Personal Loans + Standard Banking: Global Market

Part
01
of four
Part
01

Global Market Size: Consumer Standard Banking

The global market size of the consumer standard banking industry in terms of retail banking revenues as of 2018 was $2,134 billion. The incumbent banks in this industry have seen an increase in the customer preference for technology and a growing threat from FinTech players, challenger banks, and new market entrants in recent years.

Global Market Size of the Consumer Standard Banking Industry

  • As of 2018, the global market size of the consumer standard banking industry in terms of retail banking revenues was $2,134 billion. This figure is expected to reach $2,850 billion by 2025, a CAGR of 4.2% through the years 2018 to 2025.
  • The global retail banking revenues vary from one region to the other. The Western European retail banking market is expected to show the slowest growth between 2018 and 2025, a CAGR of only 1.9%. The highest growth rate is expected to be in the Asia-Pacific region, a CAGR of 6.0% through the years 2018 to 2025.
  • The region-wise retail banking revenues in 2018 compared to their expected revenues in 2025 and CAGR through the years 2018 to 2025 are presented here. The figures in brackets indicate (2018 revenue, 2025 revenue, CAGR through 2018 to 2025). These are as follows: Western Europe ($369 billion, $420 billion, 1.9%), North America ($708 billion, $870 billion, 2.9%), Eastern Europe ($50 billion, $65 billion, 4.0%), Middle East and Africa ($104 billion, $145 billion, 4.6%), Latin America ($217 billion, $320 billion, 5.9%), and Asia-Pacific ($686 billion, $1,030 billion, 6.0%).
  • Out of the global retail banking revenue of $2,134 billion in 2018, incumbent banks contributed the majority share of $2,054 billion, whereas FinTech players, challenger banks, and new market entrants contributed $80 billion. However, with increasing competition to the incumbent banks from FinTech players, challenger banks, and new market entrants, this difference is expected to become smaller in the near future.
  • To counter their market share being eaten away by challengers, the traditional incumbent banks need to change their current business models to focus more on their customers, drive efficiency in their operations, and gain competitive advantage. As per a report by PwC, traditional banks may need to reduce their operational costs by at least 15-20% (even 30-40% in some cases) to stay competitive.
  • As per a survey by Business Insider, 61% of the mobile banking users surveyed stated that they would research the bank's mobile capabilities and features prior to opening an account with the bank.
  • The customers' growing preference for technology and digital banking has pushed retail banks to invest in artificial intelligence (AI), blockchain technology, analytics, and machine learning to provide better and upgraded products and services to the customers.
  • Digital transformation has become the new buzzword for incumbent retail banks. As per IDC's global retail banking research director, digital transformation accounts for over 40% of the IT spending in some of the largest incumbent retail banks in the world.
  • In 2017, retail banks in the United States alone spent $20.2 billion on digital transformation. Spending on digital transformation is expected to grow at a CAGR of 22.5% from 2017 to 2020.

Research Strategy

We started our research by trying to find several reputed sources that provide hard data on the global market size of the consumer standard banking industry. However, even after extensive searching, we managed to find only one report in which the global market size of the target industry is mentioned. This is a free-to-download report by the Boston Consulting Group, in which they have calculated the global market size in terms of revenue (in US$). Even in this, they have not mentioned the market size of the components in retail banking (like standard checking and savings bank accounts) separately. Rather, they have mentioned the market size of global retail banking as a whole. All the other reports available in the public domain are hidden behind paywalls. Some of these paywalled reports can be accessed vide here and here. Reputed market researchers like Deloitte, PwC, and McKinsey have not presented any market size data in their reports. Considering the inadequacy of figures available in the public domain, we had to make do with the global market size of the consumer standard banking industry as mentioned in the BCG report. We have presented the same in this research, along with the two most important trends in the consumer standard banking industry currently.
Part
02
of four
Part
02

Market Growth: Consumer Standard Banking

According to BCG, the global consumer standard banking industry historically grew from 2011 to 2018 at a CAGR of 4.3% and is forecast to grow at a CAGR of 4.2% from 2019 to 2025.

Consumer Standard Banking Industry Overview

Global Market Growth Rate

  • The global consumer standard banking market is forecast to grow at a CAGR of 4.2% from 2019 to 2025.
  • Historically, the global consumer standard banking industry grew at a CAGR of 4.3% from 2011 to 2018.

Regional Market Growth Rate

  • The consumer standard banking market in Asia-Pacific is forecast to be the fastest-growing market, growing at a CAGR of 6.0% from 2018 to 2025.
  • The Latin American market is predicted to grow at a CAGR of 5.9% from 2018 to 2025.
  • The growth rate of the Middle East and Africa (EMA) consumer standard banking industry from 2018 to 2025 is 4.6%.
  • From 2018 to 2025, the Eastern European consumer standard banking industry is projected to grow at a CAGR of 4.0%.
  • The consumer standard banking market in North America is forecast to grow at a CAGR of 2.9% from 2018 to 2025.
  • Relative to other regional markets, the Western European consumer standard banking industry will experience the least growth rate, the market will grow at a CAGR of 1.9% from 2018 to 2025.

Global Consumer Standard Banking Industry Players

Industry Trends/Priorities

Part
03
of four
Part
03

Global Market Size: Personal Loans

The market size of the personal loans market in the U.S. is $308 billion. The market has seen tremendous growth in the past years. This growth can be attributed to the increased activity by market place lenders.

Market Size of Personal Loans

  • By the end of the year 2019, the market size of personal loans in the U.S. was $308 billion. This value is for both secured and unsecured personal loans.
  • In 2018, however, the market size of unsecured personal loans in the U.S. was $138 billion.
  • The size of unsecured loans has tripled in value since the year 2012.
  • TransUnion consumer credit database and DBRS divides unsecured personal loans market into four segments (that is market place lenders, banks, credit unions and traditional finance companies).
  • Market share of unsecured loans balances by marketplace lenders made up 38% of the total market share an increase from 5% in the last five years. On the other hand, the share of unsecured loans by banks was 28%, credit unions was 21%, and traditional finance companies was 13%.
  • A report by Market watch predicts that the global lending/loan market will reach $8 trillion by the year 2020. Additionally, the reports forecast that the industry will grow at a CAGR of 5% from 2019 to 2022.
  • The most common reason for taking a personal loan is usually to consolidate debt. Furthermore, personal loans are usually used to refinance credit card debt.
  • In the U.S., the average monthly payment of personal loans is $360, while the outstanding average personal loan balance is $16,259 for the year 2020.
  • Moreover, unsecured personal loans have a delinquency rate of 3.04% in the year 2020.

Research Strategy

After extensive research, your team was unable to find or triangulate the global market size of personal loans. At first, your team scoured through various industry reports hoping to find information on the global market size of personal loans. Even though various industry reports on personal loans were available, none provided the global market size of personal loans. Next, the team searched through press releases, and individual websites of key players in the personal loans space. Key players that the team looked into were SoFi, Citizens Bank, Marcus, FreedomPlus, Payoff, OneMain Financial, and Prosper. The team went through various financial statements of the key players to find the global industry outlook that might have the market size which is usually provided in financial statements.
After being unable to find the global market size of personal loans from the above sources, the team thought that it would be prudent to triangulate the market size. First, the team felt that it would be able to provide the global market size of personal loans by finding the U.S. market share of personal loans and relating it to the US market value of personal loans market, then use the relationship to calculate the global value. The data on the U.S. market size of the personal loan was readily available, but the team was not able to find the percentage that this value had in the global market. The team was, therefore, unable to continue with this triangulation method. Next, the team thought that it would find the total global market value of the loans/lending market then determine the market share of different segments in the industry. It was hoping that it could be able to derive the market share of personal loans by segmenting the loans market into secured and personal loans. Even though the team was able to get the global market value of the loans/lending market, it was unable to get the market share of the secured and personal loans to triangulate the global market size of personal loans.
It was at this point that the team decided to provide the U.S. market share of personal loans and other additional useful information for consideration. It is important to note that the requested information can be found behind pay walled sources. These two pay walled sources could be useful:
Part
04
of four
Part
04

Market Growth: Personal Loans

The global personal loans segment is predicted to grow at CAGR of 53.1 percent until at least 2025. The growth of unsecured personal loans worldwide resulted from vast changes in financial theory and technology.

Research Strategy

After carefully analyzing industry reports such as those from MarketWatch, SuperMoney, Finder, TFS Loans, PYMNTS, S&P Global, and Bloomberg, as well as articles from news publications such as CNBC, New York Times, AP News, and Business Insider, we were unable to find or triangulate specifically the global growth rate for personal loans. Data showed that the overall personal loans segment worldwide will grow at CAGR of 53.1 percent until about 2025, but evidence and reports regarding the exact global growth rate for the segment was unavailable. We also did extensive research into key players in the market to locate the global industry outlook for personal loans. These key players included TransUnion, Experian, and HSBC. After a thorough search, we were unsuccessful in finding the global growth rate for personal loans.

We then attempted to triangulate the global growth rate for personal loans. Our method included locating the most recent information on the growth rate of personal loans in each continent. When that failed, we then attempted to find the information from large markets such as the United States, United Kingdom, and Australia. Information regarding specifics of the growth rate for personal loans in various markets was lacking. Therefore, we attempted to triangulate the answer by figuring out the number of people who were taking out loans globally and comparing that with how many people were paying the loans back. Unfortunately, after extensive research, we were unable to locate this information. However, the requested information may be found behind this paywall at Market Study Report.
Sources
Sources

From Part 02
Quotes
  • "The “Global Retail Banking Market” study report will provide a valuable insight with an emphasis on global market including some of the major players such as BNP Paribas, Citigroup, HSBC, ICBC, JPMorgan Chase, Bank of America, Barclays, China Construction Bank Deutsche Bank, Mitsubishi UFJ Financial Group and Wells Fargo. "
  • "Retail banking, also referred as consumer banking, is defined as a typical mass-market banking in which individual customers use local branches of larger commercial banks. "
  • "It offers following Services that includes savings & checking accounts, mortgages, personal loans, debit/credit cards and certificates of deposit (CDs)."
From Part 04