sales, the total value of new car finance in the UK has risen. In the 12 months to October 2018, more than £19.3 billion of finance was granted, representing a two-percent uplift on the 12 months before."
  • "The popularity of finance among used car buyers has risen noticeably, with more than 1.4 million used cars bought on finance in the 12 months to October - an increase of eight percent on the preceding year-long period."
  • "And the 1.77 million used car transactions made in the final quarter of 2017, and finance deals are now accounting for just under a fifth (roughly 18 percent) of all used car sales. "
  • "Unsurprisingly, therefore, the total value of advances has also risen, hitting a total value of almost £17.4 billion between October 2017 and October 2018."
  • "The performance of the point-of-sale consumer new car finance market in October continued to reflect trends in private new car sales. The consumer car finance market overall remains on track to report single-digit new business volumes growth in 2018 as a whole."
Quotes
  • "In the 2018 Global Automotive Consumer Study, Deloitte found that in emerging car markets where many consumers are buying their first vehicle, shoppers did up to 50 per cent more research before buying. "
  • "As used car incentives improve, such as lower prices and better finance options, this pivot away from buying new cars is likely to continue. Many are also cautious about how rising interest rates will affect new car loans."
  • "The Ford Fiesta, for instance, was the UK’s top-selling car of 2018, with the VW Golf coming in second, according to the Society of Motor Manufacturers & Traders (SMMT). These are two cars the British public has long associated with ‘sturdy’ reliability."
  • "Car financing packages and PCP (Personal Contract Purchase) contracts have been on the rise. The benefits of this differ from company to company, but generally offers consumers some added perks they wouldn’t get if they were to buy a car outright."
  • "It’s essential for motor traders and garages to plan their finances and business strategy carefully this year. This includes protecting yourself with effective motor trade insurance. Any advantage should be taken, but protecting your core assets should also be a priority."
  • "Staying competitive doesn’t just mean dropping your prices lower than your competitors’; it also means approaching your operations with an informed consideration. Stocking the right models, parts or offering the best services for the used car market may be the best way to ensure survival this year."
Quotes
  • "Finance & Leasing Association (FLA) show that new business volumes in the (POS) consumer new car finance market remained stable in October, compared with the same month in 2017, while the value of new business grew by 5% over the same period to £1.5bn."
  • "The percentage of private new car sales financed by FLA members through the POS was 91.0% in the twelve months to October."
  • "The POS consumer used car finance market reported new business up in October 14% by value and 8% by volume, compared with the same month last year."
  • "In the analysis of cars bought on finance by consumers through dealerships , the value of advances totalled £1.6bn, an increase of 14% year-on-year. The number of used cars financed was 130,313, an 8% rise. "
  • "The number of new cars bought on finance by businesses for the month of October was 29,860, while used cars had 9,482 bought. For new cars this represented a fall of 33%, and in the used sector this was a marked increase of 126%."
  • "The retail new car segment saw £2.5bn in business written during the month, down 14% year-on-year, along with a 16% drop in volumes, to 123,173 contracts."
From Part 13
Quotes
  • "Total credit card spending has been on a steady upward climb since 1993. November 2017 saw the biggest month on record with £17.3 billion spent, over five times the amount spent in November 1993, £3.3 billion. As well as this general increasing trend, each year follows a distinct pattern, having a sharp increase in credit card spending in the couple of months leading up to Christmas, followed by a steep drop around February."
Quotes
  • " Indeed, according to the latest Moneyfacts UK Credit Card Trends Treasury Report, the average 0% balance transfer term has fallen by 30 days in the last three months to stand at 539 days, the shortest term seen since July 2015 and a sharp downturn from the high of 669 seen in February 2017."
  • "Looking further back reveals an even starker trend – this time a year ago, the top deal available came from MBNA with a 36-month interest-free term, while two years ago both MBNA and Halifax offered the longest-ever term of 43 months, equating to a reduction of 14 months in just two years."
Quotes
  • "That's according to the latest quarterly Moneyfacts UK Credit Card Trends Treasury Report, due to be published later this week, which shows that the average interest-free term on purchases has fallen to 335 days, down from 356 a year ago and the lowest seen since March 2017 (316 days). This marks an ongoing trend with credit card providers, many of whom are reducing the terms offered on their introductory 0% deals. Virgin Money, Santander and Post Office Money, for example, all made cuts to their terms in the last quarter, some by as much as 20 months, which has had a dramatic impact on the overall average. However, it is the slight adjustments to the top cards in the market that pose a greater threat, as other top players could well follow suit in response."
From Part 14
Quotes
  • "The majority of card payments still take place in-store (67%), but both e-commerce and m-commerce shares are growing, as more people choose to shop online and on the move."
  • "There was an increase in spending on credit cards during 2016. The total number of credit card transactions increased by 5.0% to 3.3 billion. The combined value of these transactions grew more slowly, increasing by 2.2% to £183 billion. Of the total credit card transactions, 3.2 billion were purchases, amounting to £179 billion spent."
Quotes
  • "Over the past 12 months, the outstanding level of borrowing on cards issued by the High Street banks grew by 5.7%, UK Finance said. Total spending on these bank-issued credit cards was £11.3bn in October."
Quotes
  • "“In 2017 there were 3.1 billion payments made using credit cards, an increase of 13% over the previous year.”"
From Part 15
Quotes
  • "While more than half (56%) of borrowers arranged their last loan online, two in five (40%) borrowers still choose to arrange their personal loan using offline methods. Online usage rises to almost two thirds (64%) for borrowers aged 18-44."
Quotes
  • "Nearly half (43%) of consumers are happy to choose a fintech provider for a personal loan. This compares to one in three (33%) being open to having their current account with a fintech and only one in four (26%) considering a fintech for a savings account."
  • "According to Dectech, behavioural science may provide the answer to why consumers are willing to consider a fintech provider for some banking products more than others. The report explains that loss aversion – people’s tendency to be more sensitive to potential losses than potential gains – means customers are more willing to trust unrecognised brands when borrowing money than when saving."
Quotes
  • "While the big six banks continue to dominate – holding three quarters of the cash savings market, two thirds of the personal loan market and three quarters of the mortgage market – the fintech threat is rising. "
  • "More than a third of consumers would consider a fintech for a stocks and shares ISA (35%) or a mortgage (39%), while over two in five people would consider one for a personal loan (43%)."
  • "People feel losses more strongly than equivalent gains and are more willing to engage in risk seeking behaviour in order to avoid incurring a loss. The opposite is also true; people will engage in risk averse behaviour when seeking to make a gainxvi. Therefore consumers are more likely to choose an unknown fintech for loans but an established bank when saving."
Quotes
  • "53% of those surveyed indicated that they would only borrow from an established lender, or one they have used in the past, suggesting that large portions of the population remain resistant to the products of smaller, alternative businesses. 47%, on the other hand, indicated that they would be prepared to borrow from an unfamiliar lender. "
Quotes
  • "As of the first quarter of 2017, the outstanding loan book of Peer-to-Peer lending to individuals was only £1.5bn, representing around 0.5% of total unsecured borrowing."
Quotes
  • "Online lenders filled the void by presenting borrowers with innovative innovative technology to make lending quicker, easier and hassle-free. "
Quotes
  • "Feedback demonstrates that consumers appreciate the comparatively great value rates available through P2PFA platforms, as well as features such as ‘soft searches’ – where providers can get a personalised loan quote without marking their credit score – and no early repayment charges."
From Part 16
Quotes
  • "Innovative digital startups are reshaping the challenging car shopping and financing process into a quick and easy experience for customers."
  • "The changes, which have already started to take root, will create an auto finance ecosystem in which digital aggregators increasingly control the sales and financing process and specialized players occupy the various parts of the value chain."
Quotes
  • "Today, 85% of auto financing in the UK consists of deals done via car dealerships, and of those, the vast majority are PCP deals."
Quotes
  • "FLA results, the value of advances for cars bought on finance by consumers through dealerships was £1.4bn."
  • "The total number of cars bought through consumer finance was 175, 948, down 1% year-on-year."
  • "There were 28,820 new cars bought on finance by businesses, a 13% drop from the previous year."
Quotes
  • "Peer-to-peer (P2P) lending has become an increasingly important source of funding for individuals and businesses in the UK, especially smaller businesses."
Quotes
  • "The survey found that 75 per cent of UK automotive executives think that 20-50% of the brick-and-mortar retailers will no longer exist by 2025."
Quotes
  • "Between 2011 and 2016 the car leasing industry expanded at an average rate of 13% a year."
Quotes
  • "These are cash loans offered by banks and building societies. Your business borrows a lump sum and pays it back over a set period of time."
  • "Most bank loans also require a directors' guarantee. This means that if your business is not able to pay back the loan, the directors will be personally liable for the debt."
From Part 17
Quotes
  • "British households amassed £37bn in unpaid personals loans in 2017, an increase of £7bn from three years earlier."
Quotes
  • "the Total unsecured lending in 2007 is £168 billion and £191 billion in 2017"
Quotes
  • "The UK’s unsecured personal loans market contributes £23 billion to the UK economy every year.1 When consumers are able to borrow well, that money can be used to fuel local economies right across Britain – whether it’s to local builders for home improvement work, or a cardealership for a new motor."
  • "Nearly one in 10 people are estimated to hold personal loans2 and recent data from the Bank of England has shown that personal debt has risen by nearly 11% in the past year alone.3"
Quotes
  • "Consumer lending in its simplest terms is essentially the loaning of money for personal use, family or household spending."
  • "Moreover, there were 3.6 million adults in the United Kingdom (UK) that had taken money from a friend or family member, with a further 100 thousand taking the risk of acquiring a loan through an unregistered lender. "
Quotes
  • "Unsecured loans are loans that are approved without the need for collateral"
  • "Types of Unsecured Loans: Credit cards, Student load and personal loan"
From Part 19
Quotes
  • "Credit card payment volumes are forecast to increase steadily over the next decade. In 2026 credit and charge card purchases are forecast to increase to 3.7 billion transactions, up from 2.8 billion in 2016. Values are projected to rise to £189 billion in 2026."