Consumer Credit in the United Kingdom

PROSPECTS

Consumer confidence remains fragile

Consumers were cautious in their borrowing while lenders certainly became more prudent with regard to advancing unsecured credit in 2018. Despite the increase in household spending, the slowdown in growth of such spending could point towards weaker levels of spending in the economy, paving the way for lower economic growth.

A positive property investment outlook despite Brexit

In partnership with Barclays Bank, the UK government has announced a 10-figure loan to help support small and medium-sized property developers to build 300,000 new homes per year, as demand continues to outstrip availability. While areas such as London and the southeast of England remain under a dark cloud, the Scottish and Northern Ireland property markets are showing renewed growth.

The overdraft debt spiral

The FCA’s (Financial Conduct Authority) review of overdrafts in May 2018 revealed that 19 million of UK residents use arranged overdrafts every year. To tackle this problem, the FCA made a few recommendations, such as mobile alerts warning of potential overdraft charges, stopping the inclusion of overdrafts in the term “available funds”, requiring online tools to make the cost of overdrafts clearer and making it clear that overdrafts are credit or borrowing.

COMPETITIVE LANDSCAPE

The UK FinTech industry is booming

With a passion for innovation and at the forefront of a growing market in Europe, the UK is one of the global leaders in the development of financial services powered by prepaid technology; however, if challenger banks are leading the way, consumer credit FinTech lending companies are just behind. Lendable, the next generation online lending platform, aims to undercut banks in terms of both speed and price, giving borrowers a small loan within two hours.

A cloudy future for payday loans in the UK

Regularly at the centre of controversy, the payday loan industry was under fire in 2018. The FCA’s new strict regulation and the increase in claims resulted in two of the largest lenders ceasing to accept new applications.

Competition is high in consumer credit

Overall, consumer credit remains highly competitive with organisations being granted licences by the FCA to offer credit. Examples of this include the strategies of “challenger” banks, which are to offer short-term credit options to customers in the coming years.

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