Personal Lending Innovations from Abroad 2009

Table of Contents

DATAMONITOR VIEW

• CATALYST
• SUMMARY

ANALYSIS

• The UK personal loans market has been severely affected over the last 12 months
  • Difficult conditions persist in the consumer credit market
  • Restrictions are being introduced on the sale of Payment Protection Insurance
  • The majority of loans are now used for debt consolidation
  • Banks must respond to these conditions through innovation and differentiation
• Product design: some overseas banks offer loans secured against non-property assets
  • Banks in Asia offer debt secured against gold, equities and other assets
  • The Retail Banking team view
• Customer segmentation: providers are increasingly targeting specific segments such as students, lower income consumers and those seeking ' green' loans
  • National Australia Bank offers lower income consumers access to low cost micro-loans
  • The Retail Banking team view
  • Danske Bank of Denmark offers low cost education loans to students with children
  • The Retail Banking team view
  • Several banks offer low-cost unsecured loans for environmental purposes
  • The Retail Banking team view
• Incentives: rewards can be used to encourage good behavior
  • In Malaysia, EON Bank offers cashback to reward prompt repayments
  • The Retail Banking team view
• Distribution: foreign banks make greater use of alternative channels for loan applications
  • Loan application via ATMs is commonplace in many other countries
  • The Retail Banking team view
• New technology: Twitter emerges as the next big communications medium for financial services companies
  • Banks in the US and Australia experiment with ways to exploit the new medium
  • The Retail Banking team view
  • Consumers overseas can request up-to-date loan information via mobile banking
  • The Retail Banking team view
• The Datamonitor view of the future of the UK unsecured loans market
  • Restrictions on the sale of PPI will lead to costlier loans
  • Loans will become more flexible in response to changing circumstances
  • Greater emphasis will be placed on online distribution

APPENDIX

• Definitions
  • Bank of England base rate
  • Balances outstanding
  • CAGR
  • Consumer credit
  • Gross advances
  • Payment Protection Insurance (PPI)
• Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer

FIGURES

• Figure: There was a severe fall in unsecured lending in 2008, continuing into 2009
• Figure: ICICI Bank in India offers a ' Loan Against Securities'
• Figure: Garanti Bank can grant loans through its ATMs
• Figure: Bank of America is using Twitter to deal with customer enquiries